TaxTMI 
TaxTMI 
2015 (6) TMI 304
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....s purchase tax on the same. The petitioner-firm processes/manufactures rubber thread out of raw rubber. A large amount of this rubber thread is being sold outside the State either by transfer of stock on "F" form or by means of inter-State sale on "C" form. Value added tax @ 12.5% per annum was leviable on the sale of rubber thread sold in Tripura upto 03-05- 2011 and thereafter @ 13.5% per annum w.e.f. 04-05-2011. 3. Notice was issued to the petitioner under section 31(1) of the TVAT Act, 2004 to produce the books of account and other relevant documents. The Assessing Officer found that a very small proportion of the produce was being sold in Tripura and a major portion of the manufactured product was sold outside the State of Tripura. The case of the revenue is that the petitioner purchased raw rubber from the dealers and paid tax on the purchase of raw rubber. Thereafter, the rubber was processed and rubber thread was manufactured and this rubber thread was sold outside the State by charging CST which was collected from the consignees outside the State. According to the revenue, the assessee collected huge amount as CST on the sales made but it did not pay the amount but adju....
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....oduced Inter-State sales C form not produced TOR 79,40,37,613.73 NIL TOD 79,40,37,613.73 NIL Tax collected 1,58,91,534.46 NIL Tax payable 1,58,91,534.46 NIL Total tax payable 1,58,91,534.46 Less: Tax paid Nil Balance 1,58,91,534.46 Add: Interest for 34 months at 18% PA 81,04,682.57 Add: Penalty at 150% as discussed 2,38,37,701.69 Net due. 4,78,33;918.72 Rounded off 4,78,33,919.00 2011-12 Particulars Inter-State sales C form produced Inter-State sales C form not produced TOR 76,33,40,915.19 25,55,685.81 TOD 76,33,40,915.19 25,55,685.81 Tax collected 1,53,62,257.55 51,113.71 Tax payable 1,53,62,257.55 3,45,017.58 Total Tax payable 1,57,07,275.13 Less: Tax paid Nil Balance 1,57,07,275.13 Add: Interest for 22 months at 18% PA 51,83,400.79 Add: Penalty at 150% as discussed 2,35,60,912.69 Net due 4,44,51,588.61 Rounded off 4,44,51,589.00 2012-13 Particulars Inter-State sale....
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....ion but in the present case, the petitioner is being denied the benefit of input tax credit and, therefore, this amounts to double taxation which is against the scheme of the VAT Act. 8. On the other hand, Dr. Saraf, learned Senior Counsel appearing for the State, submits that there can be no quarrel with the proposition that the State has no power to impose tax on inter-State sales. He, however, submits that what is sought to be recovered is Central Sales Tax as would be clear from the assessment orders. It is submitted by Dr. Saraf that though the assessing authority would have been better advised to also mention section 9(2) of the CST Act while issuing the notices, the mere non-mention of such provision would not be sufficient to hold that the State is not recovering Central Sales Tax but is recovering value added tax. On merits, Dr. Saraf has urged that in view of various provisions of the TVAT Act, especially section 10 and sub-sections (3) and (7) thereof, no input tax credit can be availed of in respect of inter-State sales. He submits that the provisions of the TVAT Act do not in any manner provide that input tax credit is available in respect of inter-State sales. Dr. ....
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....se as containers for packing of goods other than those exempted from tax under this Act for sale or resale in the State of Tripura; Provided that if purchases are used partially for the purposes specified in this sub-section, input tax credit shall be allowed proportionate to the extent they are used for the purposes specified in this sub-section. xxx xxx xxx (6) No input tax credit under sub-section (1) shall be claimed or be allowed to a registered dealer - xxx xxx xxx (ix) in respect of goods used for transfer of stock other than by way of sale outside the State of Tripura; (x) in respect of sales exempt from tax as specified in Schedule III. (xi) in respect of raw materials used in manufacture or processing of goods where the finished products are despatched other than by way of sales: Provided that in respect of transactions falling under item (ix), input tax credit may be allowed on the tax paid in excess of 4% on the raw materials used directly in the manufacture of the finished products. (7) The Commissioner may, after giving sufficient reasons in writing, reject the method adopted by the registered dealer in a year to determine the extent to whic....
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....made thereunder, the authorities for the time being empowered to assess, re-assess, collect and enforce payment of any tax under general sales tax law of the appropriate State shall, on behalf of the Government of India, assess, re-asses, collect and enforce payment of tax, including any interest or penalty, payable by a dealer under this Act as if the tax or interest or penalty payable by such a dealer under this Act is a tax or interest or penalty payable under the general sales tax law of the State; and for this purpose they may exercise all or any of the powers they have under the general sales tax law of the State; and the provisions of such law, including provisions relating to returns, provisional assessment, advance payment of tax, registration of the transferee of any business, imposition of the tax liability of a person carrying on business on the transferee of, or successor to, such business, transfer of liability of any firm or Hindu undivided family to pay tax in the event of the dissolution of such firm or partition of such family, recovery of tax from third parties, appeals, reviews, revisions, references, refunds, rebates, penalties, charging or payment of interest,....
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.... Apex Court held as follows:- "28. The principle thus stated has hardly ever been doubted but it is necessary in the application of that principle to remember that though the benefit of an ambiguity in a taxing provision must go to the subject and the taxing provision must receive a strict construction, "that is not the same thing as saying that a taxing provision should not receive a reasonable construction". If the statute contains a lacuna or a loophole, it is not the function of the court to plug it by a strained construction in reference to the supposed intention of the Legislature. The Legislature must then step in to resolve the ambiguity and so long as it does not do so, the tax-payer will get the benefit of that ambiguity. But, equally, courts ought not to be astute to hunt out ambiguities by an unnatural construction of a taxing section. Whether the statute, even a taxing statute, contains an ambiguity has to be determined by applying normal rules of construction for interpretation of statutes. As observed by Lord Cairns in Pryce v. Monmouthshire Canal and Railway Companies, cases which have decided that Taxing Acts are to be construed with strictness, and that no paym....
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....Court observed as follows:- "11. xxx xxx xxx If the language of a statute is clear and explicit, effect must be given to it, for in such a case the words best declare the intention of the law-giver. It would not be right to refuse to place on the language of the statute the plain and natural meaning which it must bear on the ground that it produces a consequence which could not have been intended by the legislature. It is only from the language of the statute that the intention of the Legislature must be gathered, for the legislature means no more and no less than what it says. It is not permissible to the Court to speculate as to what the Legislature must have intended and then to twist or bend the language of the statute to make it accord with the presumed intention of the legislature. xxx" 19. In Ajmera Housing Corporation and another vs. Commissioner of Income Tax, [(2010) 8 SCC 739], the Apex Court again held as follows:- "36. It is trite law that a taxing statute is to be construed strictly. In a taxing Act one has to look merely at what is said in the relevant provision. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. Ther....
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..... 22. The State is entitled to levy tax only on sale transactions which take place in the State of Tripura. There is no manner of doubt that the State cannot levy any tax on inter-State sales. The opening portion of sub-section (6) of section 10 clearly provides that no input tax credit shall be allowed to a registered dealer in respect of goods used for transfer of stock other than by way of sale outside the State of Tripura. It is urged by Sri Dubey, learned counsel for the petitioner, that this would mean that if the goods are sold outside the State of Tripura, the benefit of input tax credit would be available. We are unable to accept this submission. 23. A conjoint reading of the provisions of the Act clearly shows that input tax credit can be claimed only in respect of tax paid or payable under the Act. Section 10(3) makes it absolutely clear that input tax credit is permissible only in respect of sales or resales made within the State of Tripura. Section 10(6) is couched in negative language and is in the nature of an exception or a proviso to subsection 10(1). We have to read section 10(6) along with section 10(1) and when both of these parts of the section are read h....
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.... that the intention of the State of Tripura was to give benefit of input tax credit only in respect of sales intended or made within the State of Tripura. There is no doubt in our mind that the Act specifically excludes from its ambit, the inter-State sales and the benefit of tax paid on inter-State sales cannot be availed of by the petitioner to claim input tax credit. There is no ambiguity in the language and, therefore, reliance placed by Sri Dubey on the judgments of the Apex Court in Commissioner of Income Tax, Bombay etc. vs. M/s. Podar Cement Pvt. Ltd. etc., [(1997) 5 SCC 482] and Commissioner of Income Tax, Karnataka, Bangalore vs. M/s. Shaan Finance (P) Ltd., Bangalore, [(1998) 3 SCC 605] is totally misplaced. Intention: 27. Sri Dubey urged that it was the intention of the assessee to sell the manufactured goods within the State of Tripura in terms of section 10(3) of the Act. He submits that it is the only intention of the manufacturer which has to be taken into consideration and if for certain reasons like non-availability of the market, the goods are sold outside the State of Tripura that cannot be read to mean that the intention of the dealer was not to sell good....
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....r sale. xxx" 30. True it is, that in Polestar's case declaration was given by the dealer. Even in the absence of any such declaration in the present case, we are clearly of the view that the intention of the dealer has to be judged from the final action which takes place and, therefore, we have no hesitation in holding that the assessee cannot claim that because his intention was to sell the goods within the State of Tripura, he is entitled to benefit of input tax credit. Jurisdiction of authorities of State to collect CST: 31. It is next contended by Mr. Dubey that the Taxing authorities of the State of Tripura have no authority or jurisdiction to collect tax, interest or penalty under the Central Sales Tax Act and, therefore, the entire assessment is without jurisdiction. This argument has been made without considering the import of section 9 of the CST Act and especially, sub-section (2) of section 9 which we have quoted hereinabove. Section 9 clearly lays down that the tax payable by any dealer under the Central Sales Tax Act in the course of inter-State trade or commerce shall be levied by the Government of India but shall be collected by the Government of the State f....
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....that it does not mention Section 9(3) of the Central Sales Tax Act. As had been pointed out by the Judge (Revisions) that omission is not material because it did not mislead or prejudice the assessee in any way. xxx" 33. It is well settled law that if an authority has the power and jurisdiction to take certain action, then merely because a wrong provision of law is mentioned or because no provision of law is mentioned, the action cannot be set aside on this ground. After considering the entire record, we are clearly of the view that the intention of the taxing authorities of the State was to collect the CST which had not been deposited by the assessee by claiming input tax credit. We are in agreement with the law laid down by the Allahabad High Court and, therefore, we hold that merely because there was no reference to the provisions of the Central Sales Tax will not make the action illegal, if otherwise the authorities of the State had jurisdiction to take the said action. Power of Commissioner alone: 34. Mr. Dubey next contends that only the Commissioner can exercise powers under section 31(5) of the TVAT Act. According to him, in the present case the powers have been ex....
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....a person appointed to assist him under section 18, and not to any other person. In the present case, the Superintendent of Taxes has been appointed under section 18(1) and, therefore, also the Commissioner had the power to delegate his authority to him. Commissioner only has power to determine correctness of method: 36. It was next urged by Sri Dubey that in terms of subsection (7) of section 10, the Commissioner only has jurisdiction to reject the method adopted by the registered dealer to determine the extent to which goods are used for calculating the amount of input tax credit. He submits that the method has not been rejected and, therefore, there is no power with the Commissioner to issue an order rejecting the claim of the petitioner for the benefit of input tax credit. This argument has been made only for the purpose of being rejected. There is no merit in the same. Sub-section (7) only deals with those situations where a dealer adopts a method to arrive at the value of the inputs or goods which are used or consumed for making the taxable goods. Under sub-section (7) the Commissioner has the power to determine whether the method is right or wrong. In the present case, ....
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....ortunity of putting forth his case. When the rules provide for a minimum period of notice, then it is expected that the authority acting under the rule should give adequate notice to the affected party to put forth his case. The issuance of a notice is not a mere formality. A notice is required to be issued so that the affected party has reasonable opportunity to collect all the material which may be available before it and place it before the authority issuing the notice. Time and again, we have found that short notices are being issued by the taxation authorities in the State of Tripura. First the authorities sleep over the matters for 4 to 5 years. Then they awaken from their deep slumber and suddenly become very active and do not give a reasonable opportunity to the assessee to put forth his case. 40. In the present case, five notices should have been issued for the five assessment years giving at least 15 days time to the assessee to respond. The manner in which the notices have been issued is not proper. The first notice was issued on 01-02-2014 and in this notice, it was stated that the Superintendent of Taxes felt that he had reasons to believe that detailed scrutiny of ....
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.... DAS) Superintendent of Taxes Charge-VIII, Agartala." This was the first notice which was a complete notice and which set out the case that the petitioner had wrongly claimed input tax credit for the CST. Here also another show-cause notice was included in this notice as to why penalty be not imposed. Shockingly, though the notice is dated 22-02-2014, the assessee has been asked to appear on 25-02-2014. It is virtually impossible for any assessee to prepare a reply for a period of more than five years in three days. Therefore, the manner in which notices have been issued is highly improper. 42. Though the manner in which the notices have been issued are highly improper since for the assessment years 2008-09, 2009- 10 and 2010-11 there is no dispute between the parties with regard to the amount collected as CST and all the 'C' forms have been produced, no prejudice has been caused to the petitioner. Therefore, the basic assessments assessing the tax and interest payable for these three years are upheld. With regard to the years 2011-12 and 2012-13, since there is some dispute with regard to the 'C' forms and we are of the opinion that no proper opportunity was given to t....
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....e duty of the assessing authority to either accept or reject the tax credit. 47. In the present case, for five years the tax department was accepting the plea of the petitioner that he was entitled to input tax credit. Therefore, the officials of the department were as much at fault or as much in ignorance of law as the petitioner-assessee. It is not the case of the respondent-State that the assessee filed false documents or made wrong statements while claiming this input tax credit. The assessee claimed input tax credit by depicting the true and correct facts. Though we have decided the case against the assessee, we are clearly of the view that in such a situation it cannot be said that the dealer had claimed this input tax credit with a view to evade or avoid payment of tax. It is a plain and simple case of different interpretations of the provisions of law. The assessee interpreted section 10 in a particular manner and this interpretation was accepted by the revenue also. In such an eventuality, it would be highly unfair and unjust to impose the maximum penalty of 150%. This is a fit case where the minimum penalty of 10% alone should have been imposed. Directions: 48. I....