Tvl. Premier Systems & vs. The Asst. Commissioner (CT)

Held

The Court held that the tax collected by M/s.DELL India Pvt. Ltd. from the petitioner was not illegal. The Government Order contemplated the collection of tax on the first sale by DELL India and its remittance to the Commercial Tax Department, followed by a full refund to DELL India by the Industries Department. Therefore, the tax component paid by the petitioner to their vendor was valid, and the petitioner was entitled to claim Input Tax Credit (ITC) on such payments. The Court also found that the respondent erred in including the discount provided by DELL India in the petitioner's sales turnover. Relying on Explanation II(ii) to Section 2(41) of the Tamil Nadu Value Added Tax Act, 2006, the Court stated that discounts shall not be included in the turnover. The tax invoices clearly showed the amount as a discount, and the statute forbade its inclusion in the sales turnover. Consequently, the impugned orders were quashed on both grounds. The Court allowed the writ petitions.

Facts

The petitioner, Tvl.Premier Systems & Peripherals, challenged two orders dated 18.11.2011 passed by the Assistant Commissioner(CT), Madurai. These orders pertained to the tax periods 2009-10 and 2010-11. The petitioner had purchased computers and peripherals from M/s.DELL India Private Ltd., paid tax on these purchases, and claimed Input Tax Credit (ITC). The respondent authority, after issuing pre-revision notices and receiving explanations, reversed the ITC claimed by the petitioner and levied consequential tax and penalty. The petitioner argued that the tax collected by their vendor, DELL India, was not legally leviable due to a sales tax exemption granted to DELL India by the Government of Tamil Nadu.

Key Issues

1. Whether the sales tax exemption granted to M/s.DELL India Pvt. Ltd. by G.O.(Ms.)No.134 (Industries (IT) Department dated 16.10.2006) rendered the tax collected by DELL India from the petitioner illegal, thereby disentitling the petitioner from claiming Input Tax Credit? Petitioner's contention: The petitioner argued that the Government Order, while using the term "sales tax exemption," actually provided for an Investment Promotion Subsidy. They contended that the Government Order contemplated the collection of tax by DELL India and its subsequent refund by the Government, meaning the tax component paid by the petitioner was valid and entitled them to ITC. Revenue's contention: The respondent argued that the exemption granted to DELL India was absolute and therefore, the tax collected by DELL India from the petitioner was illegal, and the petitioner could not claim ITC on such illegally collected tax. They relied on the tax invoices showing the exemption passed on to the petitioner. 2. Whether the amount treated as discount by M/s.DELL India Pvt. Ltd. in its tax invoices to the petitioner should be included in the petitioner's sales turnover for tax purposes? Petitioner's contention: The petitioner relied on Explanation II(ii) to Section 2(41) of the Tamil Nadu Value Added Tax Act, 2006, which mandates that cash or other discounts on the price allotted in respect of any sale shall not be included in the turnover. They argued that the respondent erred in including this discount in their sales turnover, as it was a clear breach of statutory mandate. Revenue's contention: Not recorded.