2021 (3) TMI 891 - HC - VAT and Sales Tax

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

M/s. New Video Ltd., new changed as M/s. New Video Pvt. Ltd. Versus The Tamil Nadu Sales Tax Appellate Tribunal, The Appellate Assistant Commissioner (CT) IV, Chennai, The Commercial Tax Officer, Anna Salai III Assessment Circle, Chennai

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%. ... Assessment of turnover - Slabs of tax - petitioner claimed that they had to be taxed at 3.6%, the Assessing Officer, the First Appellate Authority and the Tribunal rejected the stand taken by the assessee on the ground that the local rate of tax on the goods dealt with by the petitioner was 3% and after adding surcharge and additional sales tax, the rate of tax would come to 5.1% and since this rate of tax was more than 4%, the turnover had to be assessed at 10% - HELD THAT:- In terms of the circular dated 29.4.1993, if the local rate of tax is 3% and the company is a small company with inter-state sales turnover less than ₹ 10 lakhs, the additional sales tax is '0'. The Tribunal was of the view that the turnover could not be split up, which appears to be not correct in the light of the said circular, which makes it clear that the initial ₹ 10 lakhs turnover of the dealer could not be subjected to tax. Hence, we are of opinion that such benefit should accrue to the petitioner dealer. The orders passed by (i) the Assessing Officer; (ii) the First Appellate Authority and (iii) the Tribunal are set aside and the matter is remanded to the Assessing Officer with a direction to give the benefit of the amendment by the Act 23 of 1993 by not levying additional sales tax on the first ₹ 10 lakhs of the petitioner's turnover for the subject assessment year namely 1994-95 - Petition allowed in part. Issues:1. Challenge to penalty imposed by the third respondent2. 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, 19704. Application of local tax rates and additional sales tax5. Benefit of not levying additional sales tax on the first Rs. 10 lakhs of turnoverAnalysis: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.