Change of opinion, standalone penalty orders, and duplicate purchase tax were all held unsustainable under the TNVAT scheme.

The Madras HC reiterated that reassessment or revision cannot rest on a mere change of opinion without fresh material, and the revision was therefore invalid. It further held that penalty under the TNVAT regime, where imposed in assessment proceedings, must form part of the assessment order and cannot be sustained through a separate standalone order; the penalty orders were set aside. On purchase tax, the court held that works contractors could not be subjected to duplicative tax liability on the same transaction already treated as a deemed sale, and the purchase tax demand was unsustainable. The impugned proceedings were annulled and the writ petitions were allowed.

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Issues: (i) whether revision of assessment could be sustained when it was made on mere change of opinion without new or fresh material; (ii) whether penalty under the Tamil Nadu Value Added Tax Act could be imposed by a separate order instead of forming part of the assessment order; (iii) whether works contractors could be saddled with purchase tax on the same transaction already treated as a deemed sale.

Issue (i): Whether revision of assessment could be sustained when it was made on mere change of opinion without new or fresh material.

Analysis: The impugned reassessment/revision was undertaken on verification of the existing assessment records and was not based on discovery of any fresh material. The governing principle applied was that reopening or revision of assessment cannot rest merely on a change of opinion. Where the authority proceeds only on rereading the same records, the exercise is impermissible in law.

Conclusion: The revision of assessment on mere change of opinion was invalid and was rightly set aside in favour of the assessee.

Issue (ii): Whether penalty under the Tamil Nadu Value Added Tax Act could be imposed by a separate order instead of forming part of the assessment order.

Analysis: The legal framework applied was that penalty, where imposed under the relevant provision for assessment proceedings, must be incorporated in the assessment order itself and cannot be levied through an independent or separate order. The cited authorities were treated as settling the principle that a standalone penalty order in such circumstances is not sustainable.

Conclusion: The separate penalty orders were unsustainable and were set aside in favour of the assessee.

Issue (iii): Whether works contractors could be saddled with purchase tax on the same transaction already treated as a deemed sale.

Analysis: The transaction of the petitioners, who were works contractors, had already been subjected to tax on the relevant footing. The reasoning applied was that the same transaction could not again be brought to purchase tax liability when the statutory concept of deemed sale and the applicable provision were already engaged. The court also treated the earlier sales tax provision as in pari materia with the corresponding TNVAT provision.

Conclusion: Imposition of purchase tax in these circumstances was held unsustainable and was set aside in favour of the assessee.

Final Conclusion: The impugned assessment-related proceedings were annulled and the writ petitions were allowed, leaving no surviving tax demand under the challenged orders.

Ratio Decidendi: Reassessment or revision cannot be sustained on mere change of opinion without fresh material, penalty under the assessment regime must follow the statutory mode prescribed in the assessment order, and the same transaction cannot be subjected to duplicative tax treatment contrary to the governing statutory scheme.

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