2014 (7) TMI 657 - HC - VAT and Sales Tax

Purchaser's Bogus Transactions Upheld, Penalties Valid. Evidence Insufficient. Assessment Decision Reconsideration Needed.

AVR Overseas Pvt. Ltd. Versus State of Karnataka

The High Court upheld the findings that the purchaser was not a genuine dealer, transactions were bogus, and penalties imposed by the Commercial Tax ... Imposition of penalty - non acceptance of C form - Transaction of transport of kerosene - Authorities doubted the transaction as clandestine removal since no purchaser was present - Purchaser mentioned in invoices did not exist - Whether the said purchaser who got him duly registered was carrying on the business of trading in kerosene which was purchased from the assessee - Held that:- The assessee has not produced to this date any document to show that the said goods crossed the frontiers of Karnataka and entered the adjoining State. Similarly, no material is produced to show that the purchaser dealt with the kerosene purchased by the purchaser in any manner. No material is produced to show the amount received by the assessee from the purchaser towards the sales made, no bank statements are produced. Unfortunately, though the assessing authority refused to act on these documents, the appellate authority in the assessment proceedings proceeded on the assumption that the C form issued is a genuine document and extended the benefit to the assessee. Now, that order is sought to be pressed into service to show that the concurrent findings recorded by these three authorities on proper appreciation of the material on record is erroneous. When the check-post officer refused to act on these documents and made known to the assessee that it is not a genuine transaction and the purchaser is not a genuine person to dispel that case, material to be produced should be anterior to the said date. Material on record states that the order passed by the appellate authority in the assessment proceedings in Appeal No. CST AP 10/05-06 passed on November 28, 2005 requires re-consideration and therefore it is a fit case for the Additional Commissioner or Commissioner of Sales Tax to exercise their power under section 22A of the of the Central Sales Tax Act to revise the said order - Decided against assessee. Issues Involved:1. Legitimacy of the purchaser's existence and business operations.2. Validity of the penalties imposed by the Commercial Tax Officer.3. Evaluation of evidence and documents presented by the petitioner.4. Reconsideration of the appellate authority's decision in the assessment proceedings.Issue-wise Detailed Analysis:1. Legitimacy of the Purchaser's Existence and Business Operations:The petitioner, a registered dealer under the Karnataka Sales Tax Act, 1957 (KST Act) and the Central Sales Tax Act, 1956 (CST Act), was involved in the resale of kerosene and other oils. The petitioner claimed to have sold kerosene to M/s. Jai Bherunath Traders, a registered dealer outside Karnataka. However, the Commercial Tax Officer at the Mukka check-post suspected the non-existence of the purchaser. The investigation revealed that the purchaser was not operational at the declared address, had no name board, no storing facility, and had not filed any returns or paid taxes since obtaining the registration certificate. The Assistant Commissioner of Commercial Taxes (Intelligence) confirmed these findings, leading to the conclusion that the purchaser was not a genuine dealer and that the transactions were bogus.2. Validity of the Penalties Imposed by the Commercial Tax Officer:The Commercial Tax Officer imposed penalties under section 28A(4) of the KST Act, amounting to Rs. 1,84,340, Rs. 1,53,600, and Rs. 1,07,520 for the respective goods vehicles. These penalties were based on the intelligence report and subsequent investigation, which indicated that the consignee/purchaser was non-existent. The Joint Commissioner of Commercial Taxes (Appeals) and the Karnataka Appellate Tribunal upheld these penalties, citing the lack of evidence to prove the purchaser's existence and business operations. The Tribunal noted that the driver of the truck admitted the offence, and no material was produced to show that the purchaser was carrying on any business or had paid any tax.3. Evaluation of Evidence and Documents Presented by the Petitioner:The petitioner produced various documents, including the registration certificate of the purchaser, returns filed by the purchaser, and C forms issued by the competent authority. However, these documents were not accepted by the authorities. The appellate authority in the assessment proceedings had previously granted the benefit to the petitioner based on these documents, but this decision was later contested. The Tribunal found discrepancies in the signatures on the C forms and noted that no material was produced to show the goods crossed the Karnataka borders or that the purchaser dealt with the kerosene. The authorities concluded that the documents did not infuse confidence and were likely created to deceive the authorities and evade sales tax.4. Reconsideration of the Appellate Authority's Decision in the Assessment Proceedings:The High Court observed that the order passed by the appellate authority in the assessment proceedings required reconsideration. The appellate authority had assumed the genuineness of the C forms and extended the benefit to the petitioner, which was found to be erroneous. The High Court suggested that the Additional Commissioner or Commissioner of Sales Tax exercise their power under section 22A of the CST Act to revise the said order, indicating a need for re-evaluation of the evidence and findings.Conclusion:The High Court upheld the concurrent findings of the three fact-finding authorities, confirming that the purchaser was not a genuine dealer and the transactions were bogus. The penalties imposed by the Commercial Tax Officer were deemed valid, and the evidence presented by the petitioner was found insufficient to rebut the findings. The appellate authority's decision in the assessment proceedings was ordered to be reconsidered by the Additional Commissioner or Commissioner of Sales Tax.