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2012 DIGILAW 836 (MAD)

Adiyaman Textiles Ltd. v. Commercial Tax Officer

2012-02-16

K.CHANDRU

body2012
Judgment :- 1. These writ petitions came to be posted before this court on being specially ordered by the Hon'ble Chief Justice. 2. The petitioner in all the four writ petitions are one and the same company, i.e., M/s.Adiyaman Textiles Ltd., represented by its Managing Director situated at Kaveripattinam, Krishnagiri District. 3. In the first two writ petitions, the challenge is to the assessment orders issued in Form 19 of the Tamil Nadu General Sales Tax Act, dated 31.7.2007 and 29.6.2007 respectively. By the impugned notice, the petitioner company was directed to pay the tax for additional spindles engaged by them while availing the benefit under IFST Scheme. It was for the period from 01.11.1996 to 31.10.2005. When availing the deferral scheme for payment of Sales Tax, the Enforcement Wing of the Commercial Tax Department had inspected the premises and found that they had originally installed 7424 spindles. At the time of inspection it was found that 12216 spindles were in use. The installation of additional number of spindles were not reported. They have also not paid the tax on the value of yarn produced. It is in that view of the matter, rejecting the details furnished by them, the best judgment assessment was made. An additional tax was made together with penalty under Section 22(2) of the TNGST Act. In respect of W.P.No.32128 of 2007, the tax due came around Rs.3,29,537/-. A notice in Form 54 was also issued. Similarly, in W.P.No.32129 of 2007, the tax due was arrived at Rs.2,87,691/-. 4. In both orders by the Commercial Tax Officer, Krishnagiri, though it was indicated that a regular appeal lies to the Appellate Assistant Commissioner of Commercial Taxes, Salem, the petitioner has not chosen to avail the same as required under law. Such an appeal has to b filed within 30 days from the date of receipt of the order. But however, the petitioner has chosen to come to this court and file the writ petitions on 03.10.2007. Both writ petitions were admitted on 10.10.2007. Pending writ petitions, in the applications for interim stay, this court had granted an interim stay of the impugned proceedings. On notice from this court, the Assistant Commissioner (Commercial Tax), Krishnagiri has filed a common counter affidavit in both these writ petitions, dated 6.2.2012. 5. Both writ petitions were admitted on 10.10.2007. Pending writ petitions, in the applications for interim stay, this court had granted an interim stay of the impugned proceedings. On notice from this court, the Assistant Commissioner (Commercial Tax), Krishnagiri has filed a common counter affidavit in both these writ petitions, dated 6.2.2012. 5. Even during the pendency of these two writ petitions, the same petitioner has come forward with the subsequent two writ petitions challenging the revised notice dated 1.9.2008 issued by the Assistant Commissioner, Commercial Tax, Krishnagiri. It was informed in the impugned notice dated 1.9.2008 that the extra 4792 spindles were used for the entire year and it was not reported to the department. Hence the revised tax was made. In W.P.No.23415 of 2008, while the assessment turnover was at Rs.6,89,94,769/- in respect of the cotton yarn, in W.P.No.23416 of 2008, it was Rs.83,68,086/- relating to cotton yarn. Both the notices dated 1.9.2008 are under challenge in the subsequent writ petitions. The petitioners have also referred to a division bench judgment of this court in W.P.No.17127 of 2002, dated 15.12.2005 and stated that action initiated by the respondents were contrary to the said judgment. 6. The subsequent two matters were admitted on 25.09.2008. Pending the two writ petitions, this court had granted an interim stay in the light of the earlier interim order passed in the first two writ petitions. The subsequent two writ petitions were directed to be posted along with the first two writ petitions. Hence they were grouped together and a common order is passed. 7. The ground raised by the petitioner was that neither the Government Order nor the eligibility certificate as well as an agreement entered into with the Commercial Tax department did not stipulate any condition that whenever additional spindles were employed, the eligibility certificate will get amended. This was the view taken by the division bench referred to above. The respondents have not considered the decision of the division bench. 8. In the counter affidavit filed by the respondents in the first two writ petitions, it was contended that the petitioner mill had obtained the eligibility certificate under the interest free Sales Tax Deferral Scheme from the second respondent SIPCOT on 14.11.1997 and thereafter, they entered into an agreement with the Assistant Commissioner (CT), Dharmapuri on 8.1.1998. The IFDS Scheme was available from 01.11.1997 to 31.10.2006. The IFDS Scheme was available from 01.11.1997 to 31.10.2006. At the time of obtaining the eligibility certificate from the SIPCOT, they had installed 7424 spindles and utilized the same for production of cotton yarn. It was on inspection found that they had increased the spindles to 12216 for production of yarn and that additional installation of 4292 spindles were made and increased production was done. As per the agreement entered into with the Commercial Tax Department, they are eligible for deferral of sales tax on the increased volume of production subject to condition that the increased volume of production shall be reflected in any one of the year during the last three years preceding the date of commencement of deferral. The petitioner never reported the installation of additional number of spindles as well as never paid the tax on the value of yarn produced. 9. It was found that the sale turnover for the years 1996-97, 1997-98, 1998-99 were taken into account as the base figure to ascertain the highest production / sales in the company. During 1996-97, it was Rs.65.90 lakhs, during 1997-98, it was Rs.279.05 lakhs and during 1998-99, it was Rs.351.64 lakhs. The petitioner company had declared the sales turnover of Rs.818.40 lakhs for the year 2005-06. But for the first three years, they had never had such an high turnover. It was contrary to the conditions laid down in the agreement and that no direction was obtained from the competent authority for deferral of sales tax on the increased volume of production / sale for the additional engagement of 4292 spindles. They are not eligible for the same. Reliance placed upon the judgment of this court in Jai Jagadhambiga Textiles Mills Ltd. is not apposite, since in that case the said mill had obtained eligibility certificate even for the expansion of their unit. The decision taken was based upon the inspection report of the Enforcement wing as well as the agreement entered with the Commercial Tax department. Further without exhausting the alternative remedy, the petitioner cannot challenge the assessment orders in a writ petition under Article 226 of the Constitution. In view of the same, the respondents prayed for dismissal of all the four writ petitions. 10. Further without exhausting the alternative remedy, the petitioner cannot challenge the assessment orders in a writ petition under Article 226 of the Constitution. In view of the same, the respondents prayed for dismissal of all the four writ petitions. 10. Before proceeding to deal with the legal issues involved in this case, it must be noted that in the eligibility certificate obtained from the SIPCOT for enjoying the IFSTS scheme, in paragraphs 3, 4.2,6 and 7 it was stated as follows: "(3.) Based on the above, the holder of this E.C. will be eligible for deferral of sales tax not exceeding Rs.125.34 lakhs (Rupees One Hundred and Twenty Five Lakhs and Thirty Four Thousands only) interest free for NINE YEARS from the month in which the holder's unit commenced its commercial production i.e., from 1.11.96 to 31.10.2005. (4.2.) 100% of the value of initial gross fixed assets i.e. Rs.125.34 lakhs (Rupees One Hundred and Twenty Five Lakhs and Thirty Four Thousand only). (6.) The deferral scheme will be applicable to the company only as long as it manufactures products for which the E.C has been issued..... (7.) Violation of any of the conditions in the Eligibility certificate and the connected Government Orders will result in withdrawal of deferral entirely." 11. Pursuant to the eligibility certificate, an agreement was reached between the petitioner company and the Commercial Tax department represented by its Assistant Commissioner (CT), Dharmapuri. In that agreement in paragraphs 1(b) and 2 it was stated as follows: "(b). In the case of expansion/diversification: (1) the company is eligible for deferral of Sales tax on the increased volume of production. For the purpose of determining the increased volume of production, the base figure shall be the highest of the volume of production / Sales in the Company in any one of Year during the last 3 years period preceding the date of commencement of deferral. (2.) The total amount of tax to be deferred shall not exceed the total investment made in fixed assets or the amount specified in the eligibility certificate issued by the District Centre whichever is lower." 12. It in this context of eligibility certificate and the agreement, it has to be seen whether the respondents have acted contrary to law? 13. Reliance placed by the petitioner in an unreported judgment in W.P.No.17127 of 2002, dated 15.12.2005 will have no relevance. It in this context of eligibility certificate and the agreement, it has to be seen whether the respondents have acted contrary to law? 13. Reliance placed by the petitioner in an unreported judgment in W.P.No.17127 of 2002, dated 15.12.2005 will have no relevance. The Supreme Court while considering the deferral scheme under the very same Act, referred to Section 17-A and the purpose behind Section 17-A vide its judgment in Southern Agrifurane Industries Ltd. v. Commercial Tax Officer reported in (2005) 2 SCC 575 and in paragraphs 21 and 22 it was held as follows: "(21.) Section 17-A of the Tamil Nadu General Sales Tax Act confers power on the State Government to notify deferred payment of tax for certain industries including sick units. The relevant extract of the section reads thus: “(17-A.) Power of Government to notify deferred payment of tax for new industries, etc.” (1) The Government may, in such circumstances and subject to such conditions as may be prescribed, by notification issued whether prospectively or retrospectively defer the payment by any new industrial unit or sick unit or sick textile mill of the whole or any part of the tax payable in respect of any period: Provided that such retrospective effect shall not be earlier than 9-5-1988. (1-A)*** (2) Notwithstanding anything contained in this Act, the deferred payment of tax under sub-section (1) or sub-section (1-A) shall not attract interest under sub-section (3) of Section 24 provided the conditions laid down for payment of the tax deferred are satisfied.” (22.) Therefore, under sub-section (2) interest is not payable on the deferred payment of tax provided the conditions laid down in sub-section (1) are satisfied. The purpose of the section is to grant the benefit to new industrial units to help them tide over the initial teething troubles and to sick industries to assist them to get over their sickness. To this end, the Government is empowered to defer the payment of the whole or any part of the tax payable in respect of any period. To this end, the Government is empowered to defer the payment of the whole or any part of the tax payable in respect of any period. If on the other hand, the conditions are not satisfied, then too the State Government may allow the tax due to be repaid in instalments under Section 24(1) but in such a case the assessee would be liable to pay interest under Section 24(3) which provides: “(24.) (3) On any amount remaining unpaid after the date specified for its payment as referred to in sub-section (1) or in the order permitting payment in instalments, the dealer or person shall pay, in addition to the amount due, interest at one-and-half per cent per month of such amount for the first three months of default and at two per cent per month of such amount for the subsequent period of default.” (Emphasis added) 14. In the present case, the writ petitions are liable to be rejected on more than one ground :- (i)The petitioner has not availed the appellate remedy provided under the TNGST Act. (ii)The petitioner having got the eligibility certificate followed by an agreement had clearly breached the said agreement. (iii)The decision referred to in Jai Jagadhambiga Textiles Mills Ltd., case is clearly distinguishable as in that case even for the expansion, necessary modification was obtained from the competent authority in the eligibility certificate. In the above circumstances, the argument that installation of additional spindles will not be in violation of the eligibility certificate and the agreement does not stand to reason. 15. In view of the above, all the four writ petitions will stand dismissed. However, there will be no order as to costs. Consequently connected miscellaneous petitions stand closed.