Madras HC sets aside penalty imposed by state tax authority against Nokia India
December, 10th 2014
The Madras High Court has today issued an order setting aside various tax claims of the Commercial Tax Department of Tamil Nadu for seven years, which it has issued to Nokia India Pvt Ltd through seven assessement orders, and asked the tax officials to consider some of the issues afresh by affording opportunity for personal hearing to Nokia. According to sources, the order was issued related to the tax department's claim of around Rs 131 crore.
The order comes in the backdrop of the State tax authority's action following an inspectioin held by the officials of its Audit Department in 2013, under which it pointed out issues such as suppression of taxable scrap for all the seven years and non payment of tax on sale of assets for six years and incorrect rate of tax on sale of accessories and parts on mobile phone for two years.
The tax authority issued notices proposing to revise the assessments for all the seven years and proposing to levy penalty apart from demanding interest for belated payment of tax.
Issuing the order today, Justice T S Sivagnanam said that the penalty imposed on Nokia India is liable to be deleted and accordingly, deleted. He also deleted the equal addition on the probable omission and suppression of scrap sales and said that the assessment officer did not examine various aspects related to the allegations.
The company argued that the assessments were based on its own books of accounts and the imposition of huge penalty of Rs 66.02 crore under section 27(3) of the Act is not valid and equal time addition of probable omission and suppression of scrap sales is unwarranted.
The department, on the other side, argued that the writ petition is not maintainable considering that there is an alternate remedy available for the company, which is the appellate tribunal. It also refuted the arguments of the company against the charges.
Justice Sivagnanam allowed the writ petitions elaborating on each points and said that, "the writ petitions are maintainable as the impugned orders of assessment are vitiated on the ground of serious infirmities in the decision making process; failure to take into consideration relevant particulars and details, not having assigned reasons and based on irrelevant considerations and in violation of the principles of natural justice. Therefore, this Court is justified in exercising its jurisdiction under Article 226 of the Constitution."
Further, the order said that the assessments in respect of imposition of tax on capital assets, which according to the company is not taxable since it is an export of capital assets exempted from tax, is set aside and the matter is remanded to the assessing officer for fresh consideration after giving full opportunity including affording opportunity of personal hearing to Nokia India.
The tax office has also imposed tax on transfer of business to Nokia Seimens Network in 2007, which according to the department, was a slump sale. The Justice orderderd that the tax imposed on the transfer of business to NSNPL is set aside "and the matter is remanded back to the assessing officer to redo the assessment under this head by making thorough enquiry into the contentions raised by the company by applying proper test as indicated and to see whether the transaction would fall within the scope Explanation III to Section 2 (41) of TNVAT Act."
The tax imposed as a consequence of disallowance of sales return is set aside on the ground that no opportunity was granted to the petitioner; no such clear proposal is made in the pre-revision notice and is in violation of the principles of natural justice. Liberty is granted to the assessing officer to issue show cause to the petitioner and to proceed in accordance with law.
The finding rendered by the assessing officer in the assessment orders for the years 2011-12 and 2012-13 with regard to the rate of tax to be adopted on parts and accessories is perfectly legal and valid and the finding of the assessing officer is confirmed, said the order.
It may be noted that the tax authority has also slapped a Rs 190 crore purchase tax demand for the sales of goods from Nokia India, the manufacturing company, to Nokia India Sales Pvt Ltd. The tax authority has also started process to withdraw the amount from two accounts of Nokia, which the High Court has stayed in its earlier hearing. The dispute is currently pending with the Madras High Court.