1995 (7) TMI 409 - HC - VAT and Sales Tax

Summary

Issues:
1. Arbitrary fixation of taxable turnover for assessment year 1986-87.
2. Consideration of past record of assessments in determining taxable turnover.
3. Calculation of sales based on survey data and rejection of account books.
4. Assessment made on best judgment basis and need for cogent material.
5. Relevance of price rise and number of consumers in determining taxable turnover.

Analysis:
The High Court addressed the Sales Tax Revision No. 408 of 1989 concerning the arbitrary fixation of the taxable turnover for the assessment year 1986-87 under section 11 of the Trade Tax Act. The judgment challenged the decision of the Sales Tax Tribunal, Bench II, Meerut, which partially allowed the applicant's appeal and reduced the taxable turnover to Rs. 6,50,000 while dismissing the cross appeal filed by the Commissioner of Sales Tax. The Court highlighted the issue of arbitrariness in determining the turnover, emphasizing the importance of rational considerations and avoiding guesswork in assessments made on the best judgment basis.

The Court analyzed the consideration of past record of assessments in determining the taxable turnover, pointing out that the Tribunal had referred to the past record but seemingly ignored it while fixing the turnover. The judgment emphasized the relevance of past assessments as a material factor in determining the turnover for a specific assessment year. Additionally, the Court discussed the importance of taking into account market conditions and business practices while assessing tax liabilities, stressing the need for a reasonable and fair approach by the taxing authority.

Regarding the calculation of sales based on survey data and rejection of account books, the Court scrutinized the methodology used by the assessing authority and the first appellate authority, which was based on daily sales calculations. The Court agreed with the Tribunal's rejection of this approach, emphasizing that sales cannot be calculated solely based on working hours and that the realities of business operations must be considered. The judgment highlighted the need for cogent material and rational considerations in determining taxable turnovers, emphasizing the avoidance of guesswork in assessments.

Furthermore, the Court discussed the relevance of factors such as price rise and the number of consumers in determining taxable turnover. It noted that while the increase in the number of consumers might be challenging to ascertain, price rise could serve as a practical consideration for enhancing the turnover of the assessee. The judgment highlighted the lack of material indicating price rise in the present case and suggested providing the assessee with an opportunity to present relevant material for a reasonable assessment.

In conclusion, the Court allowed the revision, quashed the impugned judgment, and remanded the matter to the Tribunal for a fresh hearing and decision within three months. The judgment dismissed the cross STR No. 728 of 1989, emphasizing that the question of fixing the taxable turnover would be decided by the Tribunal in the second appeal.