Mehar Hotels PVT. LTD. vs. The Asst. Commissioner (CT)

Held

The Court held that the petitioner was not eligible to pay tax under Section 8 of the Act, as it was a star hotel serving ready-to-eat unbranded foods, making it liable to tax at 12.5% under Section 7(1)(a). The Court found that the petitioner had invented a hybrid category and paid tax at a lower rate of 2%, constituting a short levy. Therefore, the reassessment under Section 27(1)(b) was justified. The Court rejected the petitioner's reliance on case laws as they were inapplicable. Regarding interest, while the petitioner argued it was not leviable for the period before the revised order, the Court found the petitioner liable for interest from the date the tax became due due to filing false returns. However, considering the significant delay in the disposal of the writ petitions (from admission in October 2012 to June 2019), the Court applied the doctrine of proportionality and scaled down the interest rate to 6% per annum for the period the writ petitions were pending. The petitioner was directed to pay statutory interest for the period before filing the writ petitions and after the disposal until payment.

Facts

The petitioner, Mehar Hotels Private Limited, operating a restaurant, filed returns under Form-L under the Tamil Nadu Value Added Tax Act, 2006, paying tax at 2%. The respondent, Assistant Commissioner (CT), issued notices alleging short levy of tax at 12.5% as per Section 7(1)(a) of the Act, quantifying the difference at Rs. 48,95,752/-. After rejecting the petitioner's explanation, the respondent revised the assessment under Section 27(1)(b) of the Act, demanding Rs. 59,52,423/- along with interest. The petitioner challenged these revised assessment orders dated 16.08.2012, which were passed for the tax periods 2007-08 to 2011-12, by filing five writ petitions.

Key Issues

1. Whether the reassessment under Section 27(1)(b) of the Tamil Nadu Value Added Tax Act, 2006, is valid when the petitioner had opted for and was accepted for composition levy under Section 8 of the Act, and filed returns in Form-L? Petitioner's contention: The petitioner argued that having opted for composition levy under Section 8 and having its returns in Form-L accepted by the assessing authority, the assessment could not be reopened on the ground of lower tax rate. They relied on Sinetech vs. Commercial Tax Officer and Hydro Electrical Systems vs. Commercial Tax Officer. They also contended that interest under Section 42(3) was not leviable as the revised order was passed on 16.08.2012. Revenue's contention: The respondent argued that the petitioner was not eligible for composition under Section 8 and had wrongly paid tax at 2% instead of 12.5% as mandated by Section 7(1)(a) for star hotels and restaurants. They asserted that the petitioner invented a hybrid category, and the department officials should have returned Form-L. They maintained that Section 27(1)(b) was correctly invoked as the turnover was assessed at a lower rate.