M/S. Maruthi Auto Store vs. The Commercial Tax Officer

Held

The Court found that the amendment to Section 3(4) of the TNVAT Act, which introduced the requirement to inform the assessing authority within seven days of the turnover reaching Rs. 50 lakhs and the subsequent tax liability under Sub-Section (2) with entitlement to Input Tax Credit, came into effect only from 18.06.2008. The assessment period in question was 2007-08. The Court noted that even before the amendment, the petitioner had filed returns. However, it was disputed by the respondent whether the petitioner had filed Form-I returns or paid tax only at 0.5% by filing Form-K returns for the total taxable turnover. Given this dispute and the fact that the impugned order was passed without considering the petitioner's objections and without providing a personal hearing, the Court held that the impugned order could not be sustained. The Court decided to set aside the impugned order and remit the matter back to the respondent for fresh consideration. The respondent was directed to consider the petitioner's case based on their objections, apply the relevant provision of Section 3(4) of the Act prevailing before 18.06.2008, grant a personal hearing, and pass fresh orders on merits within twelve weeks.

Facts

The petitioner, M/s. Maruthi Auto Store, is an assessee under the Tamil Nadu Value Added Tax Act, 2006. For the assessment year 2007-08, the petitioner initially opted to pay tax at the compounding rate of 0.5% under Section 3(4) of the TNVAT Act. As their turnover exceeded Rs. 50 lakhs, they switched to filing Form-I returns and paying tax. The respondent, the Commercial Tax Officer, Mahal Assessment Circle, Madurai, issued a notice proposing to assess the entire sales of Rs. 70,69,232/- at 12.5% for the year 2007-08. The petitioner requested time to reply, but the respondent passed an order on 07.10.2010 confirming the proposal without providing a personal hearing. The petitioner challenged this order.

Key Issues

1. Whether the petitioner is entitled to the assessment under the compounding rate of 0.5% for sales turnover up to December 2007 and at 4% for the subsequent period after reaching Rs. 50 lakhs, or if the respondent erred in assessing 12.5% for the total turnover, considering the provisions of Section 3(4) of the TNVAT Act and its amendments. Petitioner's arguments: The petitioner contended that they correctly availed the benefit of Section 3(4) of the TNVAT Act, initially paying tax at 0.5% on their turnover. Upon exceeding Rs. 50 lakhs, they duly informed the respondent and switched to Form-I returns, paying tax at the applicable rate for the subsequent period. They argued that the amendment to Section 3(4) of the TNVAT Act, which mandated informing the authority within 7 days of crossing Rs. 50 lakhs, was effective only from 18.06.2008 and thus could not be applied retrospectively to the 2007-08 period. They claimed entitlement to assessment at 0.5% up to December 2007 and 4% thereafter. Respondent's arguments: The respondent argued that as per the substitution to Section 3(4) of the TNVAT Act, the petitioner was obligated to inform the assessing authority in writing within 7 days of their turnover reaching Rs. 50 lakhs (from 14.12.2007). Since the petitioner admittedly did not inform the respondent within the stipulated time and continued to file Form-K returns, they lost the chance for Input Tax Credit. Therefore, the respondent prayed for the dismissal of the petition.