TaxTMI 
TaxTMI 
2023 (5) TMI 76
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the petitioner have been rejected and the determination of sale price of Iron Ore sold by the petitioner on the basis of average I.B.M. rate in exercise of the powers under Section 35 (7) read with Section 40 (1) of the JVAT Act has been upheld. Since the issue is common in all these writ applications, as such the relevant facts of W.P.(T) No. 3282 of 2022 are referred which will suffice to dispose of the issue involved in these cases. 2. The brief facts of the case as pleaded by the petitioner are that the petitioner is having merchant mines of iron ore, located at Thakurpari, Noamundi Block and Manoharpur Block. Iron ore extracted from mines is known as "Run of Mines (ROM)" which requires further processing and screening. Petitioner's premise does not have processing and screening facility and thus, only ROM was being sold by the petitioner. ROM includes Fines & Lumps and the grade of minerals found in petitioner's premises was between 52-65% Fe content, which would be evident from survey report as contained in Annexure-1. Before assessment proceeding of the petitioner was completed wherein, in alleged exercise of power u/s 35(7) r/w Section 40(2) of the JVAT Act, ta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd at Ranchi which was dismissed on 25th January, 2020 and thereafter, petitioner filed Review Case No. JR 05 of 2020 before the learned Tribunal. The learned Tribunal rejected the revision application of the petitioner. Thereafter, review petition of petitioner has also been rejected by learned Tribunal. 5. Learned counsel for the petitioner has taken us through the relevant provisions of JVAT Act, 2005, Section 2 (xlvii) Sale and 2 (xlviii) sale price definition, in particular Section 35(7) and Section 40 relating to turn over escaping assessment. Learned counsel for the petitioner has, inter alia, questioned the impugned findings on two-fold legal issues: * Whether sale price of the petitioner company can be determined on the basis of average sale price of I.B.M. as the average sale price of I.B.M. is only for the purpose of determining royalty payable on minerals and the same cannot be the basis of determination of sale price? * Whether imposition of penalty under Section 40 (1) of the JVAT Act, 2005 is sustainable in the eye of law, especially when the original proceedings were initiated under Section 40 (2) of the JVAT Act, 2005? In support of the l....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erals at a lesser price just in order to evade payment of tax especially when the said purchaser is entitled to avail ITC under the JVAT Act, 2005. (e) Further, assessing officer in its revised order has stated that "under-pricing" of the petitioner has been derived from the enquiry made from other businessmen, but no details of such enquiry has been mentioned in the revised order. The lower court records itself demonstrates that no such enquiry whatsoever was conducted by the assessing officer to conclude under-pricing done by the petitioner. (f) The quantity of goods sold has not been disputed either by the assessing officer or the learned appellate court or by the Tribunal. Further, nowhere the returns of the petitioner have been disputed by the Tax authorities or by the learned Tribunal. In fact, the remand order passed by the learned appellate court was limited remand order and the revised order should have only confined to the facts that whether petitioner has sold its goods at a higher price than shown in invoice. But the assessing officer has exceeded its jurisdiction and has held that the instant case relates to under-pricing of goods sold by the petitioner. (g) A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rate, merely because the petitioner has sold goods at a rate lower than the market rate. Apart from the above, petitioner is placing reliance upon the judgment of Hon'ble Apex Court passed in the of Commissioner of Income Tax Vs. Calcutta Discount Co. Ltd. reported in (1974) 3 SCC 260 (Para-11) wherein it has been held that a dealer cannot be assessed on the basis of market price of goods sold by the said dealer. 7. Learned AAG-II has argued on behalf of the State. A counter affidavit has been filed in the matter contending that ROM consists of less ferrous content of iron, while Iron Ore consists of higher quantity of Ferrous content. This is the reason that there is no mention of ROM in the rate of IBM. Based on the records showing the sale of iron ore filed by the petitioner, it is argued that the petitioner had been producing/raising iron ore as lumps which are more valuable than ROM and fines. It is also pointed out from these invoices that the rate of iron ore lump (ROM) and fines, ferrous wise mentioned in Tax invoices is lower rate than the ferrous wise, grade wise mentioned rate of IBM. The basis for initiation of the proceedings by the assessing officer was this ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erally colourable transaction between the buyer and the seller. The documents available showed that the goods were sold at a higher price and there was no requirement to take recourse to the provision of 35 (7), rather the assessment order could have been passed in terms of Section 35 (5) and 35 (6) of the JVAT Act. Only when such evidence is not there and on the basis of enquiry conducted by the assessing officer, he was satisfied that the goods have been underpriced, then a case under Section 35 (7) is made out. 8. Learned counsel for the State has placed reliance on the decisions of the Hon'ble Apex Court in the case of M/s VEENA THEATRE, PATNA versus THE STATE OF BIHAR reported in 1970 (3) SCC 79, Para 9 and THE COMMISSIONER OF SALES TAX, MADHYA PRADESH versus M/S H.M. ESUFALI, H.M. ABDULALI, SIYAGANJ, MAIN ROAD, INDORE reported in (1973) 2 SCC 137, Para 8 and 11 in support of his submission that in a case where the invoices and books of accounts of the petitioner were not believable the assessing officer had no other option than to make a best judgment/assessment by making an estimate of the sale price relying upon the I.B.M. rates. He lastly submits that the revised ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he case it appears that to decide the lis involved in these cases, section-35 of JVAT Act play an important role as it deals with assessment and self-assessment. For brevity, Section 35 is quoted herein below: "35. Assessment and Self-Assessment - * Subject to provisions of sub-Section (2), the amount of tax due from a registered dealer or a dealer liable to be registered under this Act shall be assessed in the manner hereinafter provided, for the Tax Period during which the dealer is so liable as prescribed. * Notwithstanding anything contained in this Section, if a registered dealer has failed to furnish return or returns under sub-Section (1) of Section 29 in respect of any tax period or periods, the prescribed authority shall proceed to make provisional assessment under Section 36. * Where a registered dealer having turnover upto 1 (one) crore per annum other than the registered dealer referred to under sub-section 5 has furnished:- * All the returns for any tax period. * Revised returns and annual returns in respect of any tax period within the prescribed time and in the prescribed manner. * Has paid the tax pay....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ax and interest due from the dealer on the basis of such returns which have come on records and after making such adjustments as may be necessary including - * disallowance of claim of input tax credit, exemptions, discounts and deductions and any other concessions or rebates not supported by requisite evidence as required under the Act or the rules made thereunder; and * disallowance of claims of tax payments and refund adjustment not verified or otherwise not admissible; and * withdrawal of claim of tax credit including carry forward of tax credit not admissible under the Act; and * levying of interest applicable under this Act. Provided, notwithstanding anything contained in Section 36 if registered dealer fails to comply with the terms of the notice under this sub-section or accounts and other evidence produced by him are, in the opinion of the prescribed authority incorrect, incomplete or unreliable either wholly or partly the said authority shall assess, to the best of its judgment, the amount of tax and interest due from the dealer which have come on records and after making such adjustments as may be necessary". (7). If ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion (7) of Section 25 - * has concealed any sales or purchases or any particulars thereof, with a view to reduce the amount of tax payable by him under this Act, or * has furnished incorrect statement of his turnover or incorrect particulars of his sales or purchases in the return furnished under sub-section (1) of Section 29; or otherwise, the prescribed authority shall, after giving such a dealer an opportunity of being heard, by an order in writing direct that he shall, in addition to any tax payable which is or may be assessed under Section 35 or 36 or 38, pay by way of penalty a sum equal to thrice the amount of tax on the concealed turnover or on concealed or incorrect particulars* for each month of such suppression or concealment or for furnishing incorrect particulars; on the amount of tax payable under the Act or on the suppressed turnover or on concealed turnover or for furnishing incorrect particulars. The interest shall be payable before the completion of the assessment and for determining the amount of penalty payable, the prescribed authority shall quantify the amount of tax payable provisionally under this Act." 11. After going....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n "real income" which means the actual income received by or which accrues to the assesses. In case of sales tax, tax is exigible on real price received or receivable by the dealer in respect of a sale. A dealer is entitled to frame his price structure in a manner conducive to the type of his business or with a view to withstand the competition. In a given case, cost may be more than the price. The dealer may base his price structure to give an incentive to his clients, agents, distributors, etc., particularly if he is a manufacturer. In such cases, his price structure has to be scrutinized by the Department under the sales tax law to find out the real sale price receivable by him. There may be cases where he is required to give a discount on account of defect in quality or delay. The important thing to be noted is that "price" is the amount of consideration which a seller charges the buyer for parting with the title to the goods. It comprises of the amount which the dealer himself has to pay for the purchase of the goods, the expenditure, which he is to incur for transporting the goods from the place of purchase to the place of sale, the duties, if any, levied on the particular go....
X X X X Extracts X X X X
X X X X Extracts X X X X
....akes a deeming provision by providing for national additions. Such deeming fictions and notional additions in excise law are totally irrelevant for sales tax purposes. Therefore, in any event, these notional additions cannot be read into Clause 5.1 and Clause t.2 of the General Agreement for Purchase of Parts dated 31.7.1997." In the case of M/s. Girdharilal Nanhelal (supra) cited by the petitioner, the Apex Court has at para-7 held that for the purpose of levy of Sales Tax it would be necessary not only to show that the source of money has not been explained but also to show existence of some material that such acquisition of money has resulted from transactions liable to Sales Tax and not from other sources. 14. At this stage it is relevant to refer the relevant part of the revised assessment order which is quoted herein below: From the above extracts of the revised assessment order, it clearly transpires that the Assessing Officer has come to the finding that it is a case of 'underpricing'. The finding with respect to "underpricing" of the goods sold by the petitioner recorded by the assessing officer is not tenable in the eye of law. Further, assessing officer in its r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o be remanded to the assessing officer to comply the provisions of Section 35(7) of the Act for initiating the proceeding, if he finds any evidence that the goods have been sold at higher price than shown by the dealers. 16. Though several contentions have been raised by the parties on the merits of the matter regarding the levy of tax and penalty but since the matter is being remanded for the assessing officer on the point of recording of satisfaction under Section 35 (7) of the JVAT Act before initiation of the proceedings, we consciously refrain from making any observation on the merits of the case regarding the levy of tax and penalty upon the petitioner under Section 35 (7) r/w Section 40 (1) of the JVAT Act. The judgment relied upon by the learned Advocate General i.e. M/s VEENA THEATRE, PATNA and THE COMMISSIONER OF SALES TAX, MADHYA PRADESH (supra) relate to cases of best judgment assessment after the rejection of Books of Account of the Assessee. Since in the present case the requirement of law for initiation of the proceedings have not been fulfilled, these decisions are not of assistance to the present cases. 17. As such, on remand, the AO shall proceed strictly in....