Madras HC lashes against Commercial Tax Officer for Cherry Picking Assessment Years for Exercising Suo Moto Revision Powers [Read Order]

A Division Bench of the Madras High Court comprising Dr Justice Anita Sumanth and Justice R Vijayakumar lashed against Commercial Tax Officer for cherry picking assessment years for exercising suo moto revision powers.

The appellant, M/s.Saghay Rubber Products, is a manufacturer of automobile fan belts and an assessee under the files of the second respondent herein. The dealer was originally assessed for the taxable turnover of “two-wheeler and tractor fan belts” to tax at 5% and 3% respectively by the second respondent herein. However, it was re-assessed at 8% on the ground that the above said item of goods were specifically included under Entry 50(vi) of Part-D of the first schedule of TNGST Act 1959 for the assessment year 1993-1994 and 1994-1995.

The said re-assessment order was challenged by the dealer before the Appellate Assistant Commissioner (CT) and he was pleased to allow the appeal on the ground that the goods are only meant for two-wheeler and tractors which are liable to be taxed at 5% and 3% respectively. As against the said order, the first respondent, The Joint Commissioner (CT)-III, had initiated suo moto revision proceedings under Section 34 of TNGST Act, 1959.

Based on the said findings, the first respondent classified the said goods as rubber products and assessed at 8% under item 50(vi) of Part-D of the first schedule of TNGST Act. However, the first respondent had deleted the penalty imposed under Section 12(3)(b) of TNGST Act. Challenging the said order, the present tax case has been filed by the dealer.

The counsel for the appellant, S.Karunakar, argued that the materials manufactured and sold by the appellant are meant for two wheelers and tractors and they can be classified only as spare parts and accessories of the said vehicles which are assessable to tax at 5% and 3% falling under item 30 of part 'C' and item 27 of part 'B' of the first schedule of the TNGST Act respectively.

The counsel who appeared for the respondents, K.S.Selvaganesan, had contended that the fan belts that are being dealt with by the appellant dealer are not only used as accessories, spare parts in motor vehicles, but they also used as spare parts for other machineries. Therefore, the first respondent has rightly brought the said assessment under entry No.50.

The Madras High Court Bench observed that “It is the specific case of the appellant/dealer that they are manufacturers of automobile fan belts and they deal with two-wheeler fan belts and tractors fan belts alone. The invoice bills produced by the appellant would clearly establish the fact that the belts that have been sold by them are accessories to two-wheeler or a tractor. Therefore, it is clear that the said goods would clearly fall within entry 30 of Part-C of the first schedule attracting 5% tax for the two-wheeler parts. As far as the tractor belts are concerned, they fall under entry 27 of Part-B of the first schedule attracting 3% tax.”

“It is brought to the notice of the Court that the first respondent had initiated suo moto revision proceedings only for the assessment year 1993-1994 and 1994-1995. However, the assessment for the previous and subsequent assessment years have not been subjected to suo moto revision. Therefore, it is clear that the first respondent has cherrypicked the said assessment years for exercising his suo moto powers for reasons best known to him” the Bench concluded.

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