Allowed

Sri Murugan Belt Traders v. the Commercial Tax Officer

Madras HC7 Aug 2018WP/10665/2010

Case brief

AI extract

What is this about?

The Madras High Court dismissed an appeal imposing 12% resale tax on old conveyor belts purchased from TNEB. Relying on Supreme Court precedent and a government clarification granting exemption until June 2002, the court set aside the impugned order levying 12% tax for the 2004-05 assessment year.

What did the court decide?

The writ petition was allowed. The appellate order dated 07.01.2010 and the re-assessment order dated 30.10.2008 were set aside.

Sri Murugan Belt Traders Vs the Commercial Tax Officer — Cheque Dishonour | Madras HC (2018)

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IN THE HIGH COURT OF JUDICATURE AT MADRAS

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DATED : 07.08.2018

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CORAM

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THE HONOURABLE MR.JUSTICE R.MAHADEVAN

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W.P.No.10665 of 2010 and M.P.No.1 of 2010

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Sri Murugan Belt Traders, Rep by its Managing Partner, G.Shanmugam, 2/6-B, Venkatappa Road, Shevapet, Salem 636 002. ... Petitioner Vs 1.The Commercial Tax Officer, Shevapet North Circle, Salem. 2.The Appellate Deputy Commissioner (CT)(FAC), Commercial Taxes Buildings, Fort Main Road, Salem. ... Respondents

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PRAYER : Petition filed under Article 226 of the Constitution of India, praying to issue a Writ of Certiorari, to call for the records on the files of the second respondent in Appeal No.20/2009 dated 07.01.2010 received on by the petitioners on 11.03.2010 and quash the same as being contrary to his earlier order in A.P.No.153/2003 dated 23.03.2004 confirmed by the appellate authority in CTSA.No.142/2001 dated 03.02.2009 and further contrary to the clarification issued by the Commissioner of Commercial Taxes in D.Dis.Acts.Cell.II/88058/2002/Clarification No.91/2003 dated 24.04.2003 issued under Section 28-A of the Tamil Nadu General Sales Tax Act, 1959 and the judgment of this Court in W.P.No.1610 of 2006 dated 25.03.2010. For Petitioner : Mr.R.Senniappan For Respondents : Mr.V.Hari Babu, Addl. Govt. Pleader (Taxes)

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Challenging the order dated 07.01.2010, passed by the second respondent in Appeal No.20/2009, the petitioner has come up with the present writ petition.

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https://hcservices.ecourts.gov.in/hcservices/

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2.According to the petitioner, they are the partnership firm, which is registered as a dealer under the Tamil Nadu General Sales Tax Act, 1959 (for brevity, “TNGST Act”). The first respondent had assessed the petitioner and passed an order relating to the assessment year 2004-05, levying resale tax at 1% representing second sales of old conveyor belts, which were purchased by the petitioner from the Tamil Nadu Electricity Board (TNEB). Subsequently, the first respondent re-opened the assessment and issued a pre-revision notice dated 30.06.2008, proposing to levy tax at 12% on the entire turnover of Rs.24,25,114/- under Section 3(2) of the TNGST Act, to which, the petitioner filed its objection on 15.07.2008. However, the first respondent passed the revised assessment order vide proceedings in TNGST No.2740986/04-05 dated 30.10.2008, confirming his proposal levying 12% tax on the petitioner. Aggrieved over the same, the petitioner preferred an Appeal in A.P.No.20/09 before the second respondent, who rejected the same and confirmed the revised assessment order passed by the first respondent, vide order dated 07.01.2010, which is impugned herein.

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3.The learned counsel for the petitioner submitted that as per the clarification issued by the Commissioner of Commercial Taxes, Chennai, in his letter bearing No.D.Dis.Acts.Cell.II/88058/2002/Clarification No.91/2003, dated 24.04.2003, the sales of old conveyor belts out of the purchases made from TNEB is exempted from tax as second sales upto 30.06.2002 and from 01.07.2002, the second sales of such conveyor belts would be liable to resale tax at 1% under Section 3-H of the TNGST Act. The learned counsel further submitted that when the first respondent allowed the claim of the petitioner in respect of earlier assessment years, they ought to have taken the same yardstick in respect of the assessment year in question, as well, but they rejected the claim of the petitioner, by the impugned order, which is against the ratio laid down by the Supreme Court in Shanmuga Traders and others v. State of Tamil Nadu and others [114 STC 1 SC]. Hence, according to the learned counsel, the impugned order is liable to be set aside.

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4.On the other hand, the learned Additional Government Pleader appearing for the respondents submitted that the circular and the decision relied on by the petitioner are not applicable to the facts of the present case. According to him, the order impugned in this writ petition is perfectly right and in accordance with law, which does not call for any interference.

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5.Heard both sides and perused the records.

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https://hcservices.ecourts.gov.in/hcservices/

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6.Admittedly, the claim of the petitioner with respect to the assessment years 2001-02, 2003-04 and 2005-06 was allowed by the first respondent, granting exemption from tax on the sales of conveyor belts purchased from TNEB as second sales upto 30.06.2002 and levying 1% resale tax from 01.07.2002 onwards. However, in respect of the assessment year 2004-05, the first respondent revised the assessment levying 12% tax on the turnover of Rs.24.25,114/-, which was also affirmed by the second respondent /Appellate Authority.

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7.According to the petitioner, such revision of tax is contrary to the decision of the Supreme Court in Shanmuga Traders (cited supra) as well as the clarification issued by the Special Commissioner and Commissioner of Commercial Taxes, Chennai, dated 24.04.2003. For better appreciation, the relevant portion of the same is extracted hereunder: Supreme Court decision:

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“12... The goods with which we are concerned being declared goods, they can only be taxed at a single point, that is, only one sale in the State can be subjected to tax. It is for the State to determine whether the single point should be the point of first sale in the State or the last sale in the State or any intermediate sale in the State. If the single point is fixed by the State at, say, the point of first sale and the State exempts the first sale from payment of tax, either by a general provision or a specific provision applicable to a class of seller, the particular seller or the goods sold may not be subjected to tax at either that point of first sale or any subsequent sale in the State.

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The Second Schedule of the State Act specifies the single point; it is "the point of first sale in the State". The first sale in the State was the sale by the said Board to the appellants/petitioners. That sale was exempt from tax by reason of the notification dated 1-12-1982 aforementioned. The iron and steel sold by the said Board to the appellants/petitioners was, therefore, not liable to tax either at the point of first sale or any subsequent sale in the State.

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There is no warrant for the emphasis that would appear to have been "placed by the

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https://hcservices.ecourts.gov.in/hcservices/

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Madras High Court on the phrase "taxable sale". The State Act does not fix the single point of the levy at the first taxable sale; it fixes it at "the point of first sale". The impugned circular cannot validly shift the point of levy from the first sale to a subsequent sale and it is, therefore, bad in law.”

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Clarification dated 24.04.2003 issued by the Special Commissioner and Commissioner of Commercial Taxes, Chennai:

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“Thiru G.Shanmugam, Salem 636 002, in his letter cited has requested rate of tax clarification under Section 28-A of the TNGST Act 1959, for resale of Old Conveyor Belt purchased from the Tamil Nadu Electricity Board and also requested to clarify

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1.Whether as per amendment to Section 2(g) Explanation 3, Tamil nadu Electricity Board which sells old conveyor belt is the first seller of the State and whether the petitioners have to pay resale tax under Section 3-H at 1% from 1.7.2002 as per Notification 22/2003 date of effect 1.7.2002.

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2.Whether he has to pay tax for the purchases prior to 1.7.2002 from TNEB at 12%.

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The issue has been examined. As per Notification issued under Section 17 (G.O.Ms.No.1215 dated 1.11.82 – Notification 294/82) of the Act, the sales of any product by TNEB is exempt. As the commodity is liable to tax under Section 3(2) of the Act and as the point of taxation cannot be shifted as per the decision of the Supreme Court in the case of Shanmuga Traders, the petitioners are clarified as follows:

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1.Sales of Old conveyor belt out of purchase made from TNEB is exempt from tax as second sales upto 30.6.2002 and

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2.However, the petitioners are liable to pay resale tax at 1% under Section 3-H of the TNGST Act, 1959 with effect from 1.7.2002.”

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8.From the above extract, it is crystal clear that the sales of old conveyor belts out of the purchases made from TNEB is exempted from tax as second sales upto 30.06.2002, however, the second sales of such conveyor belts would be liable to resale tax at 1% under Section 3-H of the TNGST Act, from 01.07.2002 onwards. Following the aforesaid Supreme Court decision as well as the clarification issued by the authority, in many cases, the

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https://hcservices.ecourts.gov.in/hcservices/

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Appellate Authority as well as the Tamil Nadu Sales Tax Appellate Tribunal decided the issue in favour of the assessees. Even in the present case, the first respondent had accepted the original assessment of the petitioner for the earlier years. However, for the assessment year 2004-05, they have strangely revised the assessment levying tax at 12% on the disputed turnover and the same was also confirmed by the second respondent in the appeal filed by the petitioner.

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9.Considering all the above aspects, this Court is of the view that such revision of assessment cannot be countenanced, as the same is very well against the dictum laid down by the Supreme Court in Shanmuga Traders (cited supra) as well as the clarification issued by the Special Commissioner and Commissioner of Commercial Taxes, Chennai dated 24.04.2003. Hence, the order impugned herein is liable to be set aside.

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10.Accordingly, the writ petition stands allowed and the order dated 07.01.2010 passed by the second respondent in Appeal No.20/2009 is set aside. Consequently, the re-assessment order dated 30.10.2008 passed by the first respondent for the year 2004-05 is also set aside. No costs. Connected Miscellaneous Petition is closed.

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Sd/Assistant Registrar(CS IX) //True Copy// Sub Assistant Registrar To 1.The Commercial Tax Officer, Shevapet North Circle, Salem. 2.The Appellate Deputy Commissioner (CT)(FAC), Commercial Taxes Buildings, Fort Main Road, Salem. +1cc to Mr.R.Senniappan, Advocate sr.no.54320 +1cc to Special Government Pleader sr.no.54481

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W.P.No.10665 of 2010 ssv(co) nr 31/10/2018

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https://hcservices.ecourts.gov.in/hcservices/

Sri Murugan Belt Traders v. the Commercial Tax Officer

Case brief

What is this about?

What did the court decide?

Sri Murugan Belt Traders v. the Commercial Tax Officer

Case brief

What is this about?

What did the court decide?

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