T. V. Sundram Iyengar and Sons Limited Vs Assistant Commissioner (ST) (Madras High Court)
In a recent judgment by the Madras High Court in the case of T. V. Sundram Iyengar and Sons Limited Vs Assistant Commissioner (ST), the court has addressed the imposition of penalties under Section 27(4) of the Tamil Nadu Value Added Tax (TNVAT) Act, 2006. The petitioner, a registered company engaged in the sale of motor vehicles and auto parts, challenged an order that confirmed penalties without proper consideration of objections raised. This article examines the key arguments, court observations, and the implications of the judgment.
Background: The petitioner, a registered dealer under the TNVAT Act, underwent a deemed assessment for the year 2012-2013. Subsequently, the turnover was re-determined under Section 27 of the Act. The petitioner challenged the order, leading to a common order by the Madras High Court directing a fresh personal hearing. Despite providing written submissions, the respondent confirmed the earlier order without due consideration, leading the petitioner to file a writ petition.
Petitioner’s Grounds: The petitioner raised various contentions, including:
1. Reversal of ITC: The petitioner argued that the reversal of Input Tax Credit (ITC) related to exempted sales to the Canteen Stores Department was not considered adequately.
2. Absence of Findings: The petitioner contended that there was no finding of wrong availment of ITC or producing false bills, which is essential for penalty under Section 27(4) of the Act.
3. Jurisdiction Issue: The petitioner challenged the imposition of a 300% penalty under Section 27(4) for the year 2012-2013, arguing that the amendment authorizing such penalties came into effect after the assessment order.
Respondent’s Counter: The respondent argued that after due consideration of the petitioner’s submissions and verification of documents, the ITC reversal was confirmed, justifying the penalty under Section 27(4). The respondent contended that the penalty was in line with the TNVAT Act and Rules.
Court’s Observations and Judgment: The court noted that the respondent failed to provide reasons for the penalty imposition, ignoring the petitioner’s explanations and not conducting sufficient verification. The court emphasized that penalties under Section 27(4) cannot be imposed without a show cause notice and findings of wrong availment of ITC.
Referring to precedent, the court highlighted that the imposition of penalties, especially under Section 27(4), should be based on careful scrutiny and a determination of whether grounds exist for such imposition. The court held that the respondent had lapsed jurisdiction by not issuing a show cause notice and failing to make findings of wrongful acts.
Regarding the retrospective imposition of penalties, the court clarified that the amended Section 27(4) allowing a 300% penalty couldn’t be applied for the assessment year 2012-2013, as the amendment came into effect later.
Conclusion: The judgment underscores the importance of due process and proper findings before imposing penalties under Section 27(4) of the TNVAT Act. The court’s decision provides clarity on the procedural aspects and safeguards against arbitrary imposition of penalties. This case serves as a precedent for taxpayers challenging penalties imposed without adherence to the statutory requirements, ensuring fairness and justice in tax assessments under the TNVAT Act.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
W.P(MD)No.16025 of 2022 is filed to quash the impugned order, dated 31.05.2023 as modified on 07.07.2022.
2. The petitioner is a registered Company under Companies Act. During the relevant period, the petitioner is a registered dealer coming within the purview of Tamil Nadu Value Added Tax Act, 2006. The petitioner is engaged in buying and selling of motor vehicles, chassis and sale of auto parts. Deemed assessment for the year 2012-2013 as provided under Section 22(2) of TNVAT Act (herein after referred as the Act) was completed. While that being so, the turn over was re-determined by the respondent for the year TIN 202-2013 vide proceedings dated 07.04.2016 under Section 27 of the Act. The petitioner challenged the said order before this Court along with the proceedings for the assessment year 2009-2010, 2010-2011 and 2012-2013. This Court has passed a Common order in W.P(MD)Nos.7982 to 7984 of 2016, vide order, dated 08.03.2021 and set aside the order on the grounds of natural justice and the respondent was directed to issue fresh personal hearing notice and while passing the order the respondent ought to consider each and every contention raised by the petitioner.
3. The respondent inorder to give effect to the order granted personal hearing to the petitioner and the petitioner has filed their written submission, dated 17.03.2022. But the respondent without appreciating the written submission and without making any further verification and without giving any reason, confirmed the earlier order, dated 31.05.2022 which was communicated on 17.06.2022. The petitioner submitted that there are errors apparent on the face of the record since there are arithmetical error apart from confirmation of penalty which was levied without jurisdiction. The petitioner was advised to file an application before the respondent under Section 84 of the Act and the same was filed on 22.06.2022 as well as by another petition on 29.06.2022.
4. The main contention in the said application is that the reversal of ITC as per return was not taken into consideration more particularly, relating to purchase return and there is no binding of any wrong availment of ITC are producing false bill, therefore, the respondent cannot impose penalty. Especially when there is no binding imposition of penalty under Section 24 (4) is without jurisdictions. The petitioner has raised the following grounds:
(a) Reversal of ITC treating sales turnover of exempted sales to Canteen Stores Department as exempted sales of goods covered under Section 15 of the Act.
(b) Reversal of ITC as per the return were not taken into consideration more particularly relating to purchase return.
(c ) There is no finding of any wrong availment of ITC or producing false bills etc. which is mandatory for the levy of penalty under Section 27(4) of the Act.
(d) Penalty under Section 27(4) of the Act for the year 2012-2013 was imposed at 300% of the tax due which was substituted by Act 13 of 2015 effective from 29.01.2016 and therefore such imposition of penalty is without authority of law.
(e) Penalty under Section 27(3) was imposed without any finding and was determined on the turnover disclosed in the books of account return and from WW for which also there is no jurisdiction to levy penalty under Section 27(3) of the Act.
(f) Only for the first time a turnover of Rs.48,86,708/-was taken into consideration for the purpose of levy of penalty under Section 27(3) of the Act which was not reflected in the earlier proceedings dated 07.04.2016.
(g) Penalty has been imposed without any finding of willful non disclosure or wrong availment of ITC.
5. The petitioner had produced details and explained about the errors apparent on the face of the record with regard to the jurisdiction to levy penalty at 300% for the year 2012-2013. The respondent, vide proceedings dated 07.07.2022, modified the said order by dropping the reversal of ITC in so far as it relates to sales of motor vehicles to Canteen Stores Department and in all other respects confirmed the earlier determination of the tax, reversal of ITC and penalties under Section 27(3)(C) as well as under Section 27(4) of the Act.
6. The contention of the petitioner is that the respondent has not stated any reason in the order. The explanations were totally ignored. No other verification was done with regard to quantum of reversal of ITC. In both the orders, it is stated that the penalty under Section 27(3)( C) and Section 27(4) of the Act is proposed to be levied. But, no reason was given with regard to levy and imposition of penalty at 300% for the year 2012-2013 for which there is no provision under Section 27(4) of the Act, even by the Amending Act 13 of 2015. Hence, the petitioner has filed this writ petition.
7. Pending writ petition, the respondent further proceed to impose penalty, vide impugned order, dated 04.01.2023 has imposed 300% penalty under Section 27(4) (2) of the Act for the Assessment year 2009-2010 and also levied penalty under Section 27(4) of the Act. Therefore, challenging the said impugned order, the petitioner had filed W.P(MD)No.2220 of 2023. Hence, both the writ petitions are taken up together and this Commons Order is passed.
8. The respondents have filed counter and stated that a proceedings under Section 27 of the Act was passed on 07.04.2016, challenging the same the petitioner had filed W.P(MD)Nos.7982 to 7984 of 2016 and this Court has set aside the order and directed to provide a fresh opportunity to the petitioner and pass orders. On receipt of said order, the petitioner had submitted reply and upon verification of the documents produced by the petitioner, the revision order, dated 07.07.2022 was passed following demand on merits:
Demand arrived in Assessment order dated 07.07.2022 with respect of Reversal of Input Tax Credit.
