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Judgment
Deepak Gupta, C.J.—These five writ petitions are being disposed of by a common judgment since the facts and legal issues involved in all the cases are identical. The only difference is that the petitions relate to different assessment years, i.e. 2008-2009 to 2012-2013.
The petitioner-company which is duly incorporated under the Companies Act, 1956 has set up a plant in the State of Tripura where it is manufacturing rubber thread. The petitioner purchases raw rubber/latex from the growers and pays purchase tax on the same. The petitioner-firm processes/manufactures rubber thread out of raw rubber. A large amount of this rubber thread is being sold outside the State either by transfer of stock on "F" form or by means of inter-State sale on "C" form. Value added tax @ 12.5% per annum was leviable on the sale of rubber thread sold in Tripura upto 03-05-2011 and thereafter @ 13.5% per annum w.e.f. 04-05-2011.
Notice was issued to the petitioner u/s 31(1) of the TVAT Act, 2004 to produce the books of account and other relevant documents. The Assessing Officer found that a very small proportion of the produce was being sold in Tripura and a major portion of the manufactured product was sold outside the State of Tripura. The case of the revenue is that the petitioner purchased raw rubber from the dealers and paid tax on the purchase of raw rubber. Thereafter, the rubber was processed and rubber thread was manufactured and this rubber thread was sold outside the State by charging CST which was collected from the consignees outside the State. According to the revenue, the assessee collected huge amount as CST on the sales made but it did not pay the amount but adjusted the amount towards the amount of VAT paid in the course of purchase of rubber by claiming input tax credit. According to the revenue, the input tax credit is not available against payment of Central Sales Tax (CST). The Assessing Officer also found that the petitioner firm did not produce the required "C" forms for many transactions during the course of hearing.
The dealer contested the notice on various grounds including the ground that input tax credit was available even in respect of sales made outside Tripura. It was further urged that the State of Tripura had no jurisdiction to levy tax on the sales made outside Tripura. The petitioner-assessee had submitted its returns for the years 2008-09 to 2012-13. In these assessments, it had claimed input tax credit for the amount collected by it as CST by adjusting it against the purchase tax payable by it in respect of purchase of raw rubber. The Assessing Officer did not accept the plea of the petitioner and held the assessee liable to pay tax amounting to Rs. 1,85,78,016.43 paisa, interest of Rs. 27,86,702.46 paisa and penalty @ 150% amounting to Rs. 2,78,67,024.64 paisa. Thus, the assessee was found liable to pay a total amount of Rs. 4,92,31,744.00. Against this order, the assessee approached the revisional authority and the revisional authority vide its order dated 20-02-2014 upheld the order of the assessing authority. Hence, these petitions.
The computation of tax made by the Assessing Officer is as follows:-
"
-:COMPUTATION:-
2008-09
2009-10
2010-11
2011-12
2012-13
The main issue is whether the petitioner is entitled to claim benefit of input tax credit and, therefore, set off the CST collected by it against the purchase tax payable by it.
We have heard Sri B. Debey, learned counsel appearing for the petitioner-company and Dr. A.K. Saraf, learned Sr. Counsel appearing for the revenue-State.
The main grounds raised by the petitioner are that since the manufactured rubber was sold outside the State of Tripura and was meant for sale outside the State of Tripura, no VAT under the TVAT Act could be levied on the inter-State sales. It is next contended that the petitioner is entitled to claim benefit of input tax credit even in respect of inter-State sales in terms of section 10 of the TVAT Act. In this behalf, it has also been contended that in terms of section 10(3) of the TVAT Act, the intention of the petitioner was to sell the product within the State of Tripura, but since there was no adequate market in Tripura, it was forced to sell the product outside the State of Tripura and it is the intention of the petitioner which has to be seen. It is next contended that CST can only be recovered by the Central Government and the State Government has no power to recover the same. It has further been urged that in the notices issued, there is no mention of section 9(2) of the CST Act and it is obvious that the authorities were recovering TVAT though now the plea taken is that Central Sales Tax was being recovered. It is also contended that the Superintendent is not empowered to issue notice or pass such orders and the power, if any, only lies with the Commissioner. It is also contended that the proper procedure was not followed and the imposition of penalty is wholly without jurisdiction. Mr. Dubey has also urged that the intention of enacting the VAT Act was that there should not be double taxation but in the present case, the petitioner is being denied the benefit of input tax credit and, therefore, this amounts to double taxation which is against the scheme of the VAT Act.
On the other hand, Dr. Saraf, learned Senior Counsel appearing for the State, submits that there can be no quarrel with the proposition that the State has no power to impose tax on inter-State sales. He, however, submits that what is sought to be recovered is Central Sales Tax as would be clear from the assessment orders. It is submitted by Dr. Saraf that though the assessing authority would have been better advised to also mention section 9(2) of the CST Act while issuing the notices, the mere non-mention of such provision would not be sufficient to hold that the State is not recovering Central Sales Tax but is recovering value added tax. On merits, Dr. Saraf has urged that in view of various provisions of the TVAT Act, especially section 10 and sub-sections (3) and (7) thereof, no input tax credit can be availed of in respect of inter-State sales. He submits that the provisions of the TVAT Act do not in any manner provide that input tax credit is available in respect of inter-State sales. Dr. Saraf contends that a taxing statute has to be interpreted in the context of the language of the Act and if the Act does not permit grant of benefit of input tax credit on inter-State sales, then merely because of the concept of VAT the same cannot be granted.
The legal provisions:
To appreciate the various arguments raised by the petitioner, it would be pertinent to refer to certain provisions of the Tripura Value Added Tax Act and Rules.
Relevant provisions of the Tripura Value Added Tax (TVAT) Act:-
Sections 2(13) and 2(28) read as follows:-
"2(13)."Input-Tax" means the tax paid or payable under this Act by a registered dealer to another registered dealer on the purchase of goods in Tripura in the course of business for resale or for the manufacture of taxable goods or for use as containers or packing material or for the execution of works contract;
2(28). "Tax" means the tax payable under this Act."
Section 10 deals with Input tax credit and the relevant portion of section 10 reads as follows:-
"10. Input tax credit:- (1) For the purpose of calculating the net tax payable by a registered dealer for any tax period after being registered, an input tax credit as determined under this section shall be allowed to such registered dealer for the tax paid or payable in respect of all taxable purchase of goods as mentioned in schedule VIII and all taxable sales other than such sales as may be prescribed subject to the following conditions:
xxx xxx xxx
(c) Input tax credit is to be given only after commencement of sale of taxable goods ''and purchase of taxable goods as mentioned in schedule VIII.''
(d) In respect of inputs used in taxable goods sent on stock/consignment transfer, tax paid in excess of 4% or the prevailing rate of C.S.T. on such inputs is to be credited.
xxx xxx xxx
(3) Input tax credit shall be allowed for purchase of goods made within the State of Tripura from a registered dealer holding a valid certificate of registration and which are intended for the purpose of-
(a) sale or resale by him in the State of Tripura; or
(b) use as raw material or as capital goods in the manufacturing and processing of goods other than those exempted from tax under this Act intended for sale in the State of Tripura; or
(c) sale in the course of export out of the territory of India; or
(d) for use as containers for packing of goods other than those exempted from tax under this Act for sale or resale in the State of Tripura;
Provided that if purchases are used partially for the purposes specified in this sub-section, input tax credit shall be allowed proportionate to the extent they are used for the purposes specified in this sub-section.
xxx xxx xxx
(6) No input tax credit under sub-section (1) shall be claimed or be allowed to a registered dealer-
xxx xxx xxx
(ix) in respect of goods used for transfer of stock other than by way of sale outside the State of Tripura;
(x) in respect of sales exempt from tax as specified in Schedule III.
(xi) in respect of raw materials used in manufacture or processing of goods where the finished products are despatched other than by way of sales:
Provided that in respect of transactions falling under item (ix), input tax credit may be allowed on the tax paid in excess of 4% on the raw materials used directly in the manufacture of the finished products.
(7) The Commissioner may, after giving sufficient reasons in writing, reject the method adopted by the registered dealer in a year to determine the extent to which goods are used, consumed or supplied or intended to be used, consumed or supplied, in the course of making taxable sales and calculate the amount of input tax credit after giving the registered dealer concerned an opportunity of being heard."
Sections 18(1), 31(5) and 85 read as follows:-
"18(1). The State Government may, for carrying out the purposes of this Act, appoint a Commissioner of Taxes, and such other persons to assist him as it thinks fit.
xxx xxx xxx
31(5). If the Commissioner is satisfied that the dealer, in order to evade or avoid payment of tax-
(a) has failed to furnish without reasonable cause, returns in respect of any period by the prescribed date; or
(b) has furnished incomplete and incorrect returns for any period; or
(c) has availed himself of tax credit to which he is not entitled to; or
(d) has followed such method of accounting which does not enable the Commissioner to assess the tax due from him, he shall, after giving the dealer reasonable opportunity of being heard, direct him to pay, in addition to tax and interest payable by him, a penalty not exceeding one and half times of the tax due but which shall not be less than 10% of that amount.
xxx xxx xxx
Delegation of Powers-The Commissioner may, subject to such restrictions and conditions as may be prescribed, delegate, by notification in the Official Gazette, any of his powers under this Act to any person appointed under sub-section (1) of section 18 to assist him."
Relevant provisions of the Tripura Value Added Tax (TVAT) Rules:-
Rules 8(1) and 21(4) of the TVAT Rules read as follows:-
"8(1). There shall be the following authorities to assist the Commissioner:-
(i) Additional Commissioner of Taxes,
(ii) Joint Commissioner of Taxes,
(iii) Deputy Commissioner of Taxes,
(iv) Assistant Commissioner of Taxes.
(v) Superintendent of Taxes,
(vi) Inspector of Taxes.
(vii) Any other person appointed as such by the State Government.
21(4). In the notice referred to in sub-rule (3), the date of hearing shall be fixed ordinarily not before fifteen days from the issue of such notice."
Relevant provisions of the Central Sales Tax (CST) Act:-
In addition thereto, reference may be made to section 9(2) of the CST Act which reads as follows:-
"9(2). Subject to the other provisions of this Act and the rules made thereunder, the authorities for the time being empowered to assess, re-assess, collect and enforce payment of any tax under general sales tax law of the appropriate State shall, on behalf of the Government of India, assess, re-asses, collect and enforce payment of tax, including any interest or penalty, payable by a dealer under this Act as if the tax or interest or penalty payable by such a dealer under this Act is a tax or interest or penalty payable under the general sales tax law of the State; and for this purpose they may exercise all or any of the powers they have under the general sales tax law of the State; and the provisions of such law, including provisions relating to returns, provisional assessment, advance payment of tax, registration of the transferee of any business, imposition of the tax liability of a person carrying on business on the transferee of, or successor to, such business, transfer of liability of any firm or Hindu undivided family to pay tax in the event of the dissolution of such firm or partition of such family, recovery of tax from third parties, appeals, reviews, revisions, references, refunds, rebates, penalties, charging or payment of interest, compounding of offences and treatment of documents furnished by a dealer as confidential, shall apply accordingly:
Provided that if in any State or part thereof there is no general sales tax law in force, the Central Government may, be rules made in this behalf make necessary provision for all or any of the matters specified in this sub-section."
Having made reference to the various legal provisions, we now propose to deal with the contentions raised before us. At the outset, it may be stated that Dr. Saraf, learned Senior Counsel appearing for the State, fairly admitted that the State has no legislative competence to tax inter-State sales. It is also not disputed before us by the parties that the tax now sought to be recovered is the amount collected on account of inter-State sales.
Interpretation of Taxing Statutes:
We have quoted all the legal provisions hereinabove and since these provisions are to be interpreted, it would be relevant to refer to the law relating to interpretation of taxing statutes.
With regard to taxing statutes, interpretation has to be made keeping in view the language of the statute. In this regard, reference may be made to the judgment of the Apex Court in A.V. Fernandez Vs. The State of Kerala, In para-29 of the judgment, the Apex Court held as follows:-
"29. It is no doubt, true that in construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of the law and not merely to the spirit of the statute or the substance of the law. If the Revenue satisfies the Court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the legislature and by considering what was the substance of the matter. We must of necessity, therefore, have regard to the actual provisions of the Act and the rules made thereunder before we can come to the conclusion that the appellant was liable to assessment as contended by the Sales Tax Authorities."
Reference may also be made to the judgment of the Apex Court in Murarilal Mahabir Prasad and Others Vs. Shri B.R. Vad and Others, wherein the Apex Court held as follows:-
"28. The principle thus stated has hardly ever been doubted but it is necessary in the application of that principle to remember that though the benefit of an ambiguity in a taxing provision must go to the subject and the taxing provision must receive a strict construction, "that is not the same thing as saying that a taxing provision should not receive a reasonable construction". If the statute contains a lacuna or a loophole, it is not the function of the court to plug it by a strained construction in reference to the supposed intention of the Legislature. The Legislature must then step in to resolve the ambiguity and so long as it does not do so, the tax-payer will get the benefit of that ambiguity. But, equally, courts ought not to be astute to hunt out ambiguities by an unnatural construction of a taxing section. Whether the statute, even a taxing statute, contains an ambiguity has to be determined by applying normal rules of construction for interpretation of statutes. As observed by Lord Cairns in Pryce v. Monmouthshire Canal and Railway Companies, cases which have decided that Taxing Acts are to be construed with strictness, and that no payment is to be exacted from the subject which is not clearly and unequivocally required by Act of Parliament to be made, probably meant little more than this, that, inasmuch as there was not any a priori liability in a subject to pay any particular tax, nor any antecedent relationship between the taxpayer and the taxing authority, no reasoning founded upon any supposed relationship of the taxpayer and the taxing authority could be brought to bear upon the construction of the Act and therefore, the taxpayer had a right to stand upon a literal construction of the words used, whatever might be the consequences.
The true implication of the principle that a taxing statute must be construed strictly is often misunderstood and the principle is unjustifiably extended beyond the legitimate field of its operation. Indeed, the more well-expressed the principle as in the Cape Brandy case (supra), greater the reluctance to see its limitations. In that famous passage marked by a happy turn of phrase, Rowlatt, J. said, "there is no equity about a tax. There is no presumption as to a tax." There is no equity about a tax in the sense that a provision by which a tax is imposed has to be construed strictly, regardless of the hardship that such a construction may cause either to the treasury or to the taxpayer. If the subject falls squarely within the letter of law he must be taxed, howsoever inequitable the consequences may appear to the judicial mind. If the Revenue seeking to tax cannot bring the subject within the letter of law, the subject is free no matter that such a construction may cause serious prejudice to the Revenue. In other words, though what is called equitable construction may be admissible in relation to other statutes or other provisions of a taxing statute, such a construction is not admissible in the interpretation of a charging or taxing provision of a taxing statute. Speaking for the Court in C.I.T., Madras v. Ajax Products Ltd. (supra), Subba Rao, J., after citing the passage from the judgment of Rowlatt J. in the Cape Brandy case said: "To put it in other words, the subject is not to be taxed unless the charging provision clearly imposes the obligation"."
This view was reiterated in Shrimati Tarulata Shyam and Others Vs. Commissioner of Income Tax, West Bengal, and in Polestar''s case (supra). In the latter judgment, the Apex Court observed as follows:-
"11. xxx xxx xxx
If the language of a statute is clear and explicit, effect must be given to it, for in such a case the words best declare the intention of the law-giver. It would not be right to refuse to place on the language of the statute the plain and natural meaning which it must bear on the ground that it produces a consequence which could not have been intended by the legislature. It is only from the language of the statute that the intention of the Legislature must be gathered, for the legislature means no more and no less than what it says. It is not permissible to the Court to speculate as to what the Legislature must have intended and then to twist or bend the language of the statute to make it accord with the presumed intention of the legislature. xxx"
In Ajmera Housing Corporation and Another Vs. Commissioner of Income Tax, the Apex Court again held as follows:-
"36. It is trite law that a taxing statute is to be construed strictly. In a taxing Act one has to look merely at what is said in the relevant provision. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. There is no room for any intendment. There is no equity about a tax. (See: Cape Brandy Syndicate v. IRC: (1921) 1 KB 64 and Federation of A.P. Chambers of Commerce & Industry & Ors. v. State of A.P. & Ors.). In interpreting a taxing statute, the Court must look squarely at the words of the statute and interpret them. Considerations of hardship, injustice and equity are entirely out of place in interpreting a taxing statute. (Also see: Commissioner of Sales Tax, Uttar Pradesh Vs. The Modi Sugar Mills Ltd.,
We now propose to interpret the various provisions in line with the aforesaid judgments of the Apex Court.
Whether the petitioner is entitled to the benefit of input tax credit by taking benefit of the CST payable in respect of inter-State sales:
Input tax has been defined to mean the tax paid or payable under the Act. Obviously, the word "Act" has to mean the Tripura Value Added Tax Act, 2004 as per the definition of the word "Act" contained in section 2(1) of the Act. Therefore, input tax is relatable to the tax paid or payable only under the TVAT Act and not under the Central Sales Tax Act. Reference may also be made to the definition of the word "Tax" which has been defined in section 2(28) to mean tax payable under the Act, i.e. the TVAT Act.
Section 10 is the most important section and sub-section (1) of section 10 permits a registered dealer to take benefit of input tax credit as determined under this section. Sub-section (3) of section 10 is very important and it clearly mentions that the input tax credit is permitted only for purchase of goods made within the State of Tripura from a registered dealer and furthermore, these goods should be intended for sale or resale in the State of Tripura or used as a raw material for manufacture or processing of goods intended for sale in the State of Tripura. Such input tax credit is also available in respect of sales in the course of export outside the territory of India. The proviso to sub-section (3) clearly lays down that if purchases are used partially for the purposes specified in the sub-section, input tax credit shall be allowed proportionate to the extent they are used for the purposes specified in the sub-section. It is thus clear that the input tax credit is allowed only in respect of those goods which are either intended to be sold in the State of Tripura or are being exported outside the territory of India.
The State is entitled to levy tax only on sale transactions which take place in the State of Tripura. There is no manner of doubt that the State cannot levy any tax on inter-State sales. The opening portion of sub-section (6) of section 10 clearly provides that no input tax credit shall be allowed to a registered dealer in respect of goods used for transfer of stock other than by way of sale outside the State of Tripura. It is urged by Sri Dubey, learned counsel for the petitioner, that this would mean that if the goods are sold outside the State of Tripura, the benefit of input tax credit would be available. We are unable to accept this submission.
A conjoint reading of the provisions of the Act clearly shows that input tax credit can be claimed only in respect of tax paid or payable under the Act. Section 10(3) makes it absolutely clear that input tax credit is permissible only in respect of sales or resales made within the State of Tripura. Section 10(6) is couched in negative language and is in the nature of an exception or a proviso to subsection 10(1). We have to read section 10(6) along with section 10(1) and when both of these parts of the section are read harmoniously, then even if a person is entitled to benefit of input tax credit u/s 10(1) but is excluded u/s 10(6), he would not be entitled to get the benefit of input tax credit. Clause (ix) of section 10(6) provides that input tax credit will not be available in respect of transfer of stock, other than by way of sale outside the State of Tripura. This by no stretch of imagination can be interpreted to mean that under Clause (ix) of sub-section (6), such benefit has been given in respect of inter-State sales. Such an interpretation would defeat the very purpose of the legislation. When the language of the legislation is clear, we cannot do violence to the language and misinterpret it in such a manner that the purport and intention of the legislature is defeated by such interpretation to the Act.
On reading all the provisions of the Act, we have no doubt in our mind that benefit of input tax credit is only available in respect of taxes collected and payable under the TVAT Act. The benefit of input tax credit is not available in respect of Central Sales Tax or any other tax which may have been collected or which may be payable under any other law.
Concept of VAT:
Sri Dubey made reference to the judgment of the Madras High Court in USA Agencies Vs. The Commercial Tax Officer, to contend that the purpose of implementing the VAT Act was to ensure that there is no double taxation. He has referred to the judgment in detail. There is no quarrel with the proposition that the purpose of bringing in a value added tax is that no item is taxed twice and at every stage, only the additional value or the added value is to be taxed. However, this is still in the realm of planning for the future. The States have not given up their rights to impose sales tax or value added tax and the dream of having a unified tax structure for the entire country is still an Utopian dream. This Court does not decide cases on what is the final goal of the policy. Cases are decided on the basis of the language of the statute. When the language of the statute is clear and permits of only one interpretation, then as we have held above, the intention of the legislature cannot be set at naught by doing violence to the language employed in the statute.
From a reading of the various provisions of the TVAT Act, we have no doubt in our mind that the intention of the State of Tripura was to give benefit of input tax credit only in respect of sales intended or made within the State of Tripura. There is no doubt in our mind that the Act specifically excludes from its ambit, the inter-State sales and the benefit of tax paid on inter-State sales cannot be availed of by the petitioner to claim input tax credit. There is no ambiguity in the language and, therefore, reliance placed by Sri Dubey on the judgments of the Apex Court in Commissioner of Income Tax, Bombay etc. Vs. M/s. Podar Cement Pvt. Ltd. etc., and Commissioner of Income Tax, Karnataka, Bangalore Vs. M/s. Shaan Finance (P) Ltd., Bangalore, is totally misplaced.
Intention:
Sri Dubey urged that it was the intention of the assessee to sell the manufactured goods within the State of Tripura in terms of section 10(3) of the Act. He submits that it is the only intention of the manufacturer which has to be taken into consideration and if for certain reasons like non-availability of the market, the goods are sold outside the State of Tripura that cannot be read to mean that the intention of the dealer was not to sell goods within the State of Tripura. On the other hand, Dr. Saraf urges that intention has to be gathered from the final action and not by the mere ipse dixit of the assessee.
We are not at all impressed with the argument raised on behalf of the petitioner. No document like a project report has been placed on record to show that when the petitioner set up the plant, his intention was to sell the goods within the State of Tripura. Some material like a project report or a feasibility report should have been produced before this Court to show that when the plant was set up, it was the intention of the dealer to sell the goods within the State of Tripura. There may be a case where the dealer sets up a plant to produce some goods which can be used by some other factory within the State. If this is reflected in the feasibility report and evidence is led to show that for reasons beyond the control of the dealer, the other plant where the goods of the dealer were to be consumed has shut down, then the dealer can be heard to argue that he was forced to sell the goods outside the State of Tripura. There is no such material placed on record in this case.
As far as the intention of a party is concerned, the Court cannot get inside the mind of the petitioner. The intention of the party has to be determined from the material placed on record. In the present case, almost the entire production for the five assessment years has been sold outside the State of Tripura. The intention of a party has to be judged from its action and as far as the actual action is concerned, it is clear that right from the very inception, the petitioner has been selling almost all its produce outside the State of Tripura. Therefore, we have no hesitation in holding that it was not the intention of the petitioner, while setting up the plant, to sell the produce in Tripura. In this regard, we may make reference to the judgment of the Apex Court in Polestar Electronic (Pvt.) Ltd. Vs. Additional Commissioner, Sales Tax and Another, wherein the Apex Court held as follows:-
"4. xxx But in view of the innumerable transactions that may be entered into by the dealers, it would be well nigh impossible for the Taxing Authorities to ascertain in each case whether the goods were purchased as being intended for re-sale or for use as raw materials in the manufacture of goods for sale. xxx"
True it is, that in Polestar''s case declaration was given by the dealer. Even in the absence of any such declaration in the present case, we are clearly of the view that the intention of the dealer has to be judged from the final action which takes place and, therefore, we have no hesitation in holding that the assessee cannot claim that because his intention was to sell the goods within the State of Tripura, he is entitled to benefit of input tax credit.
Jurisdiction of authorities of State to collect CST:
It is next contended by Mr. Dubey that the Taxing authorities of the State of Tripura have no authority or jurisdiction to collect tax, interest or penalty under the Central Sales Tax Act and, therefore, the entire assessment is without jurisdiction. This argument has been made without considering the import of section 9 of the CST Act and especially, sub-section (2) of section 9 which we have quoted hereinabove. Section 9 clearly lays down that the tax payable by any dealer under the Central Sales Tax Act in the course of inter-State trade or commerce shall be levied by the Government of India but shall be collected by the Government of the State from which the movement of the goods commenced. It is not disputed that the movement of the rubber thread commenced from Tripura. Therefore, the authorities in the State of Tripura are entitled to collect the tax. Sub-section (2) makes it amply clear that the authorities empowered to assess, reassess, collect and enforce payment of any tax under the sales tax law of the appropriate State shall on behalf of the Government of India asses, reassess, collect and enforce payment of tax including interest and penalty payable by a dealer under the Central Act. This leaves no manner of doubt that the Commissioner of Taxes, Tripura had the authority to pass the impugned orders and, therefore, this contention is also without any merit and hence, rejected.
Non-mention of provisions of CST:
It has further been urged by Sri Dubey that in the notices issued to the assessee, there is no mention of the Central Sales Tax Act much less section 9(2) of the Act. He submits that this is not a case of mere non-mentioning of section but from the notices it is clear that the authority was not taking action under the Central Sales Tax Act and what was demanded was VAT under the TVAT Act and not CST. On the other hand, Dr. Saraf, learned Senior Counsel for the Revenue, contends that though there is no reference to section 9(2) of the CST Act in the notices, mere non-mentioning of the section is not fatal to the case of the revenue. In this behalf, he has made reference to the judgments of the Allahabad High Court in Pawansut Bangle Stores Vs. Assistant Sales Tax Officer and Another, and Footer Mal Megh Raj Vs. The Commissioner, Sales Tax, . In both the cases, it was held that merely because in the notice of assessment, it was not mentioned that recovery was to be made under the Sales Tax Act and there was no mention of the provisions of the Sales Tax Act would not make the notices invalid. In para-7 of the latter judgment, the Allahabad High Court held as follows:-
"7. Now, it is not disputed that there is no separate provision under the Central Sales Tax Act for reopening an assessment and by virtue of Section 9(3) of the Central Sales Tax Act, the assessment of an escaped turnover of inter-State sales can only be made by issuing notice u/s 21 of the U.P. Sales Tax Act. The only defect pointed out in the notice is that it does not mention Section 9(3) of the Central Sales Tax Act. As had been pointed out by the Judge (Revisions) that omission is not material because it did not mislead or prejudice the assessee in any way. xxx"
It is well settled law that if an authority has the power and jurisdiction to take certain action, then merely because a wrong provision of law is mentioned or because no provision of law is mentioned, the action cannot be set aside on this ground. After considering the entire record, we are clearly of the view that the intention of the taxing authorities of the State was to collect the CST which had not been deposited by the assessee by claiming input tax credit. We are in agreement with the law laid down by the Allahabad High Court and, therefore, we hold that merely because there was no reference to the provisions of the Central Sales Tax will not make the action illegal, if otherwise the authorities of the State had jurisdiction to take the said action.
Power of Commissioner alone:
Mr. Dubey next contends that only the Commissioner can exercise powers u/s 31(5) of the TVAT Act. According to him, in the present case the powers have been exercised by the Superintendent of Taxes and, therefore, also the order is without jurisdiction. On the other hand, Dr. Saraf has drawn our attention to the notification dated 01-04-2006, whereby, in exercise of the powers conferred u/s 85 of the TVAT Act, the Commissioner of Taxes has delegated the powers of the Commissioner to the Superintendent of Taxes under various sections and one of such section is section 31 of the Act. The said notification reads as follows:-
"No. F.1-1(2)-TAX/92/5125-186 Government of Tripura Office of The Commissioner of Taxes Kar Bhawan: Agartala.
Dated, Agartala, the 01st April, 2006.
NOTIFICATION
In exercise of the powers conferred by section 85 of the Tripura Value Added Tax Act, 2004 (Tripura Act No. 1 of 2005) the powers of the Commissioner of Taxes u/s 10, 19, 20, 21, 22, 24, 25, 27, 30, 31, 32, 34, 36, 37, 38, 39, 40, 43, 44, 46, 48(4), 48(5), 49, 52, 53(3), 59, 60, 66(2), 75, 77 and 80 of the said Act are hereby delegated to the Superintendent of Taxes w.e.f. 27th April 2005.
The concerned officers will exercise the powers so delegated to them in their respective arrears.
Sd/- (01/4/06) (M.S. Bhattacharjee) Commissioner of Taxes, Government of Tripura."
In view of this notification, the Superintendent had the power to issue such order. It would be pertinent to mention that the notification has not been challenged by the petitioner.
Dealing with this issue, Mr. Dubey has also contended that u/s 85, the Commissioner can delegate the powers only for the purposes of assisting and there is excessive delegation of powers in this case. u/s 18(1), the Government is entitled to appoint a Commissioner of Taxes and such other persons to assist him. This section empowers the State Government to appoint various officers; the senior most being the Commissioner of Taxes and many other posts at the lower level. Section 85 empowers the Commissioner to delegate his powers under the Act to any person appointed under sub-section (1) of section 18 to assist him. When both the sections are read together, it is amply clear that the power of the Commissioner to delegate his powers is hedged by only one condition that he can delegate these powers only to a person appointed under sub-section (1) of section 18 to assist him. The words "assist him" have to be read in the context of section 18(1) and, therefore, the Commissioner can only delegate the powers to a person appointed to assist him u/s 18, and not to any other person. In the present case, the Superintendent of Taxes has been appointed u/s 18(1) and, therefore, also the Commissioner had the power to delegate his authority to him.
Commissioner only has power to determine correctness of method:
It was next urged by Sri Dubey that in terms of subsection (7) of section 10, the Commissioner only has jurisdiction to reject the method adopted by the registered dealer to determine the extent to which goods are used for calculating the amount of input tax credit. He submits that the method has not been rejected and, therefore, there is no power with the Commissioner to issue an order rejecting the claim of the petitioner for the benefit of input tax credit. This argument has been made only for the purpose of being rejected. There is no merit in the same. Sub-section (7) only deals with those situations where a dealer adopts a method to arrive at the value of the inputs or goods which are used or consumed for making the taxable goods. Under sub-section (7) the Commissioner has the power to determine whether the method is right or wrong. In the present case, the impugned order has not been passed under subsection (7) but has been passed in exercise of the powers vested in the Commissioner u/s 9(2) of the Central Sales Tax Act. It would also be pertinent to mention that sub-section (7) would come into play only where the benefit of input tax credit is available. If no input tax credit is available under law, then the question of determining the correctness of the method does not arise.
It was next urged by Sri Dubey that u/s 31 the audit assessment does not cover method and he submits that no assessment can be reopened unless the conditions of sub-section (7) of section 10 are fulfilled. Again we find no merit in this submission. The basic issue is whether the assessee is entitled to claim benefit of input tax credit in respect of the tax collected/paid or payable for inter-State sales. If such benefit is available, then the petitioner is entitled to the same. However, if such benefit is not at all available and the petitioner has collected the Central Sales Tax, then obviously it cannot set it off against the purchase tax and must deposit the same with the appropriate authority.
No proper notice:
The next issue raised by Sri Dubey is that no proper notice was issued to the petitioner and the petitioner had been prejudiced inasmuch as very short notices were issued to the petitioner and it could not produce all the relevant documents before the Assessing Authorities. He has drawn our attention to rule 21(4) of the TVAT Rules which provides that ordinarily the date of hearing shall be fixed not before fifteen days from the issue of such notice. He submits that as far as the present case is concerned, adequate notice was not given to the petitioner and the cases for five years were disposed of in great haste within a period of 10 to 15 days even though no proceedings were initiated for more than five years. He has also drawn our attention to rule 21(6) which lays down that the demand notice for amount of tax and penalty due from a dealer should not ordinarily be less than thirty days after service of notice. In the present case, notice of only fifteen days was given.
As far as this part of the case is concerned, we are in total agreement with Sri Dubey. Whenever a judicial or quasi-judicial authority takes action against a person, it must give that person a reasonable opportunity of putting forth his case. When the rules provide for a minimum period of notice, then it is expected that the authority acting under the rule should give adequate notice to the affected party to put forth his case. The issuance of a notice is not a mere formality. A notice is required to be issued so that the affected party has reasonable opportunity to collect all the material which may be available before it and place it before the authority issuing the notice. Time and again, we have found that short notices are being issued by the taxation authorities in the State of Tripura. First the authorities sleep over the matters for 4 to 5 years. Then they awaken from their deep slumber and suddenly become very active and do not give a reasonable opportunity to the assessee to put forth his case.
In the present case, five notices should have been issued for the five assessment years giving at least 15 days time to the assessee to respond. The manner in which the notices have been issued is not proper. The first notice was issued on 01-02-2014 and in this notice, it was stated that the Superintendent of Taxes felt that he had reasons to believe that detailed scrutiny of returns for the period 2008-09 to 2013-14 (upto 31-12-2013) is necessary. What are the reasons have not been spelt out. The Superintendent wanted to reopen the entire proceedings from the year 2008 till 2014. This notice is dated 01-02-2014 and it requires the petitioner to appear before the Superintendent of Taxes on 13-02-2014. To say the least, the manner in which this notice has been issued is highly improper. No reasons have been spelt out as to why detailed scrutiny is required and nothing is stated in the notice with regard to the nature of the inquiry.
The second notice is dated 12-02-2014 and it is couched in identical language but the date of appearance has been fixed as 21-02-2014. It appears that this notice was issued because no hearing was to be held on 13-02-2014. Thereafter, third notices were issued on 22-02-2014 wherein for the first time some reasons are given and there is mention of penalty. This notice reads as follows:-
"
No. 16180012046/586 Government of Tripura Office of The Superintendent of Taxes Charge-VIII, Agartala.
Dated, Agartala The 22nd Feb, 2014
NOTICE
Whereas, it appears from the records, the dealer/firm furnished incomplete and incorrect returns for the periods from 2008-09 to 2012-13.
Whereas, the dealer/firm availed input tax credit to which the dealer/firm are not entitled to get input tax credit in respect of interstate sale.
AND
Whereas, from the books of accounts as well as returns furnished by the dealer/firm during the period from 2008-09 to 2012-13, it appears that the dealer had adjusted input tax credit against the central sale tax so collected in course of interstate sale.
AND
Whereas, adjustment of input tax credit with CST is not illegible as per subsection (3) of section 10 of the TVAT Act, 2004 and thus the dealer has committed offence u/s. 25 of the TVAT Act, 2004.
NOW, therefore, the dealer/firm is asked to appear by person or his authorized representative on 25/02/2014 at 11 AM in the chamber of the Superintendent of Taxes, Ch-VIII, Kar Bhavan, Palace Compound, Agartala and to adduce and Show Cause as to why penalty u/s. 31(5) of the said Act shall not be imposed for such offence as stated above.
In the event of failure to comply with the term of the notice decision will be taken exparte without making any further reference.
Yours faithfully, Sd/- (N.C. DAS) Superintendent of Taxes Charge-VIII, Agartala."
This was the first notice which was a complete notice and which set out the case that the petitioner had wrongly claimed input tax credit for the CST. Here also another show-cause notice was included in this notice as to why penalty be not imposed. Shockingly, though the notice is dated 22-02-2014, the assessee has been asked to appear on 25-02-2014. It is virtually impossible for any assessee to prepare a reply for a period of more than five years in three days. Therefore, the manner in which notices have been issued is highly improper.
Though the manner in which the notices have been issued are highly improper since for the assessment years 2008-09, 2009-10 and 2010-11 there is no dispute between the parties with regard to the amount collected as CST and all the ''C'' forms have been produced, no prejudice has been caused to the petitioner. Therefore, the basic assessments assessing the tax and interest payable for these three years are upheld. With regard to the years 2011-12 and 2012-13, since there is some dispute with regard to the ''C'' forms and we are of the opinion that no proper opportunity was given to the petitioner, the assessment orders are set aside and the proceedings shall now commence from the stage of filing of reply by the petitioner.
Penalty:
It is lastly contended by Mr. Dubey that the maximum penalty of 150% has been imposed without giving any reasons as to why penalty should be imposed.
We have perused the orders in question and find that no reason has been given by the assessing authority as to why maximum penalty of 150% should be imposed.
We are clearly of the view that as far as the present cases are concerned, though the petitioner may be wrong in claiming the benefit of input tax credit, but it cannot be said that the action of the petitioner was so illegal or devious in nature that the maximum penalty should be imposed upon him. The petitioner while claiming input tax credit had not hidden any facts. The assessing authority with respect to the years 2008-09, 2009-10 and 2010-11 has found that all the ''C'' forms have been produced and there is no difference between the tax collected and the tax payable. In respect of the years 2011-12 and 2012-13, there is some discrepancy with regard to the ''C'' forms but as rightly submitted by Sri Dubey if reasonable opportunity had been given to the petitioner to put forth its case, it could have produced the balance ''C'' form also. The petitioner did not hide any facts. It claimed input tax credit by claiming that it was entitled to claim the benefit in terms of the TVAT Act. The taxing authorities of the State of Tripura permitted the petitioner to take benefit of input tax credit on these averments. Suddenly after five years the authorities became wiser and found that the assessee is not entitled to such benefit. We are in agreement with the State that the assessee may not be entitled to such benefit and, therefore, it is liable to pay the amount of Central Sales Tax collected by it along with the statutory interest payable u/s 25 of the Act which is 18% per annum.
u/s 31(5), the Commissioner is entitled to levy penalty between 10% to 150%. This sub-section envisages various situations and one of the situations is where the dealer in order to evade or avoid payment of tax has availed of tax credit to which he is not entitled to. A dealer may genuinely believe that he is entitled to benefit of certain tax credits. If he claims such tax credit, it is the duty of the assessing authority to either accept or reject the tax credit.
In the present case, for five years the tax department was accepting the plea of the petitioner that he was entitled to input tax credit. Therefore, the officials of the department were as much at fault or as much in ignorance of law as the petitioner-assessee. It is not the case of the respondent-State that the assessee filed false documents or made wrong statements while claiming this input tax credit. The assessee claimed input tax credit by depicting the true and correct facts. Though we have decided the case against the assessee, we are clearly of the view that in such a situation it cannot be said that the dealer had claimed this input tax credit with a view to evade or avoid payment of tax. It is a plain and simple case of different interpretations of the provisions of law. The assessee interpreted section 10 in a particular manner and this interpretation was accepted by the revenue also. In such an eventuality, it would be highly unfair and unjust to impose the maximum penalty of 150%. This is a fit case where the minimum penalty of 10% alone should have been imposed.
Directions:
In view of the above discussion, we dispose of the writ petitions by upholding the order of assessment of tax and interest for the assessment years 2008-09, 2009-10, and 2010-11.
As far as the assessment years 2011-12 and 2012-13 are concerned, according to the Superintendent of Taxes, certain ''C'' forms were not produced. In view of the fact that the notices issued by the respondent to the petitioner did not give an adequate opportunity to the petitioner to produce all the documents, we set aside the assessment orders and remit the matters for the years 2011-12 and 2012-13 to the Assessing Officer who shall afford reasonable opportunity to the petitioner to produce all documents and shall take into consideration any other ''C'' forms which may be produced. Thereafter, the tax payable as well as interest shall be calculated.
We further hold that in view of the peculiar facts and circumstances of the case, there was no intention on behalf of the assessee to evade or avoid taxes and, therefore, levy of penalty @ 150% is totally illegal and is accordingly quashed for all the five financial years. Only minimum penalty of 10% should be levied in these cases. Therefore, we are of the considered view that in these cases maximum penalty of 150% should not have been imposed and only the minimum penalty of 10% should have been imposed.