Entry tax on imported vehicles upheld; best judgment assessment and excluded limitation period supported demand, while penalty was limited.
Imported vehicles brought into Tamil Nadu are liable to entry tax under the Entry Tax Act, as the levy applies to entry of motor vehicles into local areas for use or sale and the liability had already been settled by binding precedent. Where the importers did not file statutory returns, the Revenue could proceed on a best judgment basis, and the demand was not barred by lack of prior assessment or by limitation because the period of litigation and interim restraint on recovery was excluded. Penalty was not leviable for the period of unsettled legal position before 29.01.2019, but could run from that date onward if tax remained unpaid.
Issues: (i) Whether importers of vehicles brought from abroad into Tamil Nadu are liable to pay entry tax under the Entry Tax Act; (ii) Whether the impugned demand and recovery proceedings were barred for want of prior assessment and by limitation; (iii) Whether penalty could be levied for the period during which the legal position remained unsettled and prior to 29.01.2019.
Issue (i): Whether importers of vehicles brought from abroad into Tamil Nadu are liable to pay entry tax under the Entry Tax Act.
Analysis: The charging provision imposes tax on the entry of motor vehicles into local areas for use or sale. The Court noted that the liability of importers of foreign vehicles had already been declared in the earlier binding line of decisions, and that the legal position ultimately stood settled against the importers after the authoritative pronouncement upholding levy on imported vehicles.
Conclusion: The petitioners are liable to pay entry tax on the imported vehicles.
Issue (ii): Whether the impugned demand and recovery proceedings were barred for want of prior assessment and by limitation.
Analysis: The scheme of the Act requires return filing, assessment, and, where returns are not filed, best judgment assessment. The petitioners had not filed the statutory returns. The Court held that the Revenue was entitled to proceed on best judgment basis. It further held that the period during which the liability itself remained under litigation and interim orders restrained recovery had to be excluded for limitation purposes, and therefore the contention that the assessment was time-barred was rejected.
Conclusion: The demand and recovery proceedings were not vitiated for want of assessment or by limitation.
Issue (iii): Whether penalty could be levied for the period during which the legal position remained unsettled and prior to 29.01.2019.
Analysis: Penalty under the Act is attracted where tax is not paid without reasonable cause. The Court held that, until the legal position was finally settled and the liability became clear, the non-payment could not be treated as without reasonable cause. However, after the Division Bench decision on 29.01.2019, continued default would justify penalty from that date onward until payment.
Conclusion: Penalty could not be imposed for any period prior to 29.01.2019, but could be levied from 29.01.2019 until full payment if the tax remained unpaid thereafter.
Final Conclusion: The petitions failed on the challenge to tax liability, assessment and limitation, but succeeded in restricting penalty to the period after the legal position was finally settled.
Ratio Decidendi: Where tax liability has been finally settled by binding precedent, non-filing of returns permits best judgment assessment, limitation may be computed excluding the period during which recovery was stayed by litigation, and penalty is not leviable for the period of bona fide uncertainty but may run from the date the liability became conclusively clear.
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