2015 (10) TMI 1048 - HC - VAT and Sales Tax

Court overturns additional tax liability, stresses burden of proof & natural justice principles in sales tax case.

The court upheld the appellate authority's decision, setting aside the additional tax liability imposed on the petitioner due to lack of independent ... Enhancement of assessable value - Inclusion of turnover as per proceedings under central excise - Held that:- no extrapolation for determination of liability under the 1954 Act can not be made on the basis of determination of liability under the Central Excise Act, 1944 or for that matter any other statute. The 1954 Act is a self contained code for determination of tax liability thereunder. When warranted, its processes are necessarily to be independently resorted to, inquiry held and principles of natural justice complied with before fastening of any liability originally assessed, or relating to escapement of tax. This was not done by the Assessing Officer in his order dated 29-3-2006. In the facts as obtaining, the Tax Board has not committed any illegality in upholding the order dated 15-6-2007 passed by the appellate authority and in dismissing the appeal filed by the department. I do not find any illegality or perversity in the impugned order dated 25-1-2010 passed by the tax Board. - Decided against Revenue. Issues:1. Revision petition under Section 84 of the Rajasthan Value Added Tax Act, 2003 and Section 86 of the Rajasthan Sales Tax Act, 1994 against the order of the Rajasthan Tax Board.2. Allegations of evasion of excise duty leading to additional tax liability and penalty.3. Lack of independent enquiry and violation of principles of natural justice.4. Applicability of sales tax based on burden of proof and valuation differences with excise duty.5. Interpretation of the self-contained code under the Rajasthan Sales Tax Act, 1954.Analysis:1. The revision petition was filed challenging the order of the Rajasthan Tax Board based on Sections 84 and 86 of the respective tax acts. The petitioner was assessed for turnover tax for the financial year 2000-01 and later received a show cause notice regarding the addition of a specific amount to its turnover, allegedly related to evasion of excise duty. The department passed an order imposing additional liability on the petitioner, leading to an appeal by the assessee against the order.2. The appellate authority found that the additional tax liability was based solely on information from the Auditor and Comptroller General without an independent enquiry or providing the assessee with a reasonable opportunity for defense. The order was set aside based on previous judgments emphasizing the need for proper inquiry and due process before imposing additional tax liability.3. The department's second appeal to the Tax Board was unsuccessful, leading to the revision petition. The court considered the impugned order and highlighted the importance of the burden of proof on the department to establish under-assessment of turnover. It was noted that the department failed to provide essential information to the assessee and did not differentiate between valuation for excise duty and sales tax purposes.4. Referring to the Supreme Court's judgment in Girdhari Lal Nannelal vs. the Sales Tax Commissioner, the court emphasized the requirement for the department to prove the sale transaction for levying sales tax. The court also highlighted the differences in valuation between excise duty and sales tax, emphasizing the need for an independent process under the Rajasthan Sales Tax Act, 1954.5. The court concluded that the Tax Board did not commit any illegality in upholding the appellate authority's order and dismissing the department's appeal. It was noted that the self-contained code under the 1954 Act required independent inquiry and compliance with principles of natural justice before imposing any liability related to tax assessment or evasion. The challenge to the Tax Board's order was dismissed, affirming the decision in favor of the assessee.