2017 (4) TMI 933 - HC - VAT and Sales Tax

Partnership firm's tax claim appeal rejected for fraudulent inclusion in registration certificate

The revision petition challenging the dismissal of the appeal by the Assam Board of Revenue regarding the concessional tax rate claimed by a partnership ... Concessional rate of tax - cement - taxable at 4% or 12.5%? - concessional rate denied on the ground that it was not a registered dealer in the item ‘cement’ - whether the petitioner can escape tax liability on account of fraud committed by the purchasing dealer i.e. M/S Meghrudra Enterprises? - Held that: - selling dealer like petitioner is required to satisfy itself that the purchasing dealer was a registered dealer and the goods purchased were actually specified in the latter’s registration certificate - the petitioner is relying upon a fake document of registration and he was also aware that ‘cement’ was never specified in the registration certificate of M/s Meghrudra Enterprises. This being the situation, petitioner is not entitled for any tax benefit at the cost of State exchequer - petition dismissed - decided against petitioner. Issues:1. Dismissal of appeal by Assam Board of Revenue regarding concessional rate of tax.2. Claim of concessional rate of tax on sale of cement to M/s Meghrudra Enterprises.3. Fraudulent inclusion of cement in registration certificate by M/s Meghrudra Enterprises.4. Tax liability of the petitioner due to fraud committed by the purchasing dealer.Analysis:1. The revision petition challenged the order of the Assam Board of Revenue dismissing the petitioner's appeal regarding the concessional rate of tax claimed during the Assessment Year 2006-2007. The petitioner, a partnership firm, sold cement outside Assam and claimed a concessional rate under the Central Sales Tax Act. However, the Assessing Officer rejected the claim, leading to subsequent appeals.2. The main issue revolved around the petitioner's claim of concessional tax rate on sales to M/s Meghrudra Enterprises, Shillong. The Assessing Officer disputed this claim, alleging that Meghrudra Enterprises was not a registered dealer for cement. Despite providing documents showing an amendment to include cement in Meghrudra Enterprises' registration certificate, the claim was rejected, leading to a series of appeals.3. The record revealed doubts regarding the registration of Meghrudra Enterprises for dealing in cement. The Taxation Department of Meghalaya confirmed that Meghrudra Enterprises fraudulently included cement in its registration certificate. This fraudulent inclusion raised questions about the validity of the petitioner's claim for a concessional tax rate.4. The judgment referenced the Supreme Court case of State of Madras vs. Radio & Electricals Limited, emphasizing that the burden of tax ultimately falls on consumers in inter-State trade. It highlighted that the selling dealer must ensure the purchasing dealer is registered and the goods are specified in the registration certificate. In this case, investigation revealed that the petitioner relied on a fake document regarding the inclusion of cement in Meghrudra Enterprises' registration certificate, leading to the dismissal of the revision petition with costs imposed on the petitioner.