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Case Law Details

Case Name : Tvl. Future General India Insurance Co. Ltd. Vs Assistant Commissioner (State Tax) (Madras High Court)
Appeal Number : Writ Petition No.3534 of 2024
Date of Judgement/Order : 16/02/2024
Related Assessment Year :

Tvl. Future General India Insurance Co. Ltd. Vs Assistant Commissioner (ST) (FAC) (Madras High Court)

The Madras High Court recently rendered a significant ruling in the case of Tvl. Future General India Insurance Co. Ltd. v. Assistant Commissioner (ST) (FAC) [WP No. 3534 OF 2024 dated February 16, 2024]. The case revolves around the imposition of tax liability solely due to the absence of state-wise turnover in financial statements.  Hon’ble Madras High Court held that an assessment order passed by the Assessing Officer, had accepted the explanation of the assessee with regard to certain defects but had imposed GST at rate of 36% instead of 18 % on the ground that the financial statements submitted by the assessee did not reflect state-wise turnover, the impugned assessment order was to be set aside, and the matter was to be remanded to the Competent Authority for reconsideration. Thus, the writ petition is disposed of and the assessing officer is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh assessment order in accordance with law.

Facts:

Tvl. Future General India Insurance Co. Ltd. (“the Petitioner”), was a private general insurance company engaged in the business of providing insurance products. On August 16, 2021, the Petitioner received an audit notice from the Assistant Commissioner (State Tax) (FAC) (“the Respondent”). The Petitioner submitted documents in response to the said notice and replied to the defects raised in the audit slips. After issuing an intimation and a show cause notice (“the SCN”), the assessment order dated December 30, 2023 (“the Impugned Order”), was passed by the Competent Authority.

In the Impugned order, regarding defect No. 10, which pertains to the difference of turnover between P & L account and balance sheet, on the one hand, and GSTR-9, on the other. The Respondent accepted the Petitioner’s explanation that the difference in turnover between the Profit & Loss account, balance sheet, and GSTR-9 arose due to the financial statements pertaining to Pan-India operations, whereas GSTR-9 was limited to turnover in Tamil Nadu. The Petitioner had submitted a Chartered Accountant’s certificate specifying the turnover specific to Tamil Nadu, amounting to Rs. 80,89,05,068/-. However, the Respondent imposed State Goods and Services Tax (SGST) and Central Goods and Services Tax (CGST) at 18% each (36% in total) on the said turnover of Rs. 80,89,05,068/-, despite the Petitioner having already paid tax on the same.

Aggrieved by the impugned assessment order, the Petitioner filed a writ petition before the Hon’ble High Court of Madras.

Issue:

Whether Tax Liability can be imposed merely because the financial statement did not provide State-wise turnover?

Held:

The Hon’ble Madras High Court, in Writ Petition No. 3534 OF 2024 held as under:

  • Observed that, the turnover for an entity operating in multiple states in India, as reflected in the financial statements, and the turnover attributable to its operations in a particular state (in this case, Tamil Nadu) would vary.
  • Opined that the bifurcation of total and state-wise turnover is the only relevant factor, and the Competent Authority erred in imposing GST at rate of 36% instead of the applicable rate of 18%, despite the Petitioner having already paid tax on the turnover of Rs. 80,89,05,068/-.
  • Held that the Impugned Order was to be quashed and the matter was to be remanded to the Respondent for reconsideration.
  • Directed that, the Respondent to provide a reasonable opportunity to the Petitioner, including a personal hearing, and thereafter issue a fresh assessment order in accordance with law within a maximum period of two months.

Conclusion: The ruling of the Madras High Court in the case of Tvl. Future General India Insurance Co. Ltd. v. Assistant Commissioner (ST) (FAC) underscores the significance of accurate assessment and adherence to legal principles. It emphasizes that tax liability cannot be arbitrarily imposed based solely on technicalities such as the absence of state-wise turnover in financial statements.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

The petitioner assails an assessment order dated 30.12.2023.

2. The petitioner is a private general insurance company engaged in the business of providing insurance products. On 16.08.2021, the petitioner received an audit notice. The petitioner submitted documents in response to the said notice and replied to the defects raised in the audit slips. Eventually, after issuing an intimation and show cause notice, the impugned assessment order came to be issued.

3. Learned counsel for the petitioner invited my attention to the findings in the impugned order relating to defect No.10, which pertains to the difference of turnover between P & L account and balance sheet, on the one hand, and GSTR-9, on the other. He points out that the assessee had explained that the difference arises as a result of the fact that the financial statements pertain to the operation of the entity at a Pan India level, whereas the GSTR-9 return is limited to the turnover in Tamil Nadu. For purposes of providing information relating to the turnover specific to Tamil Nadu, he submitted that a certificate from a Chartered Accountant specifying such turnover was submitted. In spite of providing such documents, he pointed out that SGST and CGST was imposed at 18% each (instead of 18% in the aggregate) on Rs.80,89,05,068/-. He also pointed out from the returns of the petitioner that tax was already paid on the said sum of Rs.80,89,05,068.44. He also submits that the impugned order contains a jurisdictional error with regard to the determination of transitional credit, which was dealt with in defect No.5.

4. Mr.T.N.C.Kaushik, learned Additional Government Pleader, accepts notice on behalf of the respondents. He submits that the issues raised by the petitioner are factual issues and that the petitioner should be directed to avail of the statutory remedy.

5. On examining the impugned order, I find that the assessing officer has accepted the explanation of the petitioner with regard to certain defects. As regards defect No.10, as contended by learned counsel for the petitioner, the assessing officer has recorded findings without applying his mind to the fact that the turnover for an entity operating in multiple States in India, as reflected in the financial statements, and the turnover attributable to its operations in Tamil Nadu would vary. From the findings, it also appears that tax liability was imposed merely because the Chartered Accountant’s certificate did not provide State-wise turnover. This finding does not stand to reason because only the bifurcation of total and Tamil Nadu turnover is germane. It also appears that GST has been imposed at 36% instead of the applicable rate of 18%. Even with regard to GST at 18%, from the return placed on record by the petitioner, it appears that the tax liability in respect of the turnover of Rs.80,89,05,068/- was duly discharged. The total tax imposed under this head is about Rs. 14.56 crores and the patent errors justify interference with the assessment order even without examining the order in respect of other defects for which liability was imposed. Therefore, the impugned assessment order cannot be sustained.

6. Accordingly, the impugned assessment order is quashed in so far as defect Nos. 1, 4, 5, 7, 10 and 11 are concerned and the matter is remanded for reconsideration. The assessing officer is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh assessment order in accordance with law. It is open to the petitioner to raise all contentions before the assessing officer. The fresh reassessment order shall be issued within a maximum period of two months from the date of receipt of a copy of this order.

7. The writ petition is disposed of on the above terms. There will be no order as to costs. Consequently, connected miscellaneous petitions are closed.

***

(Author can be reached at info@a2ztaxcorp.com)

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