1995 (9) TMI 347 - HC - VAT and Sales Tax

Issues Involved:

1. Legality of Assessment Orders under the Central Sales Tax Act.
2. Misuse of Registration Certificate and Declaration in Form "C".
3. Classification of Branch Transfers as Inter-State Sales.
4. Classification of Consignment Transfers to Agents as Inter-State Sales.
5. Allegations of Mala Fides against the Chief Minister.

Issue-wise Detailed Analysis:

1. Legality of Assessment Orders under the Central Sales Tax Act:

The petitioner-company challenged the assessment orders for the years 1988-89, 1989-90, and 1990-91, claiming they were illegal and arbitrary. The court noted that the assessment orders were passed without following the principles of natural justice, as the company was not given adequate time to respond to the show cause notices. The court emphasized the need for proper inquiry and evidence before finalizing such assessments. The orders were set aside and remitted to the Assessing Authority for reconsideration with directions to follow due process and allow the petitioner to present its case comprehensively.

2. Misuse of Registration Certificate and Declaration in Form "C":

The Assessing Authority had held that the petitioner-company misused its registration certificate by purchasing goods on the strength of Form "C" and using them in its branches outside Haryana, instead of its manufacturing unit in Hisar. The court disagreed, stating that neither Section 8(3)(b) of the Central Sales Tax Act nor Rule 12(1) nor the prescribed Form "C" restrict the use of purchased goods to a particular state. The court cited the Supreme Court's decision in Polestar Electronic (Pvt.) Ltd. v. Additional Commissioner, Sales Tax, which held that goods purchased for resale or use in manufacturing could be used anywhere in India. The court concluded that the Assessing Authority's interpretation was incorrect and that there was no misuse of the registration certificate.

3. Classification of Branch Transfers as Inter-State Sales:

The court examined whether the branch transfers were inter-State sales or mere transfers to branches. The Assessing Authority had classified these as inter-State sales, citing misuse of registration certificates and the impracticality of transporting goods to branches outside Haryana. The court found these reasons unsustainable, emphasizing that the law does not restrict the use of goods to a specific state. The court directed the Assessing Authority to reconsider each item and determine if it could be consumed in the manufacturing process, rather than assuming inter-State sales based on transportation logistics.

4. Classification of Consignment Transfers to Agents as Inter-State Sales:

The petitioner argued that goods sent to agents in other states were for local sales by the agents, not inter-State sales. The court noted that the Assessing Authority had not given the petitioner a fair opportunity to prove this claim. The court highlighted the importance of declarations in Form "F" under Section 6-A of the Central Sales Tax Act, which, if found true, indicate that goods were transferred otherwise than by way of sale. The court directed the Assessing Authority to verify the declarations and conduct a proper inquiry to determine the nature of these transfers.

5. Allegations of Mala Fides against the Chief Minister:

The petitioner alleged that the Chief Minister acted out of political vendetta against the company's chairman, leading to the arbitrary assessment orders. The court acknowledged the numerous legal challenges faced by the petitioner but found no concrete evidence directly linking the Chief Minister to the assessment orders. The court emphasized that allegations of mala fides require high proof and cannot be based on mere suspicion. The court rejected the plea of mala fides, stating that the chain of circumstances did not conclusively prove the Chief Minister's involvement.

Conclusion:

The court set aside the impugned assessment orders and remitted the cases to the Assessing Authority for fresh consideration, emphasizing the need for due process and adherence to legal principles. The court directed that the matter be handled by the highest taxing authority in a district other than Hisar to ensure impartiality. The plea of mala fides against the Chief Minister was rejected due to lack of concrete evidence.

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