Declared contract price for bulk sales cannot be rejected as undervalued merely because it is below retail price, and penalty needs reasons.

Declared contract price for bona fide bulk sales to an airline could not be rejected as undervalued merely because it was lower than restaurant price or an asserted market value. Under the Assam VAT Act, the disclosed sale price remained relevant, and absent lawful material showing undervaluation, reassessment on market value was untenable and was set aside. Maximum penalty also could not be sustained because no substantial reasons were recorded to justify its imposition. The assessment order was therefore unsustainable on both valuation and penalty, and relief was granted to the assessee.

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Issues: (i) Whether the sale price declared for bulk supplies made under a written contract could be treated as undervalued and re-assessed with reference to the restaurant price or market value; (ii) Whether maximum penalty could be sustained in the absence of substantial reasons.

Issue (i): Whether the sale price declared for bulk supplies made under a written contract could be treated as undervalued and re-assessed with reference to the restaurant price or market value.

Analysis: The expression "sale price" under section 2(44) of the Assam Value Added Tax Act, 2003 was relevant to the assessment, while section 78 of the same Act contemplated action where disclosed value is lower than the prevailing market price in the manner prescribed by law. The supplies in question were bulk sales made under a written contract to an airline in a competitive market, payment was made by cheque, and the amounts were capable of being assessed to income tax. Mere difference between the contracted bulk-sale price and the restaurant price did not by itself establish undervaluation or justify adoption of market value as the assessable figure.

Conclusion: The finding of undervaluation and the assessment based on market value were untenable and were set aside in favour of the assessee.

Issue (ii): Whether maximum penalty could be sustained in the absence of substantial reasons.

Analysis: A maximum penalty required substantial reasons to justify its imposition. No such substantial reasons were recorded on the facts found in the order under challenge.

Conclusion: The levy of maximum penalty was unsustainable and was set aside in favour of the assessee.

Final Conclusion: The impugned order could not be sustained either on the question of undervaluation or on the question of penalty, and the petitioner obtained relief against the assessment order.

Ratio Decidendi: A declared contract price for bona fide bulk sales cannot be rejected as undervalued merely because it is lower than retail price or asserted market price, and maximum penalty cannot be imposed without substantial reasons.

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