2001 (2) TMI 1014 - AT - VAT and Sales Tax

Issues Involved:
1. Validity of disallowing the claim of exemption for purchases from M/s. Rekha Distributors.
2. Legitimacy of the sellers, M/s. Rekha Distributors, as registered dealers.
3. Proof of actual movement of goods.
4. Application of previous legal precedents and their relevance to the case.
5. Validity of the reliance on extraneous materials gathered in the investigation.

Detailed Analysis:

1. Validity of Disallowing the Claim of Exemption:
The assessing authority disallowed the exemption claim for purchases from M/s. Rekha Distributors for April and May 1989, citing that the sellers were merely bill traders. The sales turnover disallowed amounted to Rs. 2,24,543 for April and Rs. 1,26,690 for May 1989. The Deputy Commissioner of Commercial Taxes confirmed this disallowance, noting the non-renewal of the seller's registration and the absence of genuine transport documents. The Joint Commissioner of Commercial Taxes upheld this disallowance, emphasizing the lack of check-post seals on the transport documents and the cash payments made against bearer cheques.

2. Legitimacy of the Sellers, M/s. Rekha Distributors:
The Joint Commissioner of Commercial Taxes observed that M/s. Rekha Distributors did not renew their registration for the assessment year 1989-90 and were found non-existent at their declared business premises during an investigation on February 9, 1989. The registration certificate was subsequently canceled on April 28, 1989. The Tribunal concluded that the sellers were not doing business during 1989-90, supporting the disallowance of the exemption claim.

3. Proof of Actual Movement of Goods:
The Tribunal noted that none of the bills issued by M/s. Rekha Distributors contained check-post seals, casting doubt on the actual movement of goods from Madras to Coimbatore. Payments were made through bearer cheques and cashed at Coimbatore, further indicating no real transaction. The Tribunal upheld the Joint Commissioner's finding that there was no evidence of goods movement and that the transactions were not genuine.

4. Application of Previous Legal Precedents:
The appellant cited several cases, including Sree Narayan Timbers v. Joint Commissioner (Commercial Taxes) and Lakshmi Steel Traders v. Board of Revenue (Commercial Taxes), arguing that the non-renewal of registration or closure of the seller's business should not affect the exemption claim. However, the Tribunal distinguished these cases, noting that the present case involved a seller who was found non-existent after an investigation, not merely a failure to renew registration or business closure.

5. Validity of Reliance on Extraneous Materials:
The appellant argued that the Joint Commissioner relied on extraneous materials not on record before the lower authorities, violating principles established in cases like P. Narayanasamy v. State of Tamil Nadu and N.S. Choodamani v. Commissioner of Income-tax. The Tribunal found that the Joint Commissioner relied on materials available on record, including the investigation results and the absence of check-post seals, rather than extraneous materials gathered subsequently.

Conclusion:
The Tribunal concluded that the sellers, M/s. Rekha Distributors, were not conducting business during 1989-90 and that there was no genuine movement of goods. The Tribunal upheld the Joint Commissioner's decision to disallow the exemption claim and assess a turnover of Rs. 3,33,855, adding a gross profit of 9.31% on the purchase value of Rs. 3,05,420. The appeal was dismissed, affirming the lower authorities' findings and the Joint Commissioner's conclusions.

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