2014 (4) TMI 1035 - HC - VAT and Sales Tax

High Court upholds tax assessment and penalty, includes entry tax in sales tax liability calculation

The High Court dismissed the Tax Cases, upholding the assessment and penalty imposition, emphasizing that the sales tax liability should be calculated on ... Validity of Tribunal order – Inclusion of entry tax in taxable turnover – Whether in view of Section 4(2) of Entry Tax Act, 1990, the entry tax paid by the assessee form part of their taxable turnover – Held that:- Going by the model invoice produced before the Assessing Authorities, the total consideration charged by the assessee was inclusive of entry tax – The assessee had excluded the entry tax which was part of the consideration and had charged sales tax - assessment was revised to assess the taxable turnover under Section 16(1)(a) of the Act - The mere fact that entry tax payment would be adjusted against the sales tax liability as per Section 4 of the Entry Tax Act, would not come to the aid of the assessee to contend that sales tax at 12% was to be levied on the price excluding entry tax - Tax Cases stand dismissed – Decided against assessee. Issues:1. Whether the entry tax paid by the petitioners forms part of their taxable turnover under Section 4(2) of the Entry Tax ActRs.2. Whether the Tribunal erred in confirming the liability to pay tax of the petitioners based on a clarification issued by the Principal Commissioner and Commissioner of Commercial TaxesRs.3. Whether the sales tax should be calculated on the consideration inclusive of entry tax or exclusive of entry taxRs.Analysis:1. The judgment involves multiple Tax Cases concerning the assessment years 1998-1999, 1999-2000, and 2000-2001, all related to the same assessee. The primary issue revolves around the treatment of entry tax paid by the petitioners in their taxable turnover under the Entry Tax Act. The Assessing Officer revised the assessment, considering the entry tax as part of the consideration for sales tax calculation, leading to a higher taxable turnover and subsequent penalty imposition.2. The Tribunal upheld the assessment, emphasizing that the basic price of the vehicles included the entry tax paid, and the sales tax should be calculated on the total consideration inclusive of entry tax. The Tribunal dismissed the appeal, stating that the assessee's own invoice reflected the total consideration, including the entry tax, justifying the assessment based on the actual amount received from the sale of vehicles.3. The Tribunal also addressed the issue of penalty under Section 16(2) of the Act, ruling in favor of the assessee, stating there was no lack of bona fide in excluding the entry tax from the consideration for sales tax calculation. However, the High Court concurred with the Assessing Officer and the Tribunal, affirming that the sales tax liability should be based on the total consideration, inclusive of the entry tax, as per the provisions of the Entry Tax Act.In conclusion, the High Court dismissed the Tax Cases, upholding the assessment and penalty imposition, emphasizing that the sales tax liability should be calculated on the total consideration, which includes the entry tax paid by the petitioners. The judgment clarifies the treatment of entry tax in taxable turnover calculations and reinforces the importance of considering the actual amount received in sales transactions for tax assessment purposes.