1984 (4) TMI 260 - HC - VAT and Sales Tax

Issues Involved:
1. Bifurcation of enhanced turnover into tax-free and taxable turnovers.
2. Classification of enhanced purchases under different heads.

Issue 1: Bifurcation of Enhanced Turnover into Tax-Free and Taxable Turnovers

The Tribunal concluded that the enhanced turnover of Rs. 47,725 for the period 1st April, 1958, to 31st March, 1959, and Rs. 45,545 for the period 1st April, 1959, to 31st December, 1959, should be bifurcated into tax-free and taxable turnovers based on the proportion of tax-free sales, inter-State sales, and sales taxable at different rates as disclosed by the books of account and accepted by the assessing authorities. The Tribunal observed that since the Deputy Commissioner had granted a 50% exemption under section 8(a) in respect of the enhanced turnover, this should not be disturbed. The rest of the exemption should be worked out based on the proportion of these exemptions as revealed by the books of account and accepted by the department.

The Court found it difficult to accept the department's contention that no benefit could be extended on the basis of the proportion of tax-free sales, inter-State sales, and sales taxable at different rates. The enhancement was not limited to the actual amount of suppression but was an estimate of the gross turnover. Therefore, the dealer was entitled to claim that part of the enhanced turnover was attributable to tax-free sales or sales liable to tax at different rates. The Court held that there was no reason in principle why the dealer should be debarred from claiming such deductions.

The department's argument that the burden of proving that a particular sale was tax-free or liable to tax at a reduced rate was on the dealer was not considered by the Court. The Tribunal had not entertained this question, and no application was made for directing the Tribunal to refer that question to the Court. Therefore, the Tribunal's decision to apply the same pattern of sales as disclosed by the books of account to the enhanced turnover was upheld. Question No. 1 was answered in the affirmative and in favor of the dealer.

Issue 2: Classification of Enhanced Purchases Under Different Heads

The Tribunal directed that the quantum of enhanced purchases should be worked out and classified based on the proportion of purchases under different heads such as outside Bombay State sales, inter-State sales, and sales of goods covered by entries 1 to 18 of Schedule B. However, the Tribunal also directed that the enhanced turnover of purchases should be bifurcated to account for purchases from registered dealers. The Assistant Commissioner had already treated about 50% of the enhanced turnover of purchases as being from registered dealers and entitled to benefit under section 8 of the said Act. The Deputy Commissioner had reduced the amount of enhanced purchases treated as from unregistered dealers by a little less than Rs. 2,000, and the Tribunal did not interfere with this conclusion.

The Court found that the Tribunal's direction to further bifurcate the enhanced turnover of purchases to account for purchases from registered dealers was not justified. The Tribunal had accepted the Deputy Commissioner's conclusion that 50% of the enhanced turnover of purchases should be attributable to purchases from registered dealers and had accepted the reliefs given on that basis. There was no finding of fact by the Tribunal to justify a further bifurcation. Therefore, the Tribunal's direction in this regard was contrary to its own findings.

Question No. 2 was answered by stating that the Tribunal was justified in directing that the quantum of enhanced purchases should be classified on the same basis as set out in question No. 1, but it was not justified in directing that any proportion of the enhanced turnover of purchases should be attributed to purchases from registered dealers. There was no order as to costs of this reference.

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