Tax department notices quashed for lack of jurisdiction under Section 6 TNVAT Act 2006

The HC quashed two notices dated 13.01.2020 issued by the tax department for assessment years 2012-2013 and 2013-2014, ruling them without jurisdiction regarding the petitioner. The court held that the 2% demand should be directed only against CMRL, not the petitioner, as CMRL had opted to pay tax at compounded rate under Section 6 of TNVAT Act, 2006. However, the court granted liberty to the Commercial Tax Department to complete assessment if the petitioner was liable to pay tax under Sections 5 and 6 of TNVAT Act, 2006. Petition allowed.

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Issues Involved:
1. Jurisdiction of the respondent to issue impugned notices.
2. Validity and issuance of Form S certificates.
3. Responsibility for Tax Deducted at Source (TDS) under TNVAT Act, 2006.
4. Liability of the petitioner under Sections 5 and 6 of the TNVAT Act, 2006.

Summary:

1. Jurisdiction of the Respondent to Issue Impugned Notices:
The petitioner challenged the jurisdiction of the respondent to issue two notices dated 13.01.2020 for the assessment years 2012-2013 and 2013-2014. The petitioner argued that the impugned notices were without jurisdiction as the responsibility to deduct TDS lies with the "person" responsible for payment, not the petitioner. The court observed that if CMRL failed to deduct amounts under Section 13(1) of the TNVAT Act, 2006, the machinery under Section 13(8) should be directed against CMRL, making the impugned notices without jurisdiction.

2. Validity and Issuance of Form S Certificates:
The petitioner claimed to have obtained Form S certificates for exemption from TDS for the respective contracts. However, the respondent argued that there were no records of such certificates in their office. The court noted that the petitioner failed to furnish proof or documentary evidence for the issuance and renewal of Form S certificates for the financial years 2012-2013 and 2013-2014. This required a fresh determination.

3. Responsibility for Tax Deducted at Source (TDS) under TNVAT Act, 2006:
The court detailed the responsibilities under Section 13 of the TNVAT Act, 2006, which mandates the person responsible for paying any amount to a dealer for executing a works contract to deduct tax at specified rates. The court clarified that the burden of proving tax payment lies with the dealer claiming the deduction. Any failure to deduct tax entails proceedings against the person responsible under Section 13(8).

4. Liability of the Petitioner under Sections 5 and 6 of the TNVAT Act, 2006:
The court noted that it was not clear whether the petitioner was liable to pay tax under Section 5 or 6 of the TNVAT Act, 2006. It was possible that the petitioner had opted to pay tax under Section 5 and obtained Form S but failed to pay the tax, requiring fresh determination. The court allowed the Commercial Tax Department to complete the assessment if the petitioner was liable to pay tax under Sections 5 and 6.

Conclusion:
The court quashed the proposed demand in the impugned notices, directing that any demand should be against CMRL. The writ petitions were allowed with the observations that the Commercial Tax Department could complete the assessment of the petitioner's tax liability under Sections 5 and 6 of the TNVAT Act, 2006. No costs were imposed, and connected miscellaneous petitions were closed.

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