A note on the adjudication procedure under Tamil Nadu VAT 2006

Filling of returns Every dealer, registered under this Act, shall file return, in the prescribed form showing the total and taxable turnover within the prescribed period in the prescribed manner, along with proof of payment of tax. The tax under this section shall become due without any notice of demand to the dealer on the date of receipt of the return or on the last date of the period for filing return as prescribed, whichever is later.

Provisions regarding investigation and assessment Investigation and Assessment Procedure to be followed by assessing authority The assessment in respect of the dealer shall be on the basis of return relating to his turnover submitted in the prescribed manner within the prescribed period. The assessing authority shall accept the returns submitted for the year, by the dealer, if the returns are accompanied by the proof of payment of tax and the documents prescribed, and on such acceptance, the assessing authority shall pass an assessment order.

Not exceeding twenty per cent of the total number of such assessments shall be selected by the Commissioner in such manner as may be prescribed for the purpose of detailed scrutiny regarding the correctness of the returns submitted by the dealer and in such cases, revision of assessment shall be made, wherever necessary. If no return is submitted by the dealer for that year, the assessing authority shall, after making such enquiry as it may consider necessary, assess the dealer to the best of its judgment, subject to such conditions as may be prescribed:

Provided that before taking action under this sub-section, the dealer shall be given a reasonable opportunity of being heard. In addition to the tax assessed the assessing authority shall direct the dealer to pay by way of penalty, a sum which shall be, in the case of failure to submit return, one hundred and fifty per cent of the tax assessed:

Provided that no penalty under this sub-section shall be imposed after the period of five years from the date of assessment order under this section unless the dealer affected has had a reasonable opportunity of showing cause against such imposition. Any dealer assessed may, within a period of thirty days from the date of service of the assessment order, apply to the assessing authority for re-assessment, along with the correct and complete return as prescribed. On such application, the assessing authority shall, if it is satisfied that the failure to submit the return in time was due to reasons beyond the control of the applicant, cancel the assessment made and make a fresh assessment on the basis of the return submitted:

Provided that no application shall be entertained under this sub-section unless it is accompanied by satisfactory proof of the payment of tax admitted by the applicant to be due or any such instalment thereof as might have become payable, as the case may be. If the amount of tax on the basis of the cancelled assessment has already been collected and if the amount of tax arrived at as a result of the fresh assessment is different from it, any amount over paid by the dealer shall be refunded to him without interest, or the further amount of tax, if any, due from him shall be collected in accordance with the provisions of this Act, as the case may be. Penalty, if any, imposed and collected under sub-section (5), shall be refunded to the dealer without interest on cancellation of the order of original assessment.

Procedure when assessee claims identical question of law is pending before High Court or Supreme Court where an assessee claims that any question of law arising in his case for an assessment year, which is pending before the assessing authority is identical with a question of law arising in his case for another assessment year, which is pending before the High Court or Supreme Court, he may furnish to the assessing authority a declaration in the prescribed form for verification in the prescribed manner and if the assessing authority agrees to apply in the relevant case the final decision on the question of law in the other case, he shall not raise such question of law in the relevant case. The assessing authority may, by order, in writing, -

(i) admit the claim of the assessee if it is satisfied that the question of law arising in the relevant case is identical with the question of law in the other case; or

(ii) reject the claim if it is not satisfied. Where a claim is admitted, the assessing authority may pass an order disposing of the relevant case without awaiting the final decision on the question of law in the other case.

When the decision on the question of law in the other case becomes final, it shall be applied to the relevant case and the assessing authority shall, if necessary, amend the order in conformity with such decision.

The order shall be final and shall not be called in question in any proceeding by way of appeal, reference or revision under this Act. Assessment of sales shown in accounts at low prices If the assessing authority is satisfied that a dealer has, with a view to evade the payment of tax, shown in his accounts, sales or purchases of any goods, at prices which are abnormally low compared to the prevailing market price of such goods, it may, at any time within a period of five years from the expiry of the year to which the tax relates, assess or reassess the dealer to the best of its judgement on the turnover of such sales or purchases after making such enquiry as it may consider necessary and after giving the dealer a reasonable opportunity to show cause against such assessment. The provisions of sub-sections (3) to (8) of section 27, shall, as far as may be, apply to assessment or re-assessment under sub-section (1) as they apply to the re-assessment of escaped turnover under sub-section (1) of section 27.

Procedure to be followed in assessment of certain cases If no return is submitted by the dealer, within the prescribed period, or if the return submitted by him appears to the assessing authority to be incomplete or incorrect, the assessing authority may, after making such enquiry as it considers necessary, determine the tax payable by the dealer to the best of its judgement:

Provided that, before taking action under this sub-section on the ground that the return submitted by the dealer is incomplete or incorrect, the dealer shall be given a reasonable opportunity of proving the correctness or completeness of the return submitted by him. If the assessing authority has reason to believe that the tax determined by it for any period was based on too low a turnover or was made at too low a rate or was based on too high a turnover or was made at too high a rate it may enhance or reduce, as the case may be, such determination of tax:

Provided that before making an enhancement of the tax payable as aforesaid, the assessing authority shall, give a reasonable opportunity to the dealer to show cause against such enhancement and make such enquiry as it may consider necessary. The determination and collection of tax under this section shall be subject to such adjustment as may be prescribed on the completion of assessment in the manner prescribed. Assessment of legal representatives Where a dealer dies, his executor, administrator, or other legal representative shall be deemed to be the dealer for the purposes of this Act and the provisions of this Act shall apply to him in respect of the business of the said deceased dealer, provided that, in respect of any tax or fee assessed as payable by any such dealer or any tax, or fee which would have been payable by him under this Act as if he had not died, the executor, administrator or other legal representative shall be liable only to the extent of the assets of the deceased in his hands.

Assessment of escaped turnover and wrong availment of input tax credit 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, at any time within a period of five years from the date of assessment order by the assessing authority, determine to the best of its judgment the turnover which has escaped assessment and assess the tax payable on such turnover after making such enquiry as it may consider necessary. 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 assessment by the assessing authority, reassess the tax due after making such enquiry as it may consider necessary. Where, for any reason, the input tax credit has been availed wrongly or where any dealer produces false bills, vouchers, declaration certificate or any other documents with a view to support his claim of input tax credit or refund, the assessing authority shall, at any time, within a period of five years from the date of order of assessment, reverse input tax credit availed and determine the tax due after making such a enquiry, as it may consider necessary:

Provided that no order shall be passed under sub-sections (1) and (2) without giving the dealer a reasonable opportunity to show cause against such order. In making an assessment, the assessing authority may, if it is satisfied that the escape from the assessment is due to wilful non-disclosure of assessable turnover by the dealer, direct the dealer, to pay, in addition to the tax assessed under clause (a) of sub-section (1), by way of penalty a sum which shall be - Fifty per cent of the tax due on the turnover that was wilfully not disclosed if the tax due on such turnover is not more than ten per cent of the tax paid as per the return; One hundred per cent of the tax due on the turnover that was wilfully not disclosed if the tax due on such turnover is more than ten per cent but not more than fifty per cent of the tax paid as per the return. One hundred and fifty per cent of the tax due on the assessable turnover that was wilfully not disclosed, if the tax due on such turnover is more than fifty per cent of the tax paid as per the return; In addition to the tax determined under sub-section (2), the assessing authority shall direct the dealer to pay as penalty a sum - (i) which shall be in the case of first such detection fifty per cent of the tax due in respect of such claim; and (ii) which shall be in the case of second or subsequent detections, one hundred per cent of the tax due in respect of such claim:

The powers under sub-sections (1) and (2) may be exercised by the assessing authorities even though the original order of assessment, if any, passed in the matter has been the subject matter of an appeal or revision. Limitation In computing the period of limitation for assessment or re-assessment under this section, the time during which the proceedings for assessment or re-assessment remained stayed under the orders of a Civil Court or other competent authority shall be excluded. Also, In computing the period of limitation for assessment or re-assessment under this section, the time during which any appeal or other proceeding in respect of any other assessment or reassessment is pending before the High Court or the Supreme Court involving a question of law having a direct bearing on the assessment or re-assessment in question, shall be excluded. In computing the period of limitation for assessment or re-assessment under this section, the time during which any appeal or proceeding in respect of any assessment or re-assessment of the same or part of the turnover made under any other enactment was pending before any appellate or revisional authority or the High Court or the Supreme Court shall be excluded. Assessment of turnover not disclosed under compounding provisions Any part of the turnover of business of a dealer who has opted to pay tax under sub-section (4) of section 3 or section 6 or section 8 has escaped assessment from the tax, the assessing authority may, at any time within a period of five years from the date of order of the assessment by the assessing authority, determine to the best of its judgment the turnover which has escaped assessment and re-assess the tax payable on the total turnover including the turnover already assessed under the said section. Before making the re-assessment, the assessing authority may make such enquiry as it may consider necessary and give the dealer concerned a reasonable opportunity to show cause against such re-assessment. The amount of tax already paid by the dealer concerned in pursuance of the option to compound shall be adjusted towards the amount of tax due as the result of re-assessment. Assessment in cases of price variation If a dealer receives in any year any amount due to price variations, which would have been included in his turnover for any previous year if it had been received by him in that year, he shall, within thirty days from the end of the year in which such amount is received, submit a return in the prescribed form to the assessing authority and thereupon the assessing authority shall proceed to assess the tax payable on such amount.

If a dealer returns in any year any amount due to price variations, which would have been excluded in his turnover for any previous year if it had been returned by him in that year, he shall, within thirty days from the end of the year in which such amount is returned, submit a return in the prescribed form to the assessing authority and thereupon the assessing authority shall proceed to arrive at the quantum of the tax refundable on the amount returned by the dealer; If the assessing authority is satisfied that any return submitted under clause (a) or clause (b) is correct and complete, it shall assess or re-assess, as the case may be, the dealer on the basis thereof; If the return submitted by a dealer under clause (a) appears to the assessing authority to be incorrect or incomplete, the assessing authority shall, after making such enquiry, as it may consider necessary and after taking into account all relevant materials gathered by it, assess the dealer to the best of its judgment: If no return is submitted by the dealer under clause (a), the assessing authority may, within five years within which such returns must have been submitted, proceed to assess the tax payable on the amount referred to in the said clause: In addition to the tax assessed under clauses (e), the dealer is liable to pay a penalty, at the rate specified in sub-section (5) of section 22 and the assessing authority shall in the same order of assessment or by a separate order direct the dealer to pay such penalty; In making the assessment under clause (d), in addition to the tax assessed, the dealer is liable to pay a penalty at the rate specified in sub-section (3) of section 27, if there is wilful nondisclosure of assessable turnover by the dealer. Power of Government to notify exemption or reduction of tax The Government may, by notification, whether prospectively or retrospectively make an exemption or reduction in rate, in respect of any tax payable under this Act-- Power of Government to notify remission The Government may, in such circumstances and subject to such conditions as may be prescribed, by notification, remit the whole or any part of the tax or penalty or interest or fee payable in respect of any period by any dealer under this Act.

Power of Government to notify deferred payment of tax The Government may, in such circumstances and subject to such conditions as may be prescribed, by notification whether prospectively or retrospectively, defer the payment, by any industrial unit in the pipeline, of the whole or any part of the tax payable in respect of any period. Remission of tax deemed to be deferred payment of tax All remission of tax made for a specified period or for any specified amount of tax under sub-section (4) of section 17 of the Tamil Nadu General Sales Tax Act, 1959(Tamil Nadu Act 1 of 1959) in so far as the unexpired period of such remission or balance amount of tax remitted, as the case may be, shall be deemed to be deferred payment of tax under section 32. The tax payable in respect of the unexpired period of such remission or balance amount of tax remitted shall be paid in such manner as may be prescribed:

The Government may, in such circumstances and subject to such conditions as may be prescribed, by notification, exempt the whole or any part of the tax payable for any period and sale of goods made to or purchase of goods made by a new industrial unit, in respect of which the Government have already notified exemption of tax under the Tamil Nadu General Sales Tax Act, 1959(Tamil Nadu Act 1 of 1959) and such exemption on purchases or sales shall be by way of refund of tax paid on purchases made by or sales made to such industrial unit in the manner prescribed. Liability of tax of persons not observing restrictions and conditions notified under section 30 or 31 If any restriction or condition notified under section 30 or 31 is contravened or is not observed by a dealer, the sales or purchases of such dealer may, with effect from the commencement of the year in which such contravention or non-observance took place, be assessed to tax or taxes under the appropriate provisions of this Act as if the provisions of the notifications under section 30 or 31 did not apply to such sales or purchases. Liability of firms Where any firm is liable to pay any tax or other amount under this Act, the firm and each of the partners of the firm shall be jointly and severally liable for such payment. Where a partner of a firm liable to pay any tax or any amount under this Act retires, he shall, notwithstanding any contract to the contrary, be liable to pay the tax or other amount remaining unpaid at the time of his retirement and any tax or other amount due up to the date of retirement, though un-assessed. Liability to tax of partitioned Hindu family, dissolved firm, etc If the dealer is a Hindu undivided family, firm, or other association of persons, and such family, firm or association is partitioned, or dissolved, as the case may be,-- (a) the tax payable under this Act by such family, firm, or association of persons for the period up to the date of such partition or dissolution shall be assessed as if no such partition or dissolution had taken place and all the provisions of this Act shall apply accordingly; and (b) every person who was at the time of such partition, or dissolution a member or partner of the Hindu undivided family, firm, or association of persons and the legal representative of any such person who is deceased shall, notwithstanding such partition or dissolution, be jointly and severally liable for the payment of the tax, penalty or other amount payable under this Act by such family, firm or association of persons, whether assessment is made prior to or after such partition, or dissolution. Liability to tax private company on winding up If a dealer is a private company and such company is wound up, every person who was a director of such company at the time of such winding up shall, notwithstanding such winding up, be jointly and severally liable for the payment of tax, penalty or other amount payable under this Act by such company whether assessment is made prior to or after such winding up unless he proves that the non-payment of tax cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the Company. Collection of tax No person, who is not a registered dealer, shall collect any amount by way of tax or purporting to be by way of tax under this Act; and no registered dealer shall make any such collection except in accordance with the provisions of this Act and the rules made thereunder:

If any person or registered dealer collects any amount by way of tax or purporting to be by way of tax, in contravention of the provisions of sub-section (1), whether or not any tax is due from such person or dealer under this Act in respect of the transaction in which he collects such amount, the assessing authority may, after giving such person or dealer a reasonable opportunity of being heard, by order, in writing, impose upon him by way of penalty a sum, which shall be, - (i) where the excess amount has been collected in the bona fide belief that it had to be collected, one hundred per cent of the amount collected; (ii) where the excess amount has been collected wilfully and knowing that it was not due to be collected, one hundred and fifty per cent of the amount collected: Forfeiture If any person collects any amount by way of tax and his turnover for the year falls short of the taxable limit specified, the sum so collected shall be remitted to the Government and forfeited wholly. Payment and recovery of tax, penalty, etc The tax assessed or has become payable under this Act from a dealer or person and any other amount due from him under this Act shall be paid in such manner and in such instalments, if any, and within such time as may be specified in the notice of assessment, not being less than thirty days from the date of service of the notice.

The tax under section 21 shall be paid without any notice of demand. In default of such payment, the whole of the amount outstanding on the date of the default shall become immediately due and shall be a charge on the properties of the person or persons liable to pay the tax or penalty or interest under this Act. Any tax assessed on or has become payable by, or any other amount due under this Act from a dealer or person and any fee due from him under this Act, shall, subject to the claim of the Government in respect of land revenue and the claim of the Agriculture and Rural Development Bank in regard to the property mortgaged to it under sub-section (2) of section 28 of the Tamil Nadu Co-operative Societies Act, 1983(Tamil Nadu Act 30 of 1983), have priority over all other claims against the property of the said dealer or person and the same may without prejudice to any other mode of collection be recovered,- (a) as land revenue, or (b) on application to any Magistrate, by such Magistrate as if it were a fine imposed by him: On any amount remaining unpaid after the date specified for its payment as referred to in subsection (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 a quarter per cent per month of such amount for the entire period of default: Where a dealer submits the prescribed return after the expiry of the prescribed period, he shall pay, in addition to the amount of tax due as per his return, interest at one and a quarter per cent of the tax payable for every month or part thereof. Transfers to defraud revenue void Where, during the pendency of any proceedings under this Act or after the completion thereof, any dealer creates, a charge on, or parts with the possession by way of sale, mortgage, gift, exchange or any other mode of transfer whatsoever of any of his assets in favour of any other person, with the intention to defraud the revenue, such charge or transfer shall be void as against any claim in respect of any tax, or any other sum payable by the dealer as a result of the completion of the said proceeding or otherwise: Provided that, such charge or transfer shall not be void if it is made - (a) for adequate consideration and without notice of the pendency of such proceeding under this Act or, as the case may be, without notice of such tax or other sum payable by the dealer; or (b) with the previous permission of the assessing authority. Where the excess amount is not refunded to the dealer within a period of ninety days from the date of the order of assessment or revision of assessment and in the case of order passed in appeal, revision or review within a period of ninety days from the date of order giving effect to such order passed in appeal, revision or review, the Government shall pay by way of interest, where the amount refundable is not less than one hundred rupees, a sum equal to a sum calculated at the rate of half per cent or part thereof of such amount for each month or part thereof after the expiry of the said period of ninety days. Recovery of penalty or interest Any penalty or interest payable under this Act, shall be deemed to be tax under this Act, for the purposes of collection and recovery and shall be without prejudice to the institution of any proceeding for an offence under this Act, or for the recovery of the entire amount remaining unpaid under this Act.

Further mode of recovery The assessing authority may, at any time or from time to time, by notice in writing a copy of which shall be forwarded to the dealer at his last address known to the assessing authority require (a) any person from whom money is due or may become due to the dealer, or to any person who has become liable to pay any amount due under this Act; or (b) any person who holds or may subsequently hold money for, or on account of the dealer or other person who has become liable to pay any amount due under this Act, to pay to the assessing authority either forthwith upon the money becoming due or being held at or within the time specified in the notice, (not being before the money becomes due or is held) so much of the money as is sufficient to pay the amount due by the dealer or other person in respect of the arrears that have become payable under this Act or the whole of the money when it is equal to or is less than the arrears aforesaid. The assessing authority may, at any time, or from time to time, amend or revoke any such notice or extend the time for making any payment in pursuance of the notice. Any person making any payment in compliance with a notice under this section shall be deemed to have made the payment under the authority of the dealer and the receipt of the assessing authority shall constitute a good and sufficient discharge of the liability of such person to the extent of the amount referred to in the receipt. Any person making any payment to the dealer after receipt of the notice referred to in this section, shall be personally liable to the assessing authority to the extent of the payment made or to the extent of the liability of the dealer for the amount due under this Act, whichever is less. Where any person to whom a notice under this section is served, objects to it by a statement in the prescribed form that the sum demanded or any part thereof is not due by him to the dealer or that he does not hold any money for or on account of the dealer, then, nothing contained in this section shall be deemed to require such person to pay the sum demanded or part thereof, as the case may be, to the assessing authority, but if it is discovered that such statement was false in any material particular, such person shall be personally liable to the assessing authority to the extent of his own liability to the dealer on the date of the notice or to the extent of the liability of the dealer for the amount due under this Act, whichever is less.

Any amount which a person required to pay to the assessing authority or for which he is personally liable to the assessing authority under this section shall, if it remains unpaid, be a charge on the properties of the said person and may be recovered as if it were an arrear of land revenue. Recovery of tax where business of dealer is transferred If the ownership, of the business of a dealer liable to pay tax or other amount, is transferred, any tax or other amount payable under this Act in respect of such business and remaining unpaid at the time of the transfer and any tax or other amount due up to the date of transfer, though un-assessed, may, without prejudice to any action that may be taken for its recovery from the transferor, be recovered from the transferee as if he were the dealer liable to pay such tax or other amount: Provided that the recovery from the transferee of the arrears of taxes due for the period prior to the date of the transfer shall be limited to the value of the assets he obtained by transfer. Rounding off of turnover, tax, etc. The amount of turnover, tax, fee, penalty, fine or any other sum payable, and the amount of refund due, under this Act shall be rounded off to the nearest rupee and, for this purpose, where such amount contains a part of a rupee consisting of paise, then, if such part is fifty paise or more, it shall be increased to one rupee and if such part is less than fifty paise, it shall be ignored.