Sterling Bio Energy Systems P. Ltd. vs Deputy Commercial Tax Officer, Saligramam Assessment Circle

T.S. Sivagnanam, J.�Heard Mr. D. Vijayakumar, learned counsel for the petitioner and Mr. A.N.R. Jayaprathap, learned Government Advocate for the respondent. The petitioner is a registered dealer under the provisions of the Tamil Nadu General Sales Tax Act 1959 (the Act), and in this writ petition the petitioner has challenged the order of revision of assessment under section 16 of the Act.

The petitioner is dealer in Automatic Power Factor Control Systems and they filed their monthly returns in form A-1 for the year 2004-05. They claim that appropriate rate of duty payable on sales was four per cent since the turnover represents the first sale of electronic integrated circuits and micro assemblies (power factor control systems automated and working on microprocessor based technology) as the same falls under Part B of First Schedule and G.O.Ms. No. 30, Commercial Taxes (B1) Department dated March 27, 2002. The assessing officer accepted the petitioner''s returns and passed the order of assessment on April 20, 2006.

Thereafter, another assessing officer has taken charge and issued a notice dated July 31, 2006, proposing to re-determine the total and taxable turnover. Though such notice was issued, it was not proceeded to and another notice was issued on October 24, 2007, combining all the proposals in the earlier notices. According to the respondent, the levy of four per cent is incorrect since the commodity is taxable at 12 per cent, as per the clarification issued by the Department dated July 2, 2004, and it is taxable at 12 per cent notwithstanding the fact that the product contained "electronic integrated circuits and assemblies". Therefore, proposal was made under section 16(1)(b) of the Act to revise the assessment and levied tax at 12.6 per cent instead of 4.2 per cent.

The petitioner submitted his objections dated November 28, 2007, inter alia, stating that the Automatic Power Factor Control System is only a brand name, but the commodity is micro processor controller based. Automatic Power Factor Control System contained with electronic integrated circuits and assemblies, governed by Part B of the First Schedule of the Act. Further, it was stated that the petitioner had demonstrated before the assessing officer and explained the functionality of the product, which was accepted and given then only the product was assessed to tax at four per cent. Therefore, the petitioner requested for accepting the explanation and for passing an order. Pursuant thereto, the respondent has passed the impugned order.

From the bare reading of the impugned order, it is seen that there is absolutely no discussion as to why the product should be classified under residuary entry, viz., entry 40 of Part D of the First Schedule, when the petitioner''s case is that it falls under entry 18(iii) of Part B of the First Schedule. Further more, the petitioner has relied on G.O.Ms. No. 30 CT (B1) dated March 27, 2002, stating that they fall within the category of electronic integrated circuits and micro-assemblies. Further, the petitioner stated that the Automatic Power Factor Control System is a brand name, but the commodity is microprocessor. This aspect of the matter was also not considered. In fact in the show-cause notice dated October 24, 2007, the respondent does not dispute the fact that the petitioner''s product contained electronic integrated circuits and assemblies, nevertheless he proposed to revise the assessment. If the product contains electronic integrated circuits and assemblies, then it would fall under the sub-item No. 3 of G.O.Ms. No. 30 dated March 27, 2002 and consequently fall under entry 18 of Part B of the First Schedule and in such an event, the rate of tax would be only at four per cent. This aspect of the matter has not been considered by the respondent. Therefore, the impugned order is held to be bad in law.

The respondent has levied penalty under section 12(3)(b) of the Act. However, in the show-cause notice, there was no allegation that the petitioner does not disclose the turnover, but the proceeding itself was a revision of assessment under section 16 of the Act. Hence, the penalty imposed is absolutely uncalled for and accordingly the same is deleted. In the light of above, the writ petition is allowed and the impugned assessment order is set aside. Further, if the respondent is of the opinion that the product has not been correctly classified, then it is open to the respondent to issue fresh notice and proceed in accordance with law. No costs. Consequently, connected miscellaneous petition is closed.