1999 (2) TMI 636 - AT - VAT and Sales Tax

Issues Involved:
1. Constitutionality of Section 44-A(1)(c) and Section 44-A(2)(c) of the Tamil Nadu General Sales Tax Act, 1959.
2. Interpretation of belated submission of the transit pass as deemed sale and levying compounding fee for evasion of tax.
3. Levying compounding fee under Section 46(1)(a) or 46(1)(b) for failure to obtain a transit pass at the entry check-post.

Detailed Analysis:

Constitutionality of Section 44-A(1)(c) and Section 44-A(2)(c):
The petitioners argued that Section 44-A(1)(c) and Section 44-A(2)(c) of the Tamil Nadu General Sales Tax Act, 1959, are unconstitutional and ultra vires Articles 14 and 19(1)(g) of the Constitution of India, and Entry 54, List II, and Entry 92-A, List I, of the Seventh Schedule to the Constitution of India, as well as Section 3 and Section 6A of the Central Sales Tax Act, 1956. They contended that these sections create an irrebuttable presumption of sale within Tamil Nadu if the transit pass is not submitted at the exit check-post, thus imposing a tax on transactions that may not involve a transfer of property in goods. The Tribunal, however, held that Section 44-A and Rule 35-B are machinery provisions aimed at preventing tax evasion and do not levy any charge by themselves. The Tribunal concluded that the "deemed sale" under these sections is a rebuttable presumption, allowing the concerned parties to demonstrate that the goods were not sold within Tamil Nadu. The Tribunal upheld the constitutionality of these provisions, stating they are incidental and ancillary to the power of taxation under Entry 54 and do not offend the Constitution.

Belated Submission of Transit Pass:
The Tribunal examined whether the belated submission of the transit pass at the exit check-post could be construed as a deemed sale and whether a compounding fee could be levied for evasion of tax under Section 46(1)(a). The Tribunal clarified that the mere belated submission of the transit pass does not automatically lead to the inference of evasion of tax. Adequate material must be available to show that the goods transported are different from those mentioned in the transit pass. The Tribunal emphasized that the competent assessing authority must issue a notice and provide an opportunity to the concerned parties to rebut the presumption of deemed sale before any tax liability is imposed.

Levying Compounding Fee:
The Tribunal analyzed whether compounding fees could be levied under Section 46(1)(a) or 46(1)(b) for the failure to obtain a transit pass at the entry check-post. It concluded that if the failure to obtain a transit pass is detected at an intermediary check-post and the offence is compounded, the check-post officer can issue a transit pass to ensure the goods move out of the State. However, if the failure is detected at the last check-post, the genuineness of the transaction must be verified before imposing any liability. The Tribunal held that in cases of belated submission of the transit pass without obtaining an extension of time, the offence would attract a maximum compounding fee of Rs. 1,000 under Section 46(1)(b) unless there is evidence of tax evasion, in which case Section 46(1)(a) would apply.

Conclusion:
The Tribunal upheld the constitutionality of Section 44-A(1)(c) and Section 44-A(2)(c) of the Tamil Nadu General Sales Tax Act, 1959, and clarified that these provisions create a rebuttable presumption of sale within Tamil Nadu. It also provided guidelines on the imposition of compounding fees for belated submission of transit passes and failure to obtain transit passes at entry check-posts, emphasizing the need for adequate material and proper procedural safeguards before imposing any tax liability. The petitions were disposed of accordingly.

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