1998 (4) TMI 516 - AT - VAT and Sales Tax

Issues Involved:
1. Treatment of tax liability on sales made to RSEB as incentive availed under the schemes.
2. Levy of tax, interest, etc., on all sales made after the maximum quantum of exemption was exhausted.
3. Levy of tax, interest, etc., on sales made without collecting tax from customers other than RSEB.
4. Forfeiture of the amount of tax collected from RSEB and imposition of penalty.
5. Rectification of the assessment orders under section 17, RST Act.

Detailed Analysis:

Issue 1: Treatment of Tax Liability on Sales Made to RSEB as Incentive Availed Under the Schemes
The dealer, a small-scale industrial unit, held an eligibility certificate (EC) entitling it to tax exemption benefits under the Sales Tax Incentive Schemes for Industries, 1987. The dealer sold transformers to RSEB, collected sales tax at 4%, and deposited the sums with the Government. The Assessing Authority (AA) accepted this position during regular assessment proceedings. However, the impugned notices proposed treating the tax liability on sales to RSEB as an incentive availed under the schemes, which was contested by the dealer. The Tribunal found that the dealer had the choice to either charge RSEB by way of sales tax nothing or 4% or less, and this was a matter between the customer and the dealer. The collection of tax at 4% from RSEB was in order and accepted by the AA.

Issue 2: Levy of Tax, Interest, etc., on All Sales Made After the Maximum Quantum of Exemption Was Exhausted
The dealer argued that it had not exhausted the full quantum of exemption of Rs. 7,76,583. The Tribunal noted that the schemes provided incentives and concessions for investment in new industrial ventures and did not confer any rights. The dealer could avail of the exemption on some sales and not on others without forgoing the right to avail of the total quantum allowed within the time permitted. Therefore, the AA's proposal to levy tax, interest, etc., after the maximum quantum was exhausted was not warranted.

Issue 3: Levy of Tax, Interest, etc., on Sales Made Without Collecting Tax from Customers Other Than RSEB
The dealer contended that the collection of tax on transformers sold to RSEB did not violate any provisions of the schemes or the RST Act. The Tribunal found that the dealer had the choice to charge tax or not on sales to other customers, and this was acceptable as long as the tax collected was deposited with the Government. The AA's proposal to levy tax, interest, etc., on sales made without collecting tax from other customers was not justified.

Issue 4: Forfeiture of the Amount of Tax Collected from RSEB and Imposition of Penalty
The AA proposed forfeiture of the amount of tax collected from RSEB and the imposition of a penalty under section 16(1)(j), RST Act. The Tribunal found that section 16(1)(j)(iii) would be attracted only if section 5G, RST Act applied, which was not the case here. The schemes exempted industrial units (a class of persons) from payment of tax, and the sale of transformers was exigible to tax. Therefore, the collection of tax at 4% from RSEB was not in violation of the schemes, and the AA's proposal for forfeiture and penalty was not warranted.

Issue 5: Rectification of the Assessment Orders Under Section 17, RST Act
The dealer sought to impugn the notices under section 17, RST Act, arguing that there was no error apparent on the face of the record to warrant invoking section 17. The Tribunal agreed, noting that section 17 is limited to the rectification of errors apparent from the record, and there was no such error in this case. The AA's proposal to rectify the assessment orders under section 17 was not justified.

Conclusion:
The Tribunal quashed the impugned notices and any proceedings taken pursuant thereto. The dealer was entitled to avail full exemption as per the EC, and the collection of tax from RSEB at 4% was in order. The AA's proposals for levy of tax, interest, forfeiture, and penalty were not warranted. The applications were allowed, and no order as to costs was made.

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