No Purchase Tax can be levied If Turnover is less than Rs. 300 Crores per year: Madras HC [Read Judgment]

The High Court of Madras while quashing the orders of the respondent authority held that the levy of Purchase Tax under Section 12 of the Tamil Nadu Value-added Tax Act, 2006 is not attracted if the petitioner’s turnover was also below Rs. 300 Crores during the year.

The petitioner, Sunrise Foods Private Limited is a dealer of turmeric had locally purchased turmeric from various registered/unregistered dealers without payment of tax as their turnover was reportedly below Rs. 300 crores during the respective assessment year and were therefore exempted under Section 15 read with Item 18, Part B, 4th Schedule of the Tamil Nadu Value Added Tax Act, 2006. The purchased stock was transferred stock by the petitioner to its branches outside the State of Tamil Nadu for branding, packing, and labeling and other activities and was purportedly sold from there on payment of tax.

Assessments for the respective assessment years were completed earlier. Thereafter, assessment orders were reopened under Section 22 of the Tamil Nadu Value Added Tax Act, 2006 pursuant to an investigation by the Commercial Tax Department on the ground that the petitioner had failed to pay purchase tax under Section 12(1) of the Tamil Nadu Value Added Tax Act, 2006. These proceedings culminated in the impugned order of the respondent wherein the petitioner has been asked to pay the purchase tax and penalty.

The petitioner contended that in the context of payment of purchase tax and the appropriate rate of tax would be under Item 18, Part B, IV Schedule and not under Item 52, Part B to the I Schedule of the Tamil Nadu Value Added Tax Act, 2006.

The single-judge bench of Justice C. Sarvanan while quashing the orders of the respondent authority held that the levy of Purchase Tax under Section 12 of the Tamil Nadu Value-added Tax Act, 2006 is not attracted if the petitioner’s turnover was also below Rs. 300 Crores during the year.

The court directed the respondent to pass a fresh order on merits after giving the petitioner an opportunity of hearing either in person or through video- conference in view of the risk on account of the threat of the Covid19 pandemic. The remand proceeding shall be confined to purchase tax under Section 12(1) of the Tamil Nadu Value Added Tax Act, 2006 alone.

“Petitioner is therefore directed to furnish necessary information to facilitate hearing of the case in the de-novo proceeding through video- conference to the respondent within a period of 2 weeks from date of receipt of this order if the situations so warrant on account of the continuance of Covid19 pandemic. The respondent shall thereafter take the case and pass orders in the light of the above observations,” the bench said.