Madras High Court
Eid Parry India Limited vs The Deputy Commissioner (S.T.)-I on 24 January, 2025
Author: C.Saravanan
Bench: C.Saravanan
W.P.Nos.16696 and 16702 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved On 23.08.2024
Pronounced On 24.01.2025
CORAM :
THE HONOURABLE MR. JUSTICE C.SARAVANAN
W.P.Nos.16696 and 16702 of 2021
and
W.M.P.Nos.17679 and 17681 of 2021
EID Parry India Limited,
Represented by its Authorised Signatory
L.Jayaprakash (Senior Manager) ... Petitioner in both W.Ps
Vs.
1.The Deputy Commissioner (S.T.)-I,
Large Taxpayers Unit,
Integrated Buildings,
Commercial Taxes and Registration Department,
South Tower, 4th Floor, Block No.19,
Government Farm Village,
Guindy Taluk, Nandanam, Chennai – 600 035.
2.The Commissioner of Commercial Taxes,
Commercial Taxes Ezhilagam,
Chennai – 600 005. ... Respondents in both W.Ps
Prayer in W.P.No.16696 of 2021: Writ Petition filed under Article 226 of the
Constitution of India, for issuance of a Writ of Certiorari, to call for the records
relating to the Order bearing Entry Tax No.100006/2003-2004 dated
14.07.2021 passed by the first respondent and quash the same.
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W.P.Nos.16696 and 16702 of 2021
Prayer in W.P.No.16702 of 2021: Writ Petition filed under Article 226 of the
Constitution of India, for issuance of a Writ of Certiorari, to call for the records
relating to the Order bearing Entry Tax No.100006/2004-2005 dated
14.07.2021 passed by the first respondent and quash the same.
For Petitioner : Mr.Raghavan Ramabadran
(In both W.Ps) for M/s.Lakshmi Kumaran and
Sridharan Attorneys
For Respondents : Mr.T.N.C.Kaushik
(In both W.Ps) Additional Government Pleader
COMMON ORDER
By this Common Order, the respective Writ Petitions are being disposed
of.
2. In these Writ Petitions, the petitioner has challenged the Impugned
Assessment Orders dated 14.07.2021 passed by the first respondent. The
Assessment Orders have been passed for the Assessment Years 2003-2004 and
2004-2005 whereby demand under Entry Tax under the provisions of the Tamil
Nadu Tax on Entry of Goods into Local Areas Act, 2001 [in short “Entry Tax
Act, 2001”] has been confirmed.
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3. The Impugned Assessment Order dated 14.07.2021 passed for the
Assessment Year 2004-2005 has assessed the petitioner to entry for the first
time based on the first Notice dated 10.09.2020 and the second Notice dated
05.01.2021 in exercise of Rule 4 of the Tamil Nadu Tax on Entry of Goods into
Local Area Rules, 2001 [in short “Entry Tax Rules, 2001”] which deals with
assessment under the Entry Tax Act, 2001.
4. The details of the Impugned Assessment Orders dated 14.07.2021 and
the tax imposed and the penalty levied are as under and Details of Demand
confirmed by the respondents for the respective Assessment Years read as
under:-
W.P.No. Date of Date of Total Demand Assessment
Notice Assessment Year
(in INR)
Order
Tax Penalty
16696 of 2021 10.09.2020 14.07.2021 8,28,151 6,21,1132003-2004
16702 of 2021 10.09.2020 14.07.2021 35,47,490 44,34,3622004-2005
43,75,641 50,55,475W.P.No. 16696 of W.P.No. 16702 of Total
2021 2021
Assessment Year Assessment Year
2003-2004 2004-2005
Tax due reported as per Rs. 40,85,476/- Rs. 61,80,239/-
returns
Taxable Turnover Rs. 69,01,259/- Rs. 2,95,62,419/-
brought into assessment
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W.P.No. 16696 of W.P.No. 16702 of Total
2021 2021
due to incorrect returns
and omission of
payment of tax
Tax Due (including the Rs. 49,13,627/- Rs. 97,27,729/-
Actual Suppression)
Tax paid as per returns Rs. 40,85,476/- Rs. 61,80,239/-
Balance as as per the Rs. 8,28,151/- Rs. 35,47,490/- Rs.4,375,641.00
Assessment order (Tax
A)
Penalty as per the Rs.621,113.00 Rs.4,434,362.00 Rs.5,055,475.00
Assessment order (Tax
B)
The Impugned Assessment Orders preceded two notices dated 10.09.2020.
5. Both the Impugned Assessment Orders almost read identically.
Discussion in the Impugned Assessment Orders reads as under:-
“Discussion and Findings.
1. With reference to the reply-objections as stated in (A)
above, it is to be stated that the procedures for filing returns
and for the payment of tax have been laid down under Rule 3 of
the Tamil Nadu Tax on Entry of Goods into Local Areas Act,
2001. Further, when the returns filed by the dealers are found
to be incorrect or incomplete, then Rule 4 of the Entry Tax-
Goods, with the same procedures as laid down under the parent
Act TNGST, ibid, is the provision to complete the assessment of
the dealers. Section 10 of the Entry Tax-Goods Act clearly
stipulates mutatis-mutandis concept. Based upon the materials
gathered during the course of inspection of the place of
business of the dealers and on the finding of the fact that the
dealer had not paid entry tax for certain goods imported from
up countries, proper assessment proceedings have been
initiated under Rule 4 of the said Act. The dealers themselves
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accepted that Rule 4 has not prescribed any time-limit for
doing the assessment based on returns filed. Hence, there is
no necessity to discuss about any reasonable period for
completing the assessment based on the returns filed which
are found to be incorrect by not declaring certain imported
goods within the tax net under the Entry Tax-Goods Act.
Therefore, the proceedings initiated against the dealers are
perfectly valid in law.”
6. The penalty was justified with the following observations:-
Since the balance is 57% of the tax paid as per return, the
penalty is determined at 125% of the balance as per Section 10 of
the Entry Tax-Goods Act read with Section 12(3)(b)(iv) of the
TNGST Act, 1959.
7. The assessments were completed on the ground that the returns filed
by the petitioner were incorrect and that the petitioner has not paid entry tax for
certain goods imported from up countries.
8. The challenge to the Impugned Assessment Orders are primarily on the
ground that confirmation of demand for the respective Assessment Years viz.,
2003-2004 and 2004-2005 are long after the period covered by the Impugned
Assessment Orders and was therefore contrary to the relevant precedents in
terms of the decision of the Hon’ble Supreme Court in State of Punjab Vs.
Bhatinda District Co-operative Milk Producers Union Limited, 2007 (217)
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E.L.T. 325 (S.C.) / (2007) 11 SCC 363, wherein the Hon’ble Supreme Court
held that when no period of limitation is prescribed, the statutory authority must
exercise its jurisdiction within a reasonable period.
9. Under Section 11(3) of the Punjab General Sales Tax Act, 1948, the
assessment was to be completed within a period of three years. The case dealt
with an assessment under Section 11(6) and Section 21 of the Punjab General
Sales Tax Act, 1948 after the assessment was completed.
10. Section 11(3), Section 11(6) and Section 21 of the Punjab General
Sales Tax Act, 1948 reads as under:-
Section On the day specified in the notice or as soon as
11(3) afterwards as may be, the Assessing Authority shall,
after hearing such evidence as the dealer may
produce, and such other evidence as the Assessing
Authority may require on specified points, [pass an
order of assessment within a period of three years
from the last date prescribed for furnishing the last
return in respect of any period
Section If upon information which has come into his
11(6) possession, the Assessing Authority is satisfied that
any dealer has been liable to pay tax under this Act
in respect of any period but has failed to apply for
registration, the Assessing Authority shall, within
five years after the expiry of such period, after giving
the dealer a reasonable opportunity of being heard,
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W.P.Nos.16696 and 16702 of 2021amount of tax, if any, due from the dealer in respect
of such period and all subsequent periods and in case
where such dealer has willfully failed to apply for
registration, the Assessing Authority may direct that
the dealer shall pay by way of penalty, in addition to
the amount so assessed, a sum not exceeding one and
a half times that amount.
Section 21 (1)The Commissioner may of his own motion call for
the record of any proceedings which are pending
before, or have been disposed of by any authority
subordinate to him, for the purpose of satisfying
himself as to the legality or propriety of such
proceedings or order made therein and may pass
such order in relation thereto as he may think fit.
(2)The State Government may by notification confer
on any Officer the powers of the Commissioner
under sub-section (1) to be exercised subject to such
conditions and in respect of such areas as may be
specified in the notification.
(3)A Tribunal, on application made to it against an
order of the Commissioner under sub-section (1)
within ninety days from the date of communication
of the order may call for and examine the record of
any such case and pass such orders thereon as it
thinks just and proper.
(4)No order shall be passed under this section which
adversely affects any person unless such person has
been given a reasonable opportunity of being heard.
11. Under Sub-Section 6 to Section 11 of the Punjab General Sales Tax
Act, 1948, the period of limitation for completing the assessment was five years
where the Assessing Authority was satisfied that any dealer who was liable to
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pay tax under the Act had failed to apply for registration, the Assessing
Authority could proceed to assess the tax to the best of his judgment of the
amount of tax, if any, due from the dealer in respect of such period and all
subsequent periods after giving the dealer a reasonable opportunity of being
heard.
12. In Paragraphs 14 and 15 from Bhatinda District Co-operative Milk
Producers Union Limited‘s case (referred to supra), dealt with a case for
revision under Section 21 of the Punjab General Sales Tax Act, 1948. The
Hon’ble Supreme Court concluded as follows:-
“16. A bare reading of Section 21 of the Act would reveal
that although no period of limitation has been prescribed
therefor, the same would not mean that the suo moto power can
be exercised at any time.
17. It is trite that if no period of limitation has been
prescribed, statutory authority must exercise its jurisdiction
within a reasonable period. What, however, shall be the
reasonable period would depend upon the nature of the statute,
rights and liabilities thereunder and other relevant factors.
18. Revisional jurisdiction, in our opinion, should
ordinarily be exercised within a period of three years having
regard to the purport in terms of the said Act. In any event, the
same should not exceed the period of five years. The view of the
High Court, thus, cannot be said to be unreasonable.
Reasonable period, keeping in view the discussions made
hereinbefore, must be found out from the statutory scheme. As
indicated hereinbefore, maximum period of limitation provided
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for in sub-section (6) of Section 11 of the Act is five years.
22. The question as to what would be the reasonable
period did not fall for consideration therein. The binding
precedent of this Court, some of which had been referred to us
hereto before, had not been considered. The counsel appearing
for the parties were remiss in bringing the same to the notice of
this Court. Furthermore, from a perusal of the impugned notice
dated 4-9-2006, it is apparent that the Revisional Authority did
not assign any reason as to why such a notice was being issued
after a lapse of 5 ½ years.”
13. Thus, orders have been passed within a reasonable period. However,
what shall be a reasonable period was held would depend upon the nature of the
statute, rights and liabilities thereunder and other relevant factors. The above
conclusion was based on the following decisions of the Hon’ble Supreme
Court:-
i. The State of Orissa Vs. Debaki Debi & others,
[AIR 1964 SC 1413]
ii. S.B.Gurbaksh Singh Vs. Union of India & others,
[1976 (37) SC 425]
iii. Commissioner of Sales Tax, Orissa & another Vs.
M/s.Halari Store etc., [(1997) 7 SCC 715].
14. Learned counsel for the petitioner has also placed reliance on the
decision of the Hon’ble Supreme Court in Bharat Steel Tubes Limited and
another Vs. State of Haryana and another, (1988) 3 SCC 478 wherein,
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Hon’ble Supreme Court once again reiterated the above position with the
following observations:-
“14. The short question that really falls for examination
in this case is whether an order of assessment under sub-section
(3) of Section 11 of the Punjab Act or Section 28(3) of the
Haryana Act can now be completed or would that be barred by
limitation. Undoubtedly, the assessment proceedings have been
very delayed. As the material placed before us shows, the
assessee had gone before different courts from time to time to
ask for injunction against the completion of assessment but that
trial appears to have started in December 1980 when a suit was
filed and injunction was obtained. Though notices were issued
under Section 11(2) of the Punjab Act or Section 28(2) of the
Haryana Act within a reasonable period from the filing of
returns for the further action has not been taken by the
assessing officer to complete the assessments. But as we have
said above, in the absence of any prescribed period of
limitation, the assessment has to be completed within a
reasonable period. What such reasonable period would be,
would depend upon facts of each case. One view can be that it
should be a period not exceeding five year as the legislature has
fixed the limitation of five years for completing assessments in
case of escaped turnover. Unless there be an assessment made
soon after the period to which such assessment relates, the
question of consideration of escapement would indeed become
difficult to consider and examine. We are, however, not
inclined to extend into a situation like the one before us, a
period of limitation for completion of assessments under
Section 11(3) or 28(3) of the respective Acts. The assessee has
made returns for all the quarters and must have paid its
admitted tax. Now that the assessing authority intends to
complete assessments under section 11(3) of the Act, we see no
prejudice to the assessee if the assessing authority is permitted
to complete the assessment now. On the other hand, if no
assessment is made an anamolous situation might arise and
even though the assessee has collected the sales tax on its sale
turnover, it might raise a claim for refund of it in the absence of
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would suffice to say that in the situation which has arisen in the
matter before us, it would be appropriate to call upon the
assessing authority to complete all these pending assessments
within a total period of four months from today on the basis of
available material in the record before him and such other
material as the authority may obtain. We, however, make it
clear that such assessment has to be only under Section 11(3) of
the Act.
15. Before we part with this case, we would like to
indicate that assessment of tax should be completed with
expedition. It involves the revenue to the State. In the case of a
registered dealer who collects sales tax on behalf of the State,
there is no justification for him to withhold the payment of the
tax so collected. If a timely assessment is completed, the dues
of the State can be conveniently ascertained and collected.
Delay in completion of assessment often creates problems.
The assessee would be required to keep up all the evidence in
support of his transactions. Where evidence is necessary, with
the lapse of time, there is scope for its being lost. Oral evidence
as and when required to be produced by the assessing authority
may not be available if a long period intervenes between the
transactions and the consideration of the matter by the
assessing authority. Long delay thus is not in the interest of
either the assessee or the State. In view of the fact that a period
of limitation has been prescribed for bringing the escaped
turnover into the net of taxation, such an eventuality cannot be
grappled with appropriately unless timely assessment is
completed. In several taxing statutes, even in a situation like
this, where assessment under Section 11(3) of 28(3) of the
respective Acts is contemplated, a period of limitation is
provided. Until by statute, such a limitation is provided, it is
proper for the State Governments to require, by statutory rules
or appropriate instructions to ensure completion of assessments
with expedition and reasonable haste but subject to rules of
natural justice.”
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15. It is submitted without prejudice that Section 10 of the Entry Tax
Act, 2001 borrows the machinery provision pertaining to assessment from the
Tamil Nadu General Sales Tax (TNGST) Act, 1959. Therefore, the powers of
the first respondent to assess the petitioner is restricted in scope by provisions
of the Tamil Nadu General Sales Tax (TNGST) Act, 1959. In this light, it is
relevant to note that, as per Section 40(2)(b) of the Tamil Nadu General Sales
Tax (TNGST) Act, 1959, a registered dealer is statutorily required to maintain
books of accounts only for a period of five years. In this regard, reliance is
placed on the decision of the Kerala High Court in Merchem India (P) Ltd.,
Vs. CTO, 2020 (11) TMI 25 wherein the Hon’ble Court held that the period of
five years for which Rule 58(20) of the Kerala Value Added Tax Rules casts an
obligation on a registered dealer to maintain books of accounts may be taken as
a safeguarding factor to limit the power of reassessment under Section 42 of the
Kerala Value Added Tax Act, 2003. Based on the aforesaid decision, it is
submitted that the Impugned Assessment Orders suffers from lack of
jurisdiction.
16. It is submitted that, the objection that the Impugned Assessment
Orders have been passed beyond reasonable period was raised before the first
respondent. However, the Impugned Assessment Orders grossly disregards the
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submissions without any reason or justification. Further, the Impugned
Assessment Orders also fails to appreciate the binding precedents laid down by
the Hon’ble Supreme Court. Thus, it is submitted that the Impugned
Assessment Orders ought to be quashed for pre-judging the issue in support of
the revenue.
17. It is submitted that the Impugned Assessment Orders seek to justify
assessment on the premise that the instant proceeding is one of original
assessment and not that of reassessment. Further, it proceeds on the premise
that no outer time limit has been prescribed for conducting original assessment
under Rule 4 of the Entry Tax Rules, 2001. In this regard, it is submitted that
the petitioner only stresses on the reasonable period for assessment purpose and
not merely on invocation of wrong provision. To this extent, it is submitted
that the Impugned Assessment Orders, in not addressing the petitioner’s
submissions, is arbitrary and completely revenue biased.
18. It is submitted that the Impugned Assessment Orders record that the
assessment proceedings were kept pending in view of the fact that validity of
the Entry Tax Act and Entry Tax Rules remained pending before higher judicial
fora. Such an act does not have any statutory backing and an inordinate delay
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in adjudication has consistently been struck down by Courts. With regard to
this proposition, reliance is placed on the decision of the Gujarat High Court in
Shiv Kripa Processors P. Ltd. Vs. Union of India, 2018 (362) E.LT. 773
(Guj) and Sanghvi Reconditioners Pvt. Ltd. Vs. Union of India, 2018 (12)
G.S.T.L. 200 (Bom.) wherein the Hon’ble High Courts have deprecated the
practice of keeping disputes pending for reason that the lis is pending before a
higher forum. Thus, it is submitted that the Impugned Assessment Orders are
violative of principles of natural justice as the petitioner would have no
opportunity, much less a reasonable and fair one to defend the proceedings.
19. It is submitted without prejudice that the entire assessment
proceedings initiated is premature. In Jindal Stainless Limited and another
Vs. State of Haryana and others, 2016 (11) TMI 545 SC (LB), the Hon’ble
Supreme Court only laid down the principles for determining whether entry tax
is discriminatory or not and did not decide validity of any Enactment as such.
It was held that the factum of whether or not State Entry Tax enactments are
discriminatory has to be examined only by the respective State High Courts.
Subsequent to the decision in Jindal Stainless Limited case (referred to
supra), the constitutionality of the Entry Tax Act is yet to be determined by this
Hon’ble Court in W.P.No.8109 of 2005, and therefore, it is submitted that the
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Impugned Assessment Orders are ipso facto premature and ought to be
quashed.
20. Learned counsel for the petitioner has placed reliance on the decision
of the Division Bench of this Court in M/s.J.M.Baxi & Co., Vs. The
Government of India, Represented by the Joint Secretary, Ministry of
Finance, New Delhi and others, 2016 SCC Online Mad 3176.
21. The learned Additional Government Pleader for the respondents
submitted that based upon the materials gathered during the course of
inspection of the place of business of the dealers and on the finding of the fact
that the dealer has not paid entry tax for certain goods imported from countries,
proper assessment proceedings have been initiated under Rule 4 of the Entry
Tax Rules, 2001. The dealers themselves accepted that Rule 4 of the Entry Tax
Rules, 2001, has not prescribed any time-limit for doing the assessment based
on returns filed. Hence, there is no necessity to discuss about any reasonable
period for completing the assessment based on the returns filed which are found
to be incorrect by not declaring certain imported goods within the tax net under
the Entry Tax Act, 2001. Therefore, the proceedings initiated against the
dealers are perfectly valid in law.
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22. It is submitted that the petitioner/dealer had been informed that
nowhere in the notices issued to the dealers for the assessment proceedings
under the Entry Tax Act, 2001, it was stated that it is the re-assessment after the
original assessment has already been made. It was again reiterated that it is the
proceedings for the original assessments based on the returns filed, which are
found to be incorrect, and this is contemplated under Rule 4 of the Entry Tax
Rules 2001 read with Section 12(2) of the Tamil Nadu General Sales Tax
(TNGST) Act, 1959, after a prolonged battle before the Higher-Judicial Forums
in India and finality reached in the year 2016-2017 only. Further, it is to be
pointed out that while issuing notices for the assessment and proposing penalty,
an inadvertent mistake has crept in, which is, instead of mentioning the Section
12(3) on the Tamil Nadu General Sales Tax (TNGST) Act, 1959, it has been
wrongly mentioned as Section 16(2) or 16(3) of the Tamil Nadu General Sales
Tax (TNGST) Act, 1959. However, it is a settled position of law that mere
wrong quoting of the section or provisions will not vitiate any proceedings in
the tax assessments which otherwise fit in the relevant laws.
23. It is submitted that the case laws cited by the dealers are related to the
re-assessments or escaped assessments (107 STC 210 and 68 STC 25) and the
case law 14 STC 976 refers to the limitation for invoking the assessments.
These case laws cited by the dealers would not come into their rescue because
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the assessment now being carried out is not a re-assessment or escaped
assessment. It is the original assessment based upon the incorrect returns filed.
From the co-joint reading of Section 12(2) of the Tamil Nadu General Sales
Tax (TNGST) Act, 1959 and Section 10 of the Entry Tax Act, 2001 and Rule 4
of the Entry Tax Rules 2001, one can understand the legislative intention that
such assessment is not time bounded.
24. It is submitted that the proposed levy of penalty under Section 12(3)
of the Tamil Nadu General Sales Tax (TNGST) Act, 1959 read with Section 10
of the Entry Tax Act, 2001, it has no time limit when it is taken along with the
original assessment proceedings. The time limit has been stipulated in Section
12(3) of the Tamil Nadu General Sales Tax (TNGST) Act, 1959, only when a
separate proceeding has been initiated for levy of penalty on the assessment
under Section 12(2) of the Tamil Nadu General Sales Tax (TNGST) Act, 1959.
25. It is submitted that the petitioner/dealer in their reply/objections had
not filed any materials or documents that the assessments should not be carried
out. Even though they accepted that it is settled by the Hon’ble Supreme Court
in M/s.Jindal Stainless Limited and another Vs. State of Haryana and
others, 2016 (11) TMI 545 SC (LB), they had not produced any documents or
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order from this Court to stay or otherwise stall assessment proceedings.
26. It is respectfully submitted that the petitioner/dealer had imported
sanitary wares such as triangles dual flush, ivory, basin, clean pedestal white,
etc., from China during the years 2003-2004 and 2004-2005 but not paid entry
tax as per the provisions of the Entry Tax Act, 2001. Hence, notices were
issued to the petitioner/dealer on 10.09.2020 and 05.01.2021 for above said
years proposing entry tax on the import of goods from other countries and
penalty was also proposed as per Section 4 of the Entry Tax Act, 2001 read
with Section 12(3) of the Tamil Nadu General Sales Tax (TNGST) Act, 1959,
for which, the petitioner/dealer had filed their objections vide their letters dated
06.11.2020 and 22.03.2021. Objections filed by the dealers were examined and
overruled and accordingly, the proposal for levy of tax and penalty has been
confirmed by the first respondent vide impugned proceedings dated 14.07.2021.
Hence, the order passed by the first respondent is as per the law.
27. It is respectfully submitted that the procedures for filing returns and
for the payment of tax have been laid down under Rule 3 of the Entry Tax
Rules, 2001. Further, when the returns filed by the dealers are found to be
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incorrect or incomplete, then Rule 4 of the Entry Tax Rules, 2001, with the
same procedures as laid down under the parent Act TNGST, ibid, is the
provision to complete the assessment of the dealers. Section 10 of the Entry
Tax Act, 2001 clearly stipulates the concept mutatis-mutandis.
28. It is respectfully submitted that according to Section 12(2) of the
Tamil Nadu General Sales Tax (TNGST) Act, 1959, which is relevant for
making assessment of a dealer for the years 2003-2004 and 2004-2005, no
limitation period within which the assessment has to be completed is
prescribed. It is relevant to point out that by Act 60/97 (Gazette dated
31.03.2000 – effective from 01.04.1996), Sub-Section (2-A)(a), which mandates
the completion of assessment within a period of three years from the expiry of
the year to which the assessment relates, was omitted. Therefore, it is very
clear that the legislators thought it fit to remove the period of limitation
prescribed for making assessment and consequently passed Act 60/97 (Gazette
dated 31.03.2000 – effective from 01.04.1996). Therefore, the contention of the
petitioner that the issue under notice is barred by delay is not tenable.
29. It is respectfully submitted that the levy of Tax on Entry of Goods
into Local Areas and the levy of Tax on entry of Motor vehicles into Local
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Areas were agitated before the High Courts of various States by the dealers in
the respective States. In turn, the State Governments also took the cases to
appeal to sustain the levy of Entry Tax whenever the High Court decided
against the State Revenue on this count. The issue was settled in November
2016 by the Hon’ble Supreme Court in M/s.Jindal Stainless Limited and
another Vs. State of Haryana and others, 2016 (11) TMI 545 SC (LB),
wherein the Hon’ble Supreme Court has answered several questions pertaining
to entry tax legislations of different states including Tamil Nadu and settled
various issues related to Entry Tax-Goods.
30. It is submitted that the Act was in scrutiny for long period and the
Final Judgment for legality of the Entry Tax Act, 2001 came only in the end of
2017. Since the matter was pending before the Higher Judicial Forums, the
original assessment, based upon the returns filed under the Entry Tax Act,
2001, in respect of the petitioner/dealer for the above said years have been kept
pending. Barring the period that the Act was in scrutiny in the High Courts and
Supreme Court, it is only three years from the judgment, the initiation of
assessment was done, which is within the reasonable period for maintenance of
records by the petitioner/dealer.
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31. I have considered the arguments advanced by the learned counsel for
the petitioner and the learned Additional Government Pleader for the
respondents. I have also perused the Impugned Assessment Orders passed by
the first respondent.
32. The Impugned Assessment Orders have been passed for the first time
based on the first Notice dated 10.09.2020 and the second Notice dated
05.01.2021 for the Assessment Years 2003-2004 & 2004-2005. These notices
were issued in the exercise of Rule 4 of the Entry Tax Rules, 2001.
33. The Impugned Assessment Orders dated 14.07.2021 proceed to
finalize the assessments, under Rule 4 of the Entry Tax Rules, 2001 framed
under the provisions of the Entry Tax Act, 2001 after more than 15 years of
filing of returns by the petitioner for these Assessment Years.
34. In this connection, it will be useful to refer to Section 10 of the Entry
Tax Act, 2001. As per Section 10 of the said Act, the Assessing Authority is
empowered to assess, re-assess, inspect, search, seize, confiscate, collect and
enforce payment of tax, including any interest or penalty, payable by a dealer or
an importer under this Act, as if, the tax or interest or penalty payable by such
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importer this Act is a tax or interest or penalty payable under the General Sales
Tax Act.
35. For this purpose, the Assessing Authority can exercise all or any of
the powers they have under the General Sales Tax including provisions relating
to returns, provisional assessment, advance payment of tax, imposition of the
tax penalty of a person carrying on business on the transferee of, or successor
to, such business, transfer of liability of any firm or Hindu undivided family to
pay tax in the event of the dissolution of such form or partition of such family,
recovery of tax from third parties, reviews, references, refunds, rebates,
penalties, charging or payment of interest, inspection of the premises of
transporters, goods/vehicles, business premises, search of the residential
accommodation, seizure and confiscation of unaccounted for scheduled goods,
seizure of documents, compounding of offences and treatment of documents
furnished by a dealer as confidential, shall apply accordingly.
36. For the sake of clarity, Section 10 of the Entry Tax Act, 2001, is
reproduced below:-
Section 10: Tax authorities, returns, assessments, payments and
recovery.-
1. Subject to the other provisions of this Act and the
rules made thereunder, the authorities for the timehttps://www.mhc.tn.gov.in/judis
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search, seize, confiscate, collect and enforce
payment of tax, including any interest or penalty,
payable by a dealer, an importer under this Act as if
the tax or interest or penalty by such importer this
Act is a tax or interest or penalty payable under the
General Sales Tax Act, and for this purpose they
may exercise all or any of the powers they have
under the General Sales Tax Act; and the provisions
of the General Sales Tax Act, including provisions
relating to returns, provisional assessment, advance
payment of tax, imposition of the tax penalty of a
person carrying on business on the transferee of, or
successor to, such business, transfer of liability of
any firm or Hindu undivided family to pay tax in the
event of the dissolution of such form or partition of
such family, recovery of tax from third parties,
reviews, references, refunds, rebates, penalties,
charging or payment of interest, inspection of the
premises of transporters, goods / vehicles, business
premises, search of the residential accommodation,
seizure and confiscation of unaccounted for
scheduled goods, seizure of documents,
compounding of offences and treatment of
documents furnished by a dealer as confidential,
shall apply accordingly.
2. All the provisions relating to offences, interest and
penalties including provisions relating to penalties
in lieu of prosecution for an offence or in addition
to the penalties or punishment for an offence of the
General Sales Tax Act shall, with necessary
modifications, apply in relation to the assessment,
re-assessment determination of the value or the fair
market price of goods, collection and enforcement
of payment of any tax required to be collected under
this Act, or in relation to any process connected
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were a tax under the General Sales Tax Act.”
37. Therefore, in a limited sense, for the aforesaid purpose, the Entry Tax
Act, 2001 is not a self contained enactment. It is dependent on the provisions
of the Tamil Nadu General Sales Tax (TNGST) Act, 1959 and later under the
provisions of the Tamil Nadu Value Added Tax (TNVAT) Act, 2006 after the
Tamil Nadu General Sales Tax (TNGST) Act, 1959 was repealed and stood
substituted with the Tamil Nadu Value Added Tax (TNVAT) Act, 2006.
38. Assessment under the provisions of the Entry Tax Act, 2001 and
under the provision of the Tamil Nadu General Sales Tax (TNGST) Act, 1959
have to be made coterminously as the basic documents required for assessment
are one and the same. These documents have to be maintained for a period of
five years though separate returns have been filed under these enactments.
39. This is evident from a reading of Section 40(2)(b) of the Tamil Nadu
General Sales Tax (TNGST) Act, 1959 when read in conjunction with Section
10 of the Entry Tax Act, 2001.
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40. Under Section 40(2)(b) of the Tamil Nadu General Sales Tax
(TNGST) Act, 1959, every registered dealer/assessee or an importer under the
Entry Tax Act, shall ordinarily keep the books of account for the previous five
years at such place or places as he may notify to the Registering Authority.
Section 40(2)(b) of the Tamil Nadu General Sales Tax (TNGST) Act, 1959
reads as under:-
Section 40:Maintenance of up-to-date, true and correct
accounts and records by dealers.-
(1) …..
(2)(a) ……
(2)(b)Every registered dealer shall also ordinarily keep the
books of account for the previous five years at such place
or places as he may notify to the registering authority. If
the registered dealer decides to change the place or
places so notified, he shall before effecting such change,
notify the same to the registering authority.
(3) …….
41. Thus, a registered dealer is ordinarily not required to maintain
records, documents and accounts for a period beyond five years for
assessment under the provision of the Tamil Nadu General Sales Tax
(TNGST) Act, 1959.
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42. By implication, such a dealer will also not be required to keep such
books of account and documents for a period beyond five years under the
provisions of the Entry Tax Act, 2001.
43. Therefore, assessment under the provisions of the Entry Tax Act,
2001, also ought to have been completed within reasonable period of time.
Certainly, there is no justification in finalizing the assessment after a lapse of
considerable period of time.
44. Further, a dealer who is also a dealer under the provisions of the
Tamil Nadu General Sales Tax (TNGST) Act, 1959, is entitled to set-off tax the
paid under the provisions of the Entry Tax Act, 2021 towards the tax liability
under the provisions of the Tamil Nadu General Sales Tax (TNGST) Act, 1959.
45. In this connection, it will be also useful to refer to Section 4 of the
Entry Tax Act, 2001. Section 4 of the Entry Tax Act, 2001 reads as under:-
4.Reduction in tax liability:-
(1) Where an importer of any scheduled goods liable to pay
tax under this Act, being a dealer in scheduled goods
becomes liable to pay tax under the General Sales Tax Act
and additional sales tax under the Tamil Nadu Additional
Sales Tax Act, 1970 (Tamil Nadu Act No.14 of 1970), byhttps://www.mhc.tn.gov.in/judis
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liability under those Acts shall be reduced to the extent of
tax paid under this Act.
(2)Where an importer who, not being a dealer in scheduled
goods, had purchased the scheduled goods for his own use
or consumption in any Union Territory, or any other State,
then his liability under this Act, shall, subject to such
conditions as may be prescribed, be reduced to the extent
of the amount of tax paid, in any, under the law relating to
General Sales Tax as may be in force in that Union
Territory or State.”
46. Thus, the issue is revenue neutral. What is paid/payable under the
provisions of the Entry Tax Act, 2001 can be reduced from the tax payable
under the provisions of the Tamil Nadu General Sales Tax (TNGST) Act, 1959.
47. At best, the petitioner could have been fastened with interest liability,
if the assessments were completed under Rule 4 of the Entry Tax Rules, 2001,
within a reasonable period of time after the returns were filed by the petitioner.
48. However, there is an enormous delay in finalizing the assessment
vide Impugned Assessment Orders. Therefore, it would also be unfair to fasten
the burden the petitioner at this distant point of time with interest liability.
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49. That apart, impugned assessment has also not been made strictly in
accordance with the provisions of the Entry Tax Rules, 2001. Assessment
under the Entry Tax Act, 2001 is to be made in two stages. Assessments are
governed by Rule 4 of the Entry Tax Rules, 2001. Rule 4 of the Entry Tax
Rules, 2001 cannot be read in isolation.
50. Rule 4 of the Entry Tax Rules, 2001 has to be read along with Rule 3
of the Entry Tax Rules, 2001. Rule 3 and Rule 4 of the Entry Tax Rules, 2001
are reproduced below:-
Rule 3 : Filing of returns and Rule 4 : Assessment of tax
payment of tax
1) An importer being a dealer 1) After the close of the year
in scheduled goods, who is for which the returns have
liable to pay tax under been submitted by an
Section 3 of the Act shall importer referred to in sub-
submit to the assessing rule (1) of Rule 3 or in the
authority on or before the course of the year, where
th
20 day of every month, a such importer had
return in Form I in discontinued business, the
duplicate showing the total assessing authority, shall, if
and net value of the he is satisfied, after such
scheduled goods for the scrutiny of the accounts
preceding month, along and making such enquiry as
with the remittance receipt he considered necessary
from the Government that the returns filed are
Treasury or a crossed correct and complete
demand draft drawn in finally assess in single
favour of the assessing order on the basis of the
authority for the whole of return, the tax payable for
the amount of tax payable the year to which the return
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for the month, to which the relates.
return relates.
2) Where any such importer
Provided that the method of fails to submit the return or
payment by means of cheque returns before the date
shall not be applicable to the specified in sub-rule (1) of
importers referred to in this Rule 3 or if any return or
sub-rule whose cheques got returns submitted by him
dishonoured for want of funds appears to be incorrect or
on more than one occasion. incomplete the assessing
authority shall after giving
2) In the case of an importer
the importer an
referred to in sub-rule (1)
opportunity, determine the
having more than one place
value of the scheduled
of business in the local
goods to the best of his
areas, all returns prescribed
judgment and finally assess
by these rules shall be
in a single order, the tax
submitted by the principal
payable thereon.
place of business and such
returns shall show the total 3) If on final assessment
value of the scheduled under sub-rule (1) or sub-
goods of all the places of rule (2), any tax is found to
his business in all the local be due from the importer
areas. after deducting the tax or
taxes paid by him towards
3) The returns so filed shall
the provisional assessment
provisionally be accepted
made under sub-rule (4) of
subject to the provisions of
rule 3, the assessing
sub-rules (4) and (5).
authority shall serve on the
4) Where the importer importer a notice in Form
referred to in sub-rule (1) VI and the importer shall
fails to submit the return pay the sum demanded in
on or before the date the notice therein. If any
specified in the said sub- refund of tax is found to be
rule (1) or if the return due to the importer the
submitted appears to be assessing authority shall
incorrect or incomplete, the serve on him a notice in
assessing authority shall, Form VII.
after following the
procedure prescribed in the
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General Sales Tax Rules,
determine the value of the
scheduled goods to the best
of the judgment and
provisionally assess the tax
payable for the month and
shall serve upon the
importer a notice in Form
II and the importer shall
pay the sum demanded
within the time and in the
manner specified in the
notice.
5) Where the importer
referred to in sub-rule (1)
submits a return without
receipt from the
Government Treasury or
crossed demand draft for
the whole of the amount of
the tax payable, the
assessing authority shall
serve upon the importer a
notice in Form II for the
tax due and the importer
shall pay the sum
demanded within the time
specified in the notice.
6) (a) An importer not being
a dealer in scheduled
goods shall file a return in
Form III along with the
proof of payment of tax
due thereon before the
assessing authority,
specified in sub-clause (ii)
of clause (b) of Section 2
of the Act within fifteen
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days from the date of entry
of such scheduled goods
into local area, where at
the scheduled goods are
brought into the State
other than through a
check-post; and
immediately, where the
scheduled goods are
brought through a check-
post;
Explanations.- Where an
importer brings the scheduled
goods in a goods vehicle, the
return in Form III shall be
filed by such importer or the
person in-charge of the goods
vehicle before the officer in-
charge of the first check-post
in the State through which the
scheduled goods are brought
and where the scheduled
goods are brought into the
local area either in a goods
vehicle or otherwise without
touching any check-post in
the State, such importer shall
file the return in Form III
before the Commercial Tax
Officer, having jurisdiction
over the area in which such
importer ordinarily resides;
(b) Tax due thereon shall be paid
by tendering a challan or a
demand draft or by cash;
(c) If such authority is satisfied
that the return filed is correct
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and complete, he shall pass
an order in Form IV and a
copy thereof shall be
communicated to the
importer;
(d) If the return filed in Form
III does not appear to be
correct and complete, the
authority concerned shall
determine the value of the
scheduled goods and the tax
payable thereon and serve on
the importer a notice in Form
V and the importer shall pay
the sum demanded within the
time and in the manner
prescribed in the notice.
51. These provisions are inspired from the provisions of the Tamil Nadu
General Sales Tax (TNGST) Act, 1959. Rule 3(4) of the Entry Tax Rules, 2001
is pari materia with Section 12(2) of the Tamil Nadu General Sales Tax
(TNGST) Act, 1959. They read as under:-
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W.P.Nos.16696 and 16702 of 2021Rule 3(4) of the Tamil Nadu Tax Section 12(2) of the Tamil Nadu
on Entry of Goods into Local General Sales Tax (TNGST)
Area Rules, 2001 Act, 1959
3(4) Where the importer referred to 12(2) If no return is submitted by
in sub-rule (1) fails to submit the the dealer under sub-section (1)
return on or before the date within the prescribed period, or if
specified in the said sub-rule (1) or the return submitted by him
if the return submitted appears to appears to the assessing
be incorrect or incomplete, the authority to be incomplete or
assessing authority shall, after incorrect the assessing
following the procedure authority shall, after making
prescribed in the General Sales such enquiry as it may consider
Tax Rules, determine the value of necessary, asses the dealer to
the scheduled goods to the best of the best of its judgment.
the judgment and provisionally Provided that before taking
assess the tax payable for the action under this sub-section, the
month and shall serve upon the dealer shall be given a reasonable
importer a notice in Form II and opportunity of providing the
the importer shall pay the sum correctness or completeness of
demanded within the time and in any return submitted by him.
the manner specified in the notice.
52. Returns filed under Rule 3(1) of the Entry Tax Rules, 2001 has to be
provisionally accepted subject to Sub-Rule (4) and (5) of Rule 3 of the Entry
Tax Rules, 2001. In this case, there is no dispute that the returns were filed by
the petitioner under Rule 3(1) of the Entry Tax Rules, 2001.
53. As per Sub-Rule 4 to Rule 3 of the Entry Tax Rules, 2001, the
Assessing Authority has to provisionally assesses the tax payable by a dealer
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for the month to the best of his or her Judgment, where the importer referred to
in Sub-Rule (1) either
i. fails to file the returns on or before the due date; or
ii. if the return submitted appears to be incorrect and
complete.
54. For this purpose, the Assessing Authority has to determine the value
of the scheduled goods to the best of the Judgment and shall thereafter serve
upon the importer a notice in Form II.
55. The importer has to pay the amount within such time as may be
specified in the notice in Form II. For the aforesaid purpose, the Assessing
Authority has to follow the procedure prescribed under the General Sales Tax
and the Rules made thereunder.
56. Both Rule 4(1) and Rule 4(2) of the Entry Tax Rules, 2001,
contemplate final assessment. Former, deals with final assessment under the
following two circumstances namely:-
i. Return submitted by an importer referred to in sub-rule
(1) of Rule 3; or
ii. where importer had discontinued business in the course
of the year.
Latter applies to the following two circumstances namely:-
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W.P.Nos.16696 and 16702 of 2021i. when filed returns are either incorrect and/or
incomplete; or
ii. when no monthly returns are filed by an importer.
57. Under Rule 4(2) of the Entry Tax Rules, 2001, the assessment has to
be made on Best Judgment Method. Thus, in case of incorrect or incomplete
returns, a provisional assessment has to be made in terms of Rule 3(4) of the
Entry Tax Rules, 2001 under Best Judgment Method and thereafter a Final
Assessment under Sub-Rule (2) to Rule 4 of the Entry Tax Rules, 2001. This
procedure has been given a go by in the impugned proceeding.
58. A reading of Rule 4(1) of the Entry Tax Rules, 2001, also makes it
clear that, after the close of the year, for which the returns referred to in Sub-
Rule (1) of Rule 3 of the Entry Tax Rules, 2001 have been filed or where an
importer has discontinued the business the course of the year, the Assessing
Authority has to finally assess the tax payable in a single order on the basis of
the return for the year to which the return relates.
59. Such assessment has to be completed after scrutiny of the accounts
and making such enquiry as may be considered necessary to complete and
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finalize the assessment on the basis of a single order. Thus, the scheme of the
Entry Tax Act is to finalize the assessment as expeditiously as possible although
no time limit is prescribed.
60. As the returns that were filed by the petitioner were incorrect, it was
incumbent on the part of the respondents to have first exercised the power
under Sub-Rule(4) to Rule 3 of the Entry Tax Rules, 2001 and pass a
Provisional Assessment Order after the end of the year to which the returns
relates to or within a reasonable time after the close of the year for which the
returns were filed and thereafter, Final Assessment Orders on the returns filed
in terms of Sub-Rule 2 to Rule 4 of the Entry Tax Rules, 2001 within a
reasonable period of time.
61. Although, it was canvassed by the learned counsel for both sides that
there is no period of limitation prescribed for completing the Assessment under
the provisions of the Entry Tax, it has to be construed that there is a limitation
prescribed under the Act for completing the Assessment in terms of Rule 4 of
the Entry Tax Rules, 2001.
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62. Assessments cannot be kept open ended for over a decade particularly
when a dealer is not required to maintain records for a period beyond five years.
63. Thus, not only a provisional assessment but also the final assessment
is required to be made by the Assessing Authority where no returns were filed
and/or where returns filed were either incorrect or incomplete as per the above
Rules.
64. Even if such assessment made Rule 4 of the Entry Tax Rules, 2001
resulted in escaped turnover, the Assessing Authority was empowered to invoke
the powers under Section 16 of the Tamil Nadu General Sales Tax (TNGST)
Act, 1959 in view of Section 10 of the Entry Tax Act, 2001.
65. Again here also the assessment has to be made to the Best Judgment
Method after notice to the dealer. However, this power is available in the hands
of the Assessing Authority for a period of 5 years from the date of final
assessment. Section 16(1)(a) and (b) of the Tamil Nadu General Sales Tax
(TNGST) Act, 1959 reads as under:-
“Section 16. Assessment of escaped turnover. –
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W.P.Nos.16696 and 16702 of 2021(1)(a) Where, for any reason, the whole or any part of the
turnover of business of a dealer has escaped assessment
to tax, the assessing authority may, subject to the
provisions of sub-section (2), at any time within a period
of five years from the *[date of order of the final
assessment by the assessing authority], determine to the
best of its judgement the turnover which has escaped
assessment and assess the tax payable on such turnover
after making such enquiry as it may consider necessary
and after giving the dealer a reasonable opportunity to
show cause against such assessment.
(1)(b) Where, for any reason, the whole or any part of the
turnover of business of a dealer has been assessed at a
rate lower than the rate at which it is assessable, the
assessing authority may, at any time within a period of
five years from the *[date of order of the final assessment
by the assessing authority], reassess the tax due after
making such enquiry as it may consider necessary and
after giving the dealer a reasonable opportunity to show
cause against such re-assessment.”
66. Thus, it would imply that, since no time limit has been prescribed for
completing the assessment under Rule 3(4), Rule 4(3) of the Entry Tax Rules,
2001, assessment has to be completed within a reasonable period of time and
thereafter assessment for escaped turnover under Section 16 of the Tamil Nadu
General Sales Tax (TNGST) Act, 1959 within a period of 5 years.
67. It is quite possible that assessments were not completed under the
provisions of the Entry Tax Act, 2001 as levy of entry tax on both goods and the
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motor vehicles were subject matter of challenge before various High Courts.
These cases ultimately reached the portals of the Hon’ble Supreme Court. The
Hon’ble Supreme Court answered the challenge in its verdict in Jindal
Stainless Limited and another Vs. State of Haryana and others, 2016 (11)
TMI 545 SC (LB). The said decision was rendered on 11.11.2016.
68. Subsequently, the Hon’ble Supreme Court in The State of Tamil
Nadu and others Vs. ITC Limited, 2017 (8) TMI 1648, following its decision
in Jindal Stainless Limited and another Vs. State of Haryana and others,
2016 (11) TMI 545 SC (LB) answered the case against the dealers.
69. As far as challenge to levy of entry tax on motor vehicles are
concerned, the issue was answered by the Hon’ble Supreme Court in State of
Kerala and others Vs. Fr.William Fernandez etc., 2017 SCC Online SC 1291
by holding State had powers to levy entry tax on entry of motor vehicles as
well.
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70. Thus, the respondents could argue that in view of the pendency of the
cases before various High Courts and the Hon’ble Supreme Court, the
assessment was not made earlier.
71. However, the respondents have not produced any order of the Court
which had put an embargo on them from passing Assessments Orders earlier.
That apart, the orders of the Hon’ble supreme Court were passed in 2016 and
2017. However, the Impugned Assessment Orders have been passed long after
the Hon’ble Supreme Court upheld the validity of the levy of entry tax under
various legislations.
72. Thus, there was no justification in passing the Impugned Assessment
Orders belated in the year 2021 in respect of the Assessment Year 2003-2004
and the Assessment Year 2004-2005. It has to be assumed that the Department
has accepted the returns filed by the petitioner for the respective Assessment
Years and the assessment was completed under Rule 4(1) of the Entry Tax
Rules, 2001.
73. If at all, the respondents should have invoked the machinery under
Section 16 of the Tamil Nadu General Sales Tax (TNGST) Act, 1959 read with
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Section 10 of the Entry Tax Act, 2001 within a reasonable period prescribed for
finalizing the assessment. In other words, the powers could have been invoked
within 5 years after deemed assessment under Rule 4(1) of the Entry Tax Rules,
2001 and after the date of filing of returns.
74. The period for finalizing the assessment under the Entry Tax Act,
2001 and Entry Tax Rules, 2001 cannot be left open ended for a over a decade.
If the respondents were diligent, they could have passed the Impugned
Assessment Order. The respondents could have postponed the recovery,
pending decision of the Hon’ble Supreme Court.
75. The ratio of the Hon’ble Supreme Court in State of Punjab and
another Vs. Bhatinda District Co-operative Milk Producers Union Ltd.,
2007 (217) E.L.T.325 (S.C.)/(2007) 11 SCC 363 and J.Sheik Parith Vs.
Commissioner of Customs, 2020 (374) E.L.T.15 (Mad.) will also apply to the
facts of the case.
76. Therefore, these Writ Petitions deserve to be allowed and are
accordingly allowed. No costs. Connected Writ Miscellaneous Petitions are
closed.
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24.01.2025
Neutral Citation: Yes/No
arb
To:
1.The Joint Commissioner of GST and
Central Excise (Appeals II),
Newry Towers, 2054, I Block,
12th Main Road,
2nd Avenue, Anna Nagar,
Chennai – 600 040.
2.The Assistant Commissioner of GST
and Central Excise,
Poonamallee, C 48 TNHB,
2nd Avenue, Anna Nagar,
Chennai – 600 040.
C.SARAVANAN, J.
arb
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Pre-delivery Common Order in
W.P.Nos.16696 and 16702 of 2021
24.01.2025
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