Case Law Details
Indian Oil Corporation Limited Vs Deputy Commissioner (ST) (Madras High Court)
Madras High Court directed Assessing Officer to pass a speaking order, after hearing the petitioner in full, with regard to determination of appropriate rate of tax on Aviation Turbine Fuel (ATF).
Facts-
The petitioner has supplied Aviation Turbine Fuel (ATF) to various entities, airlines as well as other organisations and institutions. The returns filed by the petitioner for the period 2009-10 were taken up for assessment, pursuant to audit conducted in their place of business.
One of the issues that came to the attention of the officer related to the rate of tax on the ATF. He appeared to differ with the petitioner that the rate of tax ought not to be the concessional rate of 4% as claimed by the petitioner and had, in the pre-assessment notices, called for various particulars in support of the concession claimed.
The officer then has initiated proceedings under Section 84 to correct the error contained in order of assessment dated 24.11.2015 and bring to tax the difference in rate of ATF in the computation. In response, the petitioner has submitted all materials in respect of its claim for concessional rate that has come to be rejected by the officer who simply states that the issue has been considered in the original assessment.
Conclusion-
Thus, the order of assessment, in so far as it relates to the claim of concessional rate of tax on ATF is set aside, as is impugned order under Section 84. The petitioner will appear before the Assessing Officer on Thursday, the 29th of September, 2022, without awaiting any further notice in this regard, along with a copy of reply dated 29.02.2012 and other materials, if any, in support of its claim of concessional rate of tax.
The petitioner should be heard in full and a speaking order passed in this regard determining the appropriate rate of tax on ATF within a period of 8 weeks from date of personal hearing.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The petitioner has challenged proceedings of the sole respondent, Assessing Officer dated 31.10.2019, in terms of Section 84 of the Tamil Nadu Value Added Tax Act, 2006 (in short ‘Act’). The proceedings arise out of piquant circumstances.
2. The petitioner has supplied Aviation Turbine Fuel (ATF) to various entities, airlines as well as other organisations and institutions. The returns filed by the petitioner for the period 2009-10 were taken up for assessment, pursuant to audit conducted in their place of business.
3. One of the issues that came to the attention of the officer related to the rate of tax on the ATF. He appeared to differ with the petitioner that the rate of tax ought not to be the concessional rate of 4% as claimed by the petitioner and had, in the pre-assessment notices, called for various particulars in support of the concession claimed.
4. To be noted that the petitioner also appears to have furnished some materials in regard to the claim of concessional rate. While dealing with this issue, the discussion in the order of assessment dated 24.11.2015 is as follows:
Sale of ATF as declared goods … as per Entry 5(II) of Iind Schedule
During the years 2009-10 the dealers have effected Sales of ATF as declared goods @ 4% as per entry 5(II) of II nd Schedule for Rs.221536532/- For the above sales, the dealers were requested to furnish relevant documentary evidences and details of invoices etc.
For the sales made under this category at 4%, though this relates to sales of Declared goods, there are certain conditions specified in Sec. 14 of CST Act 1956 as listed below.
i) The ATF should have been sold to an aircraft operated by Turbo Propeller engine
ii) The take off mass capacity of theTurbo Propeller Aircraft should not exceed 40,000 Kg.
iii) The sales should be made to scheduled airlines notified by the Central Government
iv) The scheduled airlines should cater to the needs of Air Transport services.
The dealers have furnished statement regarding the above sales for the years 2009-10.
The dealers were requested to furnish the list of scheduled airlines as notified by the Central Government in the category of Turbo Propeller Aircraft.
Further, it was inferred from the year wise statement of concessional sales furnished by the dealers, that they have effected sales to Airlines such as Air Deccan, Jet Airways, Kingfisher airlines ltd., Paramount airways, and alliance airways etc. But it was not clear whether the sales of ATF made to the above airlines, fulfills the conditions listed above (I to IV).
Moreover the dealers have also effected concessional sales of ATF @ 4% to organizations, & Institutions other than Airlines, such as First flight couriers, Force Motors Ltd., GMR Industries Ltd., Lakshmi Machine works Ltd., Orient Flight school, Jindal Vijay nagar Steel Ltd., & One time customer, etc for which the concessional rate could not be allowed.
Hence the turnover of Rs.221536532/- relating to the year 2009-10 respectively, reported as sales of ATF as declared goods is proposed to be assessed at higher rate i.e. 2.9%.]=
The differential taxes due @ 25% is worked out in the following table.
| Year | Sales turnover – ATF as declared goods |
Differential Tax due @ 25% |
| 2009-10 | 221536532 | 55384133 |
5. Thus, the officer extracts the conditions specified in Section 14 of the Central Sales Tax Act, 1946 (in short ‘CST Act’) and states in that connection that it was ‘not clear whether the sales of AFT made to the airlines, fulfils the conditions listed in Section 14 of the CST Act’. He has thus, revealed his mind as to the uncertainly lurking therein as to whether the petitioner is entitled to the concession, having fulfilled the condition, or whether it is not so entitled.
6. The proper course of action would thus have been for the Assessing Authority to embark upon an exercise of fact finding as to whether the conditions listed by him had been complied with by the petitioner or not. Had he done so, after seeking the requisite particulars from the petitioner, he could well have come to a categoric finding as to the appropriate rate of tax to be levied, which is the proper course of action for him to have followed.
7. However, he leaves this issue hanging at the level of uncertainty and does not proceed with the matter. This is the first flaw in the assessment. The second flaw is he comes to a bald conclusion that the petitioner is not entitled to the concessional rate of tax as claimed and works out the differential tax of 25% in that order itself, albeit sans any reasoning in that regard.
8. A further flaw is having come to the aforesaid conclusion, he does not carry forward the differential tax to the computation. Taking advantage of this lapse, the petitioner has allowed this issue to lie and rightly so, since order dated 24.11.2015 does not make any variation to the turnover/tax returned on this account.
9. The officer then has initiated proceedings under Section 84 to correct the error contained in order of assessment dated 24.11.2015 and bring to tax the difference in rate of ATF in the computation. In response, the petitioner has submitted all materials in respect of its claim for concessional rate that has come to be rejected by the officer who simply states that the issue has been considered in the original assessment.
10. Thus, and being of the view that the issue does not warrant any discussion, he proceeds to correct the error that has occasioned in the computation originally. According to the learned counsel for the petitioner, there is also no narration in the order of assessment and the paragraph dealing with this issue is a mere proposal and no more.
11. Thus, and in the absence of any discussion in regard to this issue, he argues there is no question of rectification of the computation by rejecting the concessional rate claimed. I have extracted the relevant paragraph above in the interests of completion and am of the considered view that, notwithstanding the use of the term ‘proposed’, by the officer, the intention of the officer to reject the claim of concession is evident.
12. Perhaps he has not couched the rejection in so many words, but the mere use of the term ‘proposed to’ does not mean that the disallowance was at proposal stage. This argument of the assessee is rejected. However, and be that as it may, the issue in regard to claim of concession on ATF has not been looked into in a comprehensive and appropriate manner either at the time of assessment or at the time of revision.
13. Since the challenge in this writ petition is only in regard to the order under Section 84, I mould the same, to include the order of assessment dated 24.11.2015 as well, with the concurrence of Mr.Parthasarathy, learned counsel for the petitioner who agrees with the aforesaid approach.
14. Thus, the order of assessment, in so far as it relates to the claim of concessional rate of tax on ATF is set aside, as is impugned order under Section 84. The petitioner will appear before the Assessing Officer on Thursday, the 29th of September, 2022, without awaiting any further notice in this regard, along with a copy of reply dated 29.02.2012 and other materials, if any, in support of its claim of concessional rate of tax.
15. The petitioner should be heard in full and a speaking order passed in this regard determining the appropriate rate of tax on ATF within a period of 8 weeks from date of personal hearing. This writ petition is allowed in the aforesaid terms. No costs. Connected miscellaneous petitions are closed.
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