Kaveri Feeds vs The Secretary, Sales Tax Appellate Tribunal, Additional Bench and The Commercial Tax Officer

K. Raviraja Pandian, J.—The correctness of the order of the Sales Tax Appellate Tribunal confirming the order of the assessing officer

levying tax in respect of the turnover of lease rental received by the assessee by leasing its fleet of lorry and imposing penalty for the act of the

assessee in not returning that turnover for taxation by setting aside the order of the appellate authority, is assailed in this writ petition.

Though revisional provision is available in the statute, subject to limitation, the assessee has filed the writ petition in the year 2009 as against the

order passed by the Tribunal on 24.04.2008 after the expiry of the period of limitation fixed by the statute itself. However, the writ Court thought it

fit to direct the Registry to place the matter before the Honourable Chief Justice for posting it before the Division Bench. Thus, the matter is before

us.

There is absolutely no bar for the assessee for filing the writ petition, if he is able to satisfy the writ Court that he is having valid ground to bypass

the statutory remedy. Hence, without going into technicalities of the matter, we heard the learned Counsel for the petitioner as well as the learned

Government Pleader on merits and disposed of the matter in the following manner:

The one and only dispute in this case is as to whether certain turnover received by the assessee as lease rental by leasing out a fleet of lorry to its

sister concern would come within Section 3A of the Tamil Nadu General Sales Tax Act. Section 3A provides for levy of tax on right to use any

goods and which authorised the levy of taxation relating to the business of transfer of right to use any goods for any purpose. Admittedly, in this

case, the assessee is the owner of a fleet of lorry and he has allowed the sister concern to use the lorries for its business purpose and the lease

rental has been received by the assessee. It is the contention of the assessee that the ownership of the lorry has not been transferred to the sister

concern, but remains only with the assessee, but that being the position, whatever amount is collected by the assessee could only be regarded as

freight charges and it cannot come within the purview of Section 3A as lease rental is exigible to tax.

We heard the learned Counsel on either side and perused the materials available on record.

The assessing officer, after perusing the materials on record, recorded a finding to the effect that the motor vehicles were maintained by the sister

concern and exclusive use by them for their purpose. The assessee had received the amount for such use of the vehicle by the sister concern,

namely, Kaveri Bio Proteins (P) Ltd. If the vehicles were exclusively used by other persons bearing all the maintenance charges, then the amount

received from that person for use of the vehicles for any purpose would be taxable u/s 3A of the Act. On appeal, the first appellate authority, by a

cryptic order, has reversed the finding by saying that the verification of the records would show that there was no transfer of right to use the motor

vehicle by the assessee and the amount represented income and freight received by operating it as a public goods carrier in the open market. The

first appellate authority has not taken note of the relevant provision which provides that the transfer of ownership has to be for the purpose of

levying tax u/s 3A of the Act. That order has been taken on appeal. As stated earlier, the Tribunal has set aside the order of the first appellate

authority and restored the order of the assessing officer including the penalty levied.

Learned Counsel for the assessee very strenuously contended that the amount received would only tantamount to freight charges and it cannot

be regarded as a lease rental u/s 3A of the Act. Even assuming for a moment, the amount received on renting out the lorry would attract tax u/s 3A

of the Act, the levy of penalty is not warranted, because till the issue has been settled by apex Court in the case of 20th century Finance

Corporation Ltd. v. State of Maharashtra 119 STC 182, it was a debatable issue. This contention is having some force, because having taken into

consideration the difficulties experienced by the dealers, Commissioner has issued a circular No. Acts Cell-I/12975/2001 dated 28.02.2001,

wherein it is stated that in respect of the assessment year 1999-00 and prior to 1999-2000 completed assessment need not be reopened to give

effect to the Supreme Court decision and pending assessment can be completed by the above guidelines. Admittedly, this case is prior to 1999-

2000. The dispute is related to the transaction of the like nature. The circular would clearly apply to the case of the assessee.

In the light of what is stated in the foregoing paragraphs, the writ petition is disposed of confirming the levy of tax, and setting aside the

imposition of penalty.