Case Law Details
Clean Switch India Pvt. Ltd. Vs State Tax Officer (Madras High Court)
The case revolves around an order dated 18.03.2024, which imposed tax and a 300% penalty on Clean Switch India Pvt. Ltd. for the delayed filing of returns, resulting in the reversal of Input Tax Credit (ITC). The order also pertains to the assessment year 2016-2017, with the initial assessment order issued on 03.09.2019. The petitioner, Clean Switch India Pvt. Ltd., neither appealed the assessment order nor filed a petition against it. However, on 06.02.2023, the petitioner submitted a rectification application, which was rejected by an order dated 17.08.2023. Consequently, the petitioner challenged this rejection by filing W.P. No. 35621 of 2023, leading to the remanding of the matter for reconsideration due to the non-speaking nature of the order.
Petitioner’s Argument
The petitioner’s counsel contended that the respondent accepted the rectification request regarding the wrong claim of ITC amounting to Rs. 40,15,403. However, regarding the delayed filing of returns and the subsequent reversal of ITC, the petitioner claimed that they had requested copies of the returns, notably by a letter dated 08.08.2019. Despite this request, the tax proposal was confirmed without providing the returns, and a 300% penalty was imposed. The petitioner argued that such a penalty, invoked under sub-section (4) of Section 27 of the Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act), was unjustified for merely delayed filing of returns. The petitioner supported this argument with a Division Bench judgment from the same court and cited other relevant case law regarding the scope of Section 84 of the TNVAT Act.
Respondent’s Defense
The learned Additional Government Pleader, representing the respondent, pointed out that the earlier order dated 17.08.2023 was set aside purely because it was non-speaking. The respondent argued that there was no directive to provide the returns to the petitioner and, therefore, no grounds to interfere with the rectification order.
Court’s Findings
Upon examining the impugned order, the court noted that the petitioner’s request regarding the erroneous ITC claim had been accepted. However, concerning the delayed ITC claim, the court observed that the returns for March 2017 were filed late on 02.08.2017, as documented in the Web Portal. The petitioner did not dispute this timeline. Given that the respondent’s conclusion was based on a reasonable assessment of the available materials, the court found no reason to interfere with the tax component of the order.
Penalty Assessment
Regarding the 300% penalty, the petitioner cited a judgment from the Division Bench in M/s. Shree Laxmi Jewellery Limited v. The State of Tamil Nadu, which established that sub-section (4) of Section 27 of the TNVAT Act should not be invoked solely due to delayed return filing. Despite this, the respondent failed to consider this judgment or its principles in the impugned order. The court determined that this oversight warranted interference with the penalty component of the order.
Conclusion
The Madras High Court disposed of W.P. No. 18171 of 2024 by setting aside the portion of the order dated 18.03.2024 concerning the imposition of the 300% penalty. The court remanded the matter for reconsideration and directed the respondent to issue a revised order within three months after providing the petitioner with a reasonable opportunity for a hearing. The connected miscellaneous petition was also closed.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An order dated 18.03.2024 is assailed in so far as it pertains to the tax and penalty imposed in respect of the belated filing of returns and the consequential reversal of Input Tax Credit (ITC). An assessment order for assessment year 2016-2017 was issued on 03.09.2019. The petitioner did challenge such order either by way of a statutory appeal or by way of a petition. On 06.02.2023, the petitioner filed a rectification application. Such rectification application was rejected by order dated 17.08.2023. W.P.No.35621 of 2023 was filed challenging such order. By accepting the contention that the order was non speaking, the matter was remanded for reconsideration. The order impugned herein was issued in these facts and circumstances on 18.03.2024.
2. Learned counsel for the petitioner submits that the respondent accepted the petitioner’s request for rectification with regard to the issue relating to the wrong claim of ITC to the extent of Rs.40,15,403/-. As regards the belated filing of returns and the reversal of ITC on that account, learned counsel contends that the petitioner had requested for a copy of the returns, including by letter dated 08.08.20 19. Without providing a copy of the petitioner’s returns, he submits that the tax proposal was confirmed by refusing to rectify. He also submits that penalty was imposed at 300%. Learned counsel submits that penalty cannot be imposed by invoking sub-section (4) of Section 27 of the Tamil Nadu Value Added Tax Act, 2006 NVAT Act) in respect of belated filing of returns. He submits that the ner had placed on record a judgment of a Division Bench of this Court to that effect. He also submits that the failure to consider a binding judgment of the High Court or the Supreme Court constitutes a valid reason for rectification. For this proposition, he relied upon the judgment of the Division Bench of this Court in Khivraj Motors Limited v. Assistant Commissioner (CT) and another, W.A.Nos.3201 to 3204 of 2004, judgment dated 04.02.2010. He also relies upon judgments with regard to the scope of Section 84 of the TNVAT Act.
3. Mr.C.Harsha Raj, learned Additional Government Pleader, accepts notice for the respondent. He points out that the earlier order dated 17.08.2023 was set aside by order dated 21.12.2023 in W.P.No.35621 of 2023 solely on the ground that such order was non speaking. He also points out that the order records that the petitioner had traced the old documents and that there was no direction in the said order to provide the returns to the petitioner. In these circumstances, he submits that no case is made out to interfere with the rectification order.
4. On examining the impugned order, it is evident that the petitioner’s contention was accepted with regard to the wrong claim of ITC after noticing that the dealer had rectified the error. As regards belated claim of ITC, it is recorded, in relevant part, as under:
“ The reply of the dealer is examined carefully. They have filed returns for the Month of March 2017 belatedly on 02.08.2017. Return copy available as per ‘Dealer details’ from the Web Portal [CF.Page 35].
Hence, the reply filed by the dealer is found not acceptable as they have not filed any proof of filing of return for the Month of March 2017 by availing of ITC amount of Rs. 1,28,30,514.00 within the prescribed time limit as per the provisions of Section 19(11) of the TNVA T Act 2006.”
From the above extract, it follows that the respondent noticed that the returns for the month of March 2017 were filed belatedly on 02.08.2017. The order also records that the copy of the return was available on the web portal. The petitioner does not assert that the return was not filed on 2017 and that it was filed earlier. The turnover and other particulars taken from the petitioner’s returns while recording conclusions on this issue. Since the conclusion was based on a reasonable appraisal of the material, no interference is warranted as regards the tax component.
5. As regards penalty, the petitioner relied on the judgment of the Division Bench of this Court in M/s. Shree Laxmi Jewellery Limited v. The State of Tamil Nadu, Tax Case (Revision) No.1 of 2016, judgment dated 01.2019 for the proposition that sub-section (4) of Section 27 of the TNVAT Act should not be invoked merely on account of belated filing of return. In spite of placing this judgment before the respondent, there is no mention of such judgment or any consideration of such principle in the impugned order. To that extent, interference with the order is called for.
6. For reasons set out above, W.P.No.18171 of 2024 is disposed of without any order as to costs by partly setting aside order dated 18.03.2024 only in so far as the imposition of penalty is concerned and remanding that aspect for reconsideration. After providing a reasonable opportunity to the ner, including a personal hearing, the respondent is directed to issue a order within a period of three months from the date of receipt of a copy of this order. Consequently, connected miscellaneous petition is closed.
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