1990 (2) TMI 288 - HC - VAT and Sales Tax

Summary

Issues:
Claim of exemption based on a notification dated 1st February, 1985 for sales of tractors made between 20th May, 1986 to 15th September, 1986. Allegation of reducing tractor prices under a colorable device to take advantage of the notification. Disagreement between assessing officer and appellate authority regarding the exemption claim. Tribunal's decision in favor of the assessee. Revenue's argument against the reduction in tractor prices and denial of exemption.

Analysis:
The case involved a manufacturer and dealer of tractors claiming exemption based on a notification dated 1st February, 1985, for sales made between 20th May, 1986 to 15th September, 1986. The assessing officer denied the exemption, alleging that the assessee reduced tractor prices as a colorable device to benefit from the notification. The officer also claimed that the price reduction was offset by an increase in accessory prices. The appellate authority upheld the denial of exemption, agreeing with the assessing officer's reasoning.

The Tribunal, in a second appeal, ruled in favor of the assessee, allowing the exemption claim. The Tribunal found no evidence to support the Revenue's argument that the manufacturing cost of the tractors could not have decreased during the relevant period. The Tribunal highlighted that the assessing officer failed to establish that tractors were sold at a higher price than indicated on the invoices. The Tribunal emphasized the assessee's argument that the reduction in tractor prices was to boost sales after a decline in the preceding period.

In the High Court, the Revenue reiterated its argument against the reduction in tractor prices and the alleged misuse of the notification. The Court rejected the Revenue's contentions, stating that dealers have the discretion to set prices and are not obligated to make a profit always. The Court emphasized the lack of evidence showing that tractors were sold at higher prices than invoiced. The Court noted that the assessing officer's theory of price manipulation lacked substantiation and that exemption could not be denied without concrete proof of fraud.

Ultimately, the High Court upheld the Tribunal's decision, dismissing the revision petition and emphasizing that the assessing authority could reassess if new information emerged. The Court highlighted the importance of concrete evidence in denying exemptions and the freedom of sellers to set prices as they see fit, concluding that the assessee's claim was valid based on the available records.