2012 (10) TMI 1013 - HC - VAT and Sales Tax

High Court reverses Tribunal on tax exemption eligibility under G.O. Ms. No. 122, upholding penalty deletion

The High Court overturned the Tribunal's decision in favor of the assessee regarding tax exemption eligibility under G.O. Ms. No. 122, emphasizing that ... - Issues Involved:1. Eligibility for Tax Exemption: Whether the Tribunal erred in allowing the appeal filed by the assessee regarding the purchase of goods not listed in the Schedule to the Khadi and Village Industries Commission Act and not purchased from certified institutions.2. Legality of Penalty Deletion: Whether the Tribunal's decision to delete the consequential penalty is legally tenable.Summary:Issue 1: Eligibility for Tax ExemptionThe Revenue challenged the Tribunal's decision in favor of the assessee, who claimed tax exemption u/s G.O. Ms. No. 122, dated March 20, 1992. The Government of Tamil Nadu had exempted sales by institutions certified by the Khadi and Village Industries Commission (KVIC) from tax. The assessee argued that goods purchased from traders dealing in Khadi and Village Industries products from outside the State should also be exempt. The assessing officer rejected this claim, stating that only products sold by certified institutions were eligible for exemption. The first appellate authority remanded the case, requiring the assessee to prove the goods were from certified village industries. The assessing officer reaffirmed the rejection, noting the goods were bought from dealers, not certified institutions. The Appellate Assistant Commissioner upheld this view, confirming the assessment order.The Tribunal, however, allowed the appeal, stating the purchases were from recognized societies manufacturing handicraft products. The High Court disagreed, emphasizing that the exemption applied only to products from certified institutions. The Court noted the assessee admitted to purchasing from non-certified dealers and found no evidence linking the products to certified institutions. Thus, the Tribunal's decision was overturned, and the assessment order was restored.Issue 2: Legality of Penalty DeletionThe Tribunal had set aside the penalty levied due to the assessment order being overturned. The High Court, while restoring the assessment order, considered the bona fide nature of the assessee's exemption claim. Given the genuine misunderstanding regarding the notification's scope, the Court decided not to restore the penalty. Consequently, the penalty was deleted, and only the quantum of assessment was confirmed.Conclusion: The tax case (revision) is allowed, restoring the assessment order but deleting the penalty due to the bona fide nature of the exemption claim. No costs were awarded.