Court reduces tax rate, exempts low-turnover dealers, remands for amendment application.

The court allowed the writ petitions challenging the penalty and assessment at 10%, finding that the petitioner should be taxed at 3.6% instead of 10%. The court emphasized the exemption for dealers with turnover below one crore rupees from paying additional tax on the first ten lakhs. The matter was remanded for application of the relevant amendment, exempting the initial turnover from additional tax for the specified assessment year, and the penalty was set aside without costs.

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Issues:
1. Challenge to penalty imposed by the third respondent
2. Challenge to order confirming assessment at 10%
3. Interpretation of the amendment to Section 2(1)(a) of the Tamil Nadu Additional Sales Tax Act, 1970
4. Application of local tax rates and additional sales tax
5. Benefit of not levying additional sales tax on the first Rs. 10 lakhs of turnover

Analysis:
1. The petitioner filed writ petitions challenging the penalty imposed by the third respondent and the order confirming the assessment at 10%. The petitioner contended that they should be taxed at 3.6%, but the authorities assessed the turnover at 10% based on local tax rates and additional sales tax calculations.

2. The Tribunal and the First Appellate Authority rejected the petitioner's claim, stating that the local tax rate on the goods was 3%, which, after adding surcharge and additional sales tax, amounted to 5.1%. As this rate exceeded 4%, the turnover was assessed at 10%.

3. The argument presented before the court highlighted an amendment to Section 2(1)(a) of the Tamil Nadu Additional Sales Tax Act, 1970. The amendment, effective from April 1, 1993, exempted dealers with turnover not exceeding one crore rupees from paying additional tax on the first ten lakhs.

4. Referring to a circular by the Special Commissioner and Commissioner of CT, the court noted that if the local tax rate is less than 4%, only the lower rate should be charged. The circular provided examples illustrating the application of local tax rates and additional sales tax based on turnover thresholds.

5. The court found that the benefit of not levying additional sales tax on the first Rs. 10 lakhs of turnover should accrue to the petitioner dealer. The Tribunal's view that the turnover could not be split up was deemed incorrect in light of the circular, leading to the partial allowance of the writ petitions and setting aside of previous orders.

6. Consequently, the court remanded the matter to the Assessing Officer with a directive to apply the amendment by Act 23 of 1993, exempting the first Rs. 10 lakhs of the petitioner's turnover from additional sales tax for the assessment year 1994-95. The levy of penalty to that extent was also set aside, with no costs imposed.

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