Court quashes tax order based on circular, directs refund for excess paid.

The Court allowed the writ petition, quashing the order imposing tax based on a circular fixing a minimum price for coal and directing tax calculation at the actual sale price. Any excess amount paid was to be refunded to the petitioner. The Court found that imposing tax solely based on the circular without specific evidence of under-pricing was arbitrary and unsustainable. The prayer to declare the circular ultra vires was not considered due to the GST Act coming into force.

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Issues:
Challenge to order imposing tax on petitioner under VAT Act based on circular fixing minimum price of coal.

Analysis:
The petitioner challenged an order imposing tax under the VAT Act by treating the price of coal at Rs. 7000 per Metric Ton instead of the actual sale price of Rs. 1740 per M.T. The petitioner contended that the tax was paid based on the actual purchase price and not the assumed minimum price from a circular. Reference was made to a previous judgment questioning a similar act by the Commercial Tax Department. The respondents argued that the price was fixed after technical evaluation. The Court sought clarification on the authority behind fixing prices in the circular, which was explained in a supplementary counter affidavit.

The circular dated 18.07.2013 was clarified to be a measure for software preparation to detect tax evasion and facilitate the Suvidha Scheme Software. The circular did not fix minimum prices for all commodities but aimed to prevent under-valuation. If goods were transported at prices lower than the minimum, an enquiry was conducted to verify authenticity. The Court noted that the petitioner produced evidence of purchasing coal at Rs. 1740 per M.T., with documents showing tax deductions by the company and assessment by the Jharkhand Government based on the same price. The Court held that imposing tax solely based on the circular without specific evidence of under-pricing was arbitrary and unsustainable.

The Court allowed the writ petition, quashing the order imposing tax based on the circular and directing tax calculation at Rs. 1740 per M.T. Any excess amount paid was to be refunded to the petitioner. The prayer to declare the circular ultra vires was not considered due to the GST Act coming into force. The writ petition was allowed and disposed of accordingly.

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