2014 (5) TMI 721 - HC - VAT and Sales Tax

High Court overturns Tribunal's decision on sales tax exemption, upholds penalty ruling.

The High Court set aside the Tribunal's decision on the claim for exemption under Section 6(2) of the Central Sales Tax Act, ruling in favor of the ... Validity of the order of the Tribunal – Claim for exemption - Constructive delivery – Held that:- Judgment in STATE OF TAMIL NADU v. N. RAMU BROTHERS [1992 (9) TMI 324 - MADRAS HIGH COURT] followed - The Appellate Assistant Commissioner rightly pointed out that there was no obligation on the part of the carrier to transport the goods further to any place beyond Coimbatore - Subsequent arrangement that the assessee had with the transporter to carry the goods to another place for a different person, however, did not make the movement a continuation of the original interstate sale - When once the movement of goods terminated at Coimbatore, on the doctrine of constructive delivery, the authorities rightly rejected the assessee's claim for exemption u/s 6(2) - Even though there were separate sales at the point of time in the eye of law, there were two deliveries which synchronized at the same point of time - Further movement done as per the fresh invoices prepared and trip sheets and way bill clearly pointed out to fresh movement from Coimbatore to other State and to the local purchaser from the assessee - The condition as stipulated in Explanation I to Section 3(b), thus not satisfied - A reading of the order of the Tribunal shows that without adverting to any of these facts, Tribunal merely accepted the statement from the assessee to grant the relief. Going by the materials indicating the break in the journey of the interstate movement of goods, it is held that the findings of the Tribunal is without any material and there are no materials to disturb the findings given by the Appellate Assistant Commissioner - Thus, having regard to the perversity in the order of the Tribunal there is no hesitation in allowing this revision, thereby, setting aside the order of the Tribunal – Decided in favour of Revenue. Levy of Penalty – Held that:- Having regard to the facts referred to by the first appellate authority, which upheld the assessment on actual stock variation and the estimation made on equal addition, there is no ground to sustain the same - Consequently, the order of Tribunal stands confirmed on penalty - Revision is allowed – Decided against Revenue. Issues Involved:1. Claim for exemption under Section 6(2) of the Central Sales Tax Act.2. Addition made on account of stock variation.3. Levy of penalty.Detailed Analysis:1. Claim for exemption under Section 6(2) of the Central Sales Tax Act:The Revenue challenged the Tribunal's acceptance of the assessee's claim for EII sales. The assessee, a dealer in chemicals, acids, and solvents, was inspected by the Enforcement Wing of the Commercial Tax Department, which detected stock differences and in-transit sales. The assessee claimed exemption under Section 6(2) of the Central Sales Tax Act by filing EI, EII, and Form C declarations, asserting that they effected further interstate sales before taking delivery of the goods. However, the Assessing Authority rejected this claim, stating that the goods had arrived at Coimbatore and the assessee had taken constructive delivery there. The Appellate Assistant Commissioner upheld this view, noting that the transport documents indicated Coimbatore as the destination, and subsequent movement required new documents, breaking the interstate movement. The Tribunal, however, accepted the assessee's plea, stating there was no evidence of delivery being taken.Upon review, the High Court emphasized that the burden of proof rested on the assessee to show that the second interstate sale occurred during the goods' movement. The court found that the transport documents showed the journey ended in Coimbatore, and subsequent arrangements did not constitute a continuation of the original interstate sale. The court cited the case of STATE OF TAMIL NADU v. N. RAMU BROTHERS, affirming that once the movement terminated at Coimbatore, the claim for exemption under Section 6(2) was invalid. The Tribunal's decision was deemed unsupported by material evidence, leading the High Court to set aside the Tribunal's order and uphold the findings of the Appellate Assistant Commissioner and Assessing Officer.2. Addition made on account of stock variation:The Tribunal upheld the actual stock variation but deleted the estimated addition. The High Court agreed with this decision, finding no grounds to contest the Tribunal's order regarding the estimation of stock variation.3. Levy of penalty:The first Appellate Authority had modified the penalty, canceling the assessment on a turnover of Rs.34,000/- related to local commission sales. The High Court found no reason to sustain the penalty, agreeing with the Tribunal's decision to cancel it.Conclusion:The High Court allowed the tax case revision, setting aside the Tribunal's order regarding the claim for exemption under Section 6(2) of the Central Sales Tax Act. The Tribunal's decisions on the cancellation of the estimation made on actual variation and on the penalty were confirmed. The tax case revision was allowed with no costs.