The petitioner has come forward with this petition seeking for the relief of Declaration declaring that the petitioner above named is not liable to pay additional sales tax in respect of the assessment under the Central Sales Tax Act, 1956 when the petitioner is not liable for payment of additional sales tax under the Tamil Nadu General Sales Tax Act, 1959, since their taxable turnover is less than Rs.25 Crores and further to direct the respondent above named to refund to the petitioner the amount of additional sales tax of Rs.15,79,415/- paid by the petitioner under protest to get the bank attachment raised.
2. The petitioner is a registered dealer under the provisions of the Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as 'the Local Act') and under the Central Sales Tax Act, 1956 (hereinafter referred to as 'the Central Act'). The petitioner is an assessee on the file of the respondent. The petitioner filed the monthly returns under the Central Act in respect of the assessment years 1998-99, 1999-2000 to the respondent and remitted the sales tax due from the petitioner. Now, the respondent issued notices dated 14.3.2000 and 20.3.2000 in respect of the assessment years 1998-99 and 1999-2000 under the Central Act, calling upon the petitioner to pay an additional sales tax at the rate of 2% on the alleged ground that in the computation of the rates of sales tax under the Central Act, it is open as per the decision of this Court reported in 90 STC 84, to reckon with additional sales tax mentioned in
Section 8(2)(b) of the Central Act and the petitioner sent a detailed reply for the said notices to the respondent on 20.03.2000 contending that they were not liable for payment of additional sales tax. It is mainly stated in the said reply dated 20.3.2000 that as under the Local Act, the turnover of the petitioner for the assessment years 1998-99 and 1999-2000 is less than Rs.25 Crores, the petitioner is not liable for additional sales tax as the rate of sales tax is only 11% under the Local Act.
3. The further case of the petitioner is that after sending such reply dated 20.3.2000 to the notice issued by the respondent dated 14.3.2000, yet another notice dated 21.3.2000 was issued to the petitioner calling upon them to pay immediately on receipt of the same, the additional sales tax as demanded, failing which that the respondent would take coercive steps against the petitioner. It is stated that the said notice was received by the petitioner on 27.3.2000 and even before the expiry of seven days on 28.3.2000 by a B-6 Notice, the Bank account of the petitioner with the State Bank of India, Sivakasi was attached. Therefore, the petitioner was compelled to remit the demand made without the authority of law in respect of a sum of Rs.15,79,415/- to avoid the bank attachment under protest. The petitioner also filed a Miscellaneous Petition in M.P.No.11134/2000 seeking for the relief of directing the respondent to refund to the petitioner the additional sales tax of Rs.15,79,415/- which was paid under protest for raising the bank attachment pending disposal of the Writ Petition. The said petition was dismissed on the ground that the question would be decided in the main writ petition itself at the time of final hearing by order of this Court dated 30.12.2002.
4. The learned senior counsel appearing for the petitioner mainly contended that the petitioner has disputed the liability to pay the additional sales tax under the Central Act on the ground that only in the event of taxable turnover of the petitioner exceeding Rs.25 Crores,
Section 2(1)(aa) is applicable for invoking the Central Act in order to demand the additional sales tax from the petitioner herein. It is vehemently contended by the learned senior counsel for the petitioner that the taxable turnover not exceeded Rs.25 Crores in respect of the petitioner firm during the relevant period under the Local Act. Therefore, it is submitted that the respondent cannot place reliance on the provision of
Section 2(1)(aa) for issuing the demand notice dated 14.3.2000 on the basis of alleging that the taxable turnover of the petitioner exceeded Rs.40 Crores under the Central Act. It is further contended that the petitioner is not liable to pay additional sales tax even as per the provision under
Section 8(2)(b) of the Central Act. In view of the said Sections it is manifest that only when the petitioner is liable for payment of additional sales tax under the Local Act, it is open to the respondent to demand payment of additional sales tax under the Central Act. It is contended that the petitioner has given a detailed reply dated 20.3.2000 to the notice dated 14.3.2000 issued by the respondent herein clearly stating that the taxable turnover of the petitioner firm never exceeded Rs.25 Crores during the relevant period. It is pointed out by the learned senior counsel that ignoring and overlooking such reply, the respondent herein resorted to issue another notice, dated 21.3.2000, calling upon the petitioner to pay the amount of Rs.15,79,415/-, failing which the petitioner was threatened that the bank account of the petitioner with the State Bank of India, Sivakasi would be attached and the said notice was received by the petitioner on 27.3.2000 and even before the expiry of seven days, on 28.3.2000, by a B-6 notice, the Bank account of the petitioner with the State Bank of India, Sivakasi was attached. It is further pointed out by the learned senior counsel for the petitioner that in view of such hurried and hasty action taken by the respondent herein, the petitioner has left with no other alternative except to pay the demanded amount of Rs.15,79,415/- under protest.
5. In view of such contentions, the learned senior counsel for the petitioner contended that the petitioner is entitled to the relief of declaration declaring that the petitioner is not liable to pay the additional sales tax under the Central Act, when the petitioner is not liable for the payment of additional tax under the Local Act since their taxable turnover is less than Rs.25 Crores. It is also contended that in the event of disputing the liability on the ground that the taxable turnover of the petitioner not exceeded Rs.25 Crores, the authorities could have passed an order of provisional assessment or final assessment by giving opportunity to the petitioner before resorting to issue the said notices dated 14.3.2000 and 21.3.2000. The learned senior counsel would also contend that in view of the contravention and misinterpretation of the provisions contained under the Act, the notices issued by the respondent are liable to be quashed and as such the petitioner is also entitled to the refund of the amount of Rs.15,79,415/- paid under protest for lifting the attachment of the Bank Account during the pendency of this petition.
6. Per contra, the learned Government Advocate (Taxes) contended that there is no illegality or infirmity in issuing the notices dated 14.3.2000 and 21.3.2000. It is further submitted that both the notices are well within the provision of the Local Act as well as within the Central Act. He would also contend that the respondent had taken all steps to collect the additional sales tax with authority of law provided under Section 3B of the Tamil Nadu Additional Sales Tax Act, 1970 read with Rule 3. It is also submitted that the respondent has not given any undue pressure for the payment of Rs.15,79,415/-. The learned Government Advocate (Taxes) would further contend that as per the facts of the instant case, the question of making a provisional or final assessment before issuing the notices dated 14.3.2000 and 21.3.2000 not at all arises.
7. I have carefully considered the rival contentions put forth by either side and also perused the entire materials available on record including the notices issued by the respondent dated 14.3.2000 and 21.3.2000 and the reply given by the petitioner dated 20.3.2000.
8. The crux of the question involved in this matter is revolving around the two demand notices dated 14.3.2000 and 21.3.2000 issued by the respondent herein to the petitioner calling upon the petitioner to pay the additional sales tax at the rate of 2% on the computation of Sales Tax under the Central Act and legality of the said notices and whether the petitioner is liable to pay the additional sales tax as demanded in the said impugned notices under the Central Act ?
9. Before proceeding to consider the question involved in this matter, it is relevant to refer the said provision, namely
Section 2(1)(aa) of the Local Act (Tamil Nadu Additional Sales Tax Act, 1970).
Section 2(1)(aa) of the Local Act reads as follows:
"The tax payable under the Tamil Nadu General Sales Tax Act, 1959 (Tamil Nadu Act 1 of 1959) hereinafter in this section referred to as the said Act), shall in the case of a dealer including the principal selling or buying goods through agents, whose taxable turnover for a year exceeds twenty five crores of rupees, be increased by an additional tax, calculated at the following rates, namely :
Rate of Tax
(i) Where the taxable turnover 1.5 per cent exceeds twenty-five crores of the taxable of rupees but does not exceed turnover.
10. A reading of the above said provision makes it crystal clear that only in the event of the taxable turnover exceeds Rs.25 Crores under the Local Act, then only, the dealer, namely, the assessee is liable to pay the additional sales tax as prescribed under the Additional Sales Tax Act. The categorical contention and assertion of the petitioner is to the effect that the taxable turnover never exceeded Rs.25 Crores during the relevant period of term mentioned in the notices dated 14.3.2000 and 21.3.2000. It is pertinent to note at this juncture that in the counter filed by the respondent herein the said claim and assertion of the petitioner was not at all disputed or denied.
11. This Court is also constrained to state that the respondent is not entitled to invoke the provision under
Section 8(2)(b) of the Central Act for issuing the impugned demand notices as it is evident from the provisions of the Act that only when the petitioner is liable for payment of additional sales tax under the Local Act, it is open to the respondent to demand payment of additional sales tax under the Central Act.
12. This Court cannot lost sight of yet another important factor to the effect that the petitioner has given a detailed reply dated 20.3.2000 explaining the stand of the petitioner to the effect that his turnover never exceeded Rs.25 Crores during the period of relevant assessment year and as such they are not liable to pay any additional sales tax under the Local Act and it is made clear in the said reply that only when the petitioner is liable for payment of additional sales tax under the Local Act, it is open to the respondent to demand payment of additional sales tax under the Central Act. But, unfortunately, the counter is silent in respect of the explanation and the reply given by the petitioner dated 20.03.2000 except making a bald reference to the said reply given by the petitioner. Such being the position, this Court is of the considered view that there is much force in the contention advanced by the learned senior counsel appearing for the petitioner to the effect that the petitioner having disputed the computation of taxable turnover which is said to have been exceeded Rs.40 Crores as mentioned in the notice dated 14.3.2000, the respondent ought to have passed an order of provisional assessment or final assessment and without resorting to such course of action, the notices dated 14.3.2000 and 21.3.2000 were issued overlooking the procedure contemplated under the provisions of the Local Act and the Central Act. Therefore, this Court has no hesitation to hold that the respondent had issued the impugned notices arbitrarily and mechanically without application of mind resulting in grave prejudice and injustice to the petitioner and as such, the impugned notices are liable to be set aside.
13. For the foregoing reasons, this Court is left with the irresistible conclusion of quashing both the notices issued by the respondent dated 14.3.2000 and 21.3.2000. Accordingly, the notices issued by the respondent dated 14.3.2000 and 21.3.2000 respectively are hereby quashed. In view of quashing of the impugned notices, the petitioner is entitled to the refund of the amount of Rs.15,79,415/- paid under protest towards the additional sales tax pursuant to the said notices dated 14.3.2000 and 21.3.2000 and as such, the respondent is directed to refund the said amount to the petitioner within a period of two months from the date of receipt of a copy of this Order and if the period exceeds two months, the respondent is liable to pay interest at the rate of 12% per annum for the said sum of Rs.15,79,415/-.
14. It is made clear that it is open to the respondent to proceed further in accordance with law for claiming any additional sales tax by scrupulously following the provisions contemplated under the Local Act and the Central Act by affording reasonable opportunity to the petitioner.
This petition is ordered accordingly.
tsi/gg To The Commercial Tax Officer-I, Sivakasi