THE HONOURABLE DR. JUSTICE ANITA SUMANTH W.P.Nos.3408 and 3410 of 2019 & W.M.P.No.3691 & 3692 of 2019 M/s.Surya Sri Constructions. For Petitioner     : Mr.C.Baktha Siromoni                                     For Respondent  : Mr.V.Prasanth Kiran            Government Advocate , The orders of assessment are confirmed expect for the penalty, that stands waived.

IN THE HIGH COURT OF JUDICATURE AT MADRAS

DATED: 23.06.2022

CORAM

THE HONOURABLE DR. JUSTICE ANITA SUMANTH

W.P.Nos.3408 and 3410 of 2019 &

W.M.P.No.3691 & 3692 of 2019

 

M/s.Surya Sri Constructions,

Rep.by its Proprietor,

No.17/10, Sai Nagar, 3^rd Street,

Jawahar Nagar,

Chennai-600082                                                           …Petitioner in both WPs

Vs.

State Tax Officer,

Perambur Assessment Circle,

Chennai-600099                                                          …Respondent in both WPs

 

Common Prayer: Writ Petition filed under Article 226 of the Constitution of India, to issue a Writ of Certiorarified mandamus calling for the records of the respondent in his proceedings of the assessment order in Rc.No.103/2016 B1 (2014-15 & 2015-16) dated 31.12.2018 quash the same and direct the respondent to pass fresh orders by following the decision of the High Court of Madras in W.P.Nos.6750 & 6751 of 2017 dated 04.07.2017 and also the directions and guidelines given by the Apex Court in the case of State of Tamil Nadu Vs. M/s.Devendran Company reported in 103 STC 95 (SC) after providing an opportunity of personal hearing to the petitioner.

 

 

For Petitioner     : Mr.C.Baktha Siromoni

 

For Respondent  : Mr.V.Prasanth Kiran

Government Advocate

 

C O M M O N   O R D E R

The impugned orders of assessment relating to the periods 2014-15 and 2015-16 have been passed under the provisions of the Tamil Nadu Value Added Tax Act, 2006 (in short ‘Act’). The petitioner is in the second round of litigation and had approached this Court earlier in W.P.Nos.6750 & 6751 of 2017, challenging the orders passed initially, on the ground that they were incorrect as well as framed contrary to the principles of natural justice.

2. The aforesaid writ petitions had come to be allowed by order dated 04.07.2017 and the orders of assessment were set aside. A direction was issued to the respondent officer to furnish a copy of the proceedings of the enforcement officer dated 30.03.2016, after which the petitioner was to be heard, its objections considered and the assessment redone, in accordance with law.
3. Complying with the aforesaid order, the petitioner was called to the office of the respondent and given a copy of the VAT enforcement proposal. It was also offered an opportunity of personal hearing which it availed before the authority. A notice was issued to the petitioner thereafter and a response also received. The impugned order of assessment has come to be passed thereafter.
4. Thus, I find no merit in the ground of the petitioner to the effect that the principles of natural justice have been violated as I find that the Officer has adhered to the procedure for assessment, as well as the directions of this Court in order dated 04.07.2017.
5. On merits, the petitioner has not registered itself under the Act. No monthly returns have been filed by it for the periods in question. The Officers of the Enforcement Wing in the course of their inspection recorded statement in which the petitioner confirms that it has not registered itself under the Commercial Tax Act and the petitioner also confirms that it will remit the applicable tax, being 2%, in line with the provisions of Section 6 of the Act.
6. As regards the factum of non-registration, the petitioner expressed its willingness to compound the violation and the statement records that the violation was compounded and a sum of Rs.2000/- paid by cheque. It has been the submission of the petitioner at the time of assessment that the liability to tax for the periods in question, when it was unregistered, would only be 2% availing benefit of Section 6 of the Act.
7. Section 6 of the Act provides for the payment of tax at compounded rates for a works contractor and grants the benefit of presumptive taxation to a dealer. Thus, an assessment would be completed on a fixed percentage, being 2% in the cases of civil and civil maintenance works contracts and 5% in the case of other works contract, without the necessity for maintenance of books of accounts and verification of the same and benefit of input tax credit (ITC).
8. The petitioner relies on the following decisions of this Court in support of its submissions on the merits of claim in regard to rate of tax:

(i) M/s.T.Azhakesen Vs. the State of Tax Officer and Others, W.A.No.2262, 2263, 2264 & 2267 of 2021 dated 08.09.2021;

(ii) Commissioner of Income Tax, Coimbatore Vs. M/s.Kikani Exports Pvt. Ltd., Coimbatore, TC(A).No.330 of 2013 dated 09.09.2014;

(iii) K.Ramasamy Vs. The Deputy Commercial Tax Officer, W.P.No.12556 of 2006 dated 18.12.2017.

9. The question of law decided in those cases relates to the option to be exercised by an assessee who claims benefit of presumptive taxation. Though the provisions requires an option to be exercised by the petitioner, it was the case of several assessees that there is no specific provision/form for exercise of the option and in such circumstances there returns filed should itself be deemed to be exercise of option. This contention was accepted by the Court, noticing that there was no form prescribed, under which option could be exercised.
10. One of the above decisions has been rendered in the context of provisions of the Income Tax Act, 1961 analogous to the present context. The ratio therein is that a return filed by an assessee would be construed to be exercise of option for payment of tax on compounded, presumptive rates, since there is no specific provision for exercise of option by way of a separate form or otherwise.
11. There is no quarrel on this proposition. However, in the present case, I am afraid the petitioner will not be entitled to the benefit of this decision for the admitted reason that he was unregistered till September 2016, which means that he was unregistered dealer for the periods in question.
12. As rightly pointed out by learned Government Advocate, on a combined reading of Section 6 of the Act with Rule 7(c) of the Tamil Nadu Value Added Tax Rules, 2007 (in short ‘Rules’), which deals with filing of returns, it is contemplated that every registered dealer should file a return in Form-K on or before 20thof the succeeding month along with proof of payment of tax.
13. Had this been done, this would be deemed to be exercise of option. The procedure as contemplated under Rule 7(c) is a pre-condition to the creation of the deeming fiction that the assessee in question has, indeed, exercised its option. This fiction cannot be stretched to encompass those cases where a dealer is unregistered and has not complied with the statutory provisions and rules in relation to filing of returns.
14. It is to be noted that the definition of dealer under Section 15 could encompass various categories of persons enumerated thereunder, whether registered or otherwise. However, a registered dealer is separately defined under Section 2 (3) meaning a dealer registered under the provisions of the Act. It is only such a dealer who can file a return in line with the procedure set out under the Act who can consequently claim that he has exercised his option for presumptive taxation.
15. In the present case, since the petitioner has, admittedly, registered itself only in September 2016, it is only from that date that such an option may be claimed if at all, and the registration cannot be reckoned backwards and telescoped into the prior periods. Doing this, would, in my view, be a distortion of the deeming fiction, beyond acceptable proportions.
16. Mr.Siromani would make a last ditch attempt to refer to a decision in W.P.No.29096 of 2007 etc., batch in which, while dealing with the vires of Section 6 of the Act, at para 17, the Bench has stated ‘the option of composition scheme can be availed at the discretion of a contractor if he thinks it advantageous to him‘.
17. Evidently, the occasion did not arise for the Division Bench to deliberate upon the specific issue arising in, and dealt with under this order and the effect of the observation of the Bench, as above, can only be to address a registered dealer and none other.
18. LearnedIN THE HIGH COURT OF JUDICATURE AT MADRAS
    DATED: 23.06.2022
    CORAM
    THE HONOURABLE DR. JUSTICE ANITA SUMANTH
    W.P.Nos.3408 and 3410 of 2019 &
    W.M.P.No.3691 & 3692 of 2019

    M/s.Surya Sri Constructions,
    Rep.by its Proprietor,
    No.17/10, Sai Nagar, 3rd Street,
    Jawahar Nagar,
    Chennai-600082 …Petitioner in both WPs
    Vs.
    State Tax Officer,
    Perambur Assessment Circle,
    Chennai-600099 …Respondent in both WPs

    Common Prayer: Writ Petition filed under Article 226 of the Constitution of India, to issue a Writ of Certiorarified mandamus calling for the records of the respondent in his proceedings of the assessment order in Rc.No.103/2016 B1 (2014-15 & 2015-16) dated 31.12.2018 quash the same and direct the respondent to pass fresh orders by following the decision of the High Court of Madras in W.P.Nos.6750 & 6751 of 2017 dated 04.07.2017 and also the directions and guidelines given by the Apex Court in the case of State of Tamil Nadu Vs. M/s.Devendran Company reported in 103 STC 95 (SC) after providing an opportunity of personal hearing to the petitioner.

    For Petitioner : Mr.C.Baktha Siromoni

    For Respondent : Mr.V.Prasanth Kiran
    Government Advocate

    C O M M O N O R D E R
    The impugned orders of assessment relating to the periods 2014-15 and 2015-16 have been passed under the provisions of the Tamil Nadu Value Added Tax Act, 2006 (in short ‘Act’). The petitioner is in the second round of litigation and had approached this Court earlier in W.P.Nos.6750 & 6751 of 2017, challenging the orders passed initially, on the ground that they were incorrect as well as framed contrary to the principles of natural justice.
    2. The aforesaid writ petitions had come to be allowed by order dated 04.07.2017 and the orders of assessment were set aside. A direction was issued to the respondent officer to furnish a copy of the proceedings of the enforcement officer dated 30.03.2016, after which the petitioner was to be heard, its objections considered and the assessment redone, in accordance with law.
    3. Complying with the aforesaid order, the petitioner was called to the office of the respondent and given a copy of the VAT enforcement proposal. It was also offered an opportunity of personal hearing which it availed before the authority. A notice was issued to the petitioner thereafter and a response also received. The impugned order of assessment has come to be passed thereafter.
    4. Thus, I find no merit in the ground of the petitioner to the effect that the principles of natural justice have been violated as I find that the Officer has adhered to the procedure for assessment, as well as the directions of this Court in order dated 04.07.2017.
    5. On merits, the petitioner has not registered itself under the Act. No monthly returns have been filed by it for the periods in question. The Officers of the Enforcement Wing in the course of their inspection recorded statement in which the petitioner confirms that it has not registered itself under the Commercial Tax Act and the petitioner also confirms that it will remit the applicable tax, being 2%, in line with the provisions of Section 6 of the Act.
    6. As regards the factum of non-registration, the petitioner expressed its willingness to compound the violation and the statement records that the violation was compounded and a sum of Rs.2000/- paid by cheque. It has been the submission of the petitioner at the time of assessment that the liability to tax for the periods in question, when it was unregistered, would only be 2% availing benefit of Section 6 of the Act.
    7. Section 6 of the Act provides for the payment of tax at compounded rates for a works contractor and grants the benefit of presumptive taxation to a dealer. Thus, an assessment would be completed on a fixed percentage, being 2% in the cases of civil and civil maintenance works contracts and 5% in the case of other works contract, without the necessity for maintenance of books of accounts and verification of the same and benefit of input tax credit (ITC).
    8. The petitioner relies on the following decisions of this Court in support of its submissions on the merits of claim in regard to rate of tax:
    (i) M/s.T.Azhakesen Vs. the State of Tax Officer and Others, W.A.No.2262, 2263, 2264 & 2267 of 2021 dated 08.09.2021;
    (ii) Commissioner of Income Tax, Coimbatore Vs. M/s.Kikani Exports Pvt. Ltd., Coimbatore, TC(A).No.330 of 2013 dated 09.09.2014;
    (iii) K.Ramasamy Vs. The Deputy Commercial Tax Officer, W.P.No.12556 of 2006 dated 18.12.2017.
    9. The question of law decided in those cases relates to the option to be exercised by an assessee who claims benefit of presumptive taxation. Though the provisions requires an option to be exercised by the petitioner, it was the case of several assessees that there is no specific provision/form for exercise of the option and in such circumstances there returns filed should itself be deemed to be exercise of option. This contention was accepted by the Court, noticing that there was no form prescribed, under which option could be exercised.
    10. One of the above decisions has been rendered in the context of provisions of the Income Tax Act, 1961 analogous to the present context. The ratio therein is that a return filed by an assessee would be construed to be exercise of option for payment of tax on compounded, presumptive rates, since there is no specific provision for exercise of option by way of a separate form or otherwise.
    11. There is no quarrel on this proposition. However, in the present case, I am afraid the petitioner will not be entitled to the benefit of this decision for the admitted reason that he was unregistered till September 2016, which means that he was unregistered dealer for the periods in question.
    12. As rightly pointed out by learned Government Advocate, on a combined reading of Section 6 of the Act with Rule 7(c) of the Tamil Nadu Value Added Tax Rules, 2007 (in short ‘Rules’), which deals with filing of returns, it is contemplated that every registered dealer should file a return in Form-K on or before 20th of the succeeding month along with proof of payment of tax.
    13. Had this been done, this would be deemed to be exercise of option. The procedure as contemplated under Rule 7(c) is a pre-condition to the creation of the deeming fiction that the assessee in question has, indeed, exercised its option. This fiction cannot be stretched to encompass those cases where a dealer is unregistered and has not complied with the statutory provisions and rules in relation to filing of returns.
    14. It is to be noted that the definition of dealer under Section 15 could encompass various categories of persons enumerated thereunder, whether registered or otherwise. However, a registered dealer is separately defined under Section 2 (3) meaning a dealer registered under the provisions of the Act. It is only such a dealer who can file a return in line with the procedure set out under the Act who can consequently claim that he has exercised his option for presumptive taxation.
    15. In the present case, since the petitioner has, admittedly, registered itself only in September 2016, it is only from that date that such an option may be claimed if at all, and the registration cannot be reckoned backwards and telescoped into the prior periods. Doing this, would, in my view, be a distortion of the deeming fiction, beyond acceptable proportions.
    16. Mr.Siromani would make a last ditch attempt to refer to a decision in W.P.No.29096 of 2007 etc., batch in which, while dealing with the vires of Section 6 of the Act, at para 17, the Bench has stated ‘the option of composition scheme can be availed at the discretion of a contractor if he thinks it advantageous to him’.
    17. Evidently, the occasion did not arise for the Division Bench to deliberate upon the specific issue arising in, and dealt with under this order and the effect of the observation of the Bench, as above, can only be to address a registered dealer and none other.
    18. Learned counsel for the petitioner prays that there has been no willful contravention of the provisions of the Act and in any event with the passing of the present order, confirming the order of assessment, the turnover would be brought to tax under Section 5. He would thus pray that the penalty levied be cancelled.
    19. I am persuaded to accept this argument in light of the fact that the issue decided is a question of law and also in light of there being no serious objection to this request, from the side of the learned Government Advocate. The orders of assessment are confirmed expect for the penalty, that stands waived.
    20. Dismissed, connected miscellaneous petitions are closed. No costs.

    ska 23.06.2022
    Index : Yes
    Speaking Order

    To

    State Tax Officer,
    Perambur Assessment Circle,
    Chennai-600099.

     

    DR.ANITA SUMANTH, J.

    ska

     

     

     

     

    W.P.Nos.3408 and 3410 of 2019 and
    W.M.P.No.3691 & 3692 of 2019

     

     

     

     

     

     

    counsel for the petitioner prays that there has been no willful contravention of the provisions of the Act and in any event with the passing of the present order, confirming the order of assessment, the turnover would be brought to tax under Section 5. He would thus pray that the penalty levied be cancelled.

19. I am persuaded to accept this argument in light of the fact that the issue decided is a question of law and also in light of there being no serious objection to this request, from the side of the learned Government Advocate. The orders of assessment are confirmed expect for the penalty, that stands waived.
20. Dismissed, connected miscellaneous petitions are closed. No costs.

 

 

ska                                                                                                   23.06.2022

Index     : Yes

Speaking Order

 

To

 

State Tax Officer,

Perambur Assessment Circle,

Chennai-600099.

 

 

 

DR.ANITA SUMANTH, J.

 

ska

 

 

 

 

 

 

 

 

 

 

W.P.Nos.3408 and 3410 of 2019 and

W.M.P.No.3691 & 3692 of 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

23.06.2022