2004 (12) TMI 654 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of the assessment order under the CST Act.
2. Burden of proof regarding stock transfers vs. inter-State sales.
3. Requirement and duration for maintaining books of accounts.
4. Authority and jurisdiction of the revisional authority.

Issue-wise Detailed Analysis:

1. Validity of the assessment order under the CST Act:
The appellant, a dealer in cotton yarn, claimed that it had transferred cotton yarn worth Rs. 89,04,733.05 to its branch office in Ponda-Goa and declared its CST turnover as "nil". The assessing authority initially accepted this claim without verification and declared the turnover as "non-assessable". However, the Deputy Commissioner of Commercial Taxes reviewed this order, finding it improper and prejudicial to the Revenue's interest, and referred the matter for revision. The revisional authority, after verifying the form "F" declarations, found that the assessing authority had mechanically accepted these declarations without verifying the transactions and issued a notice to the assessee to show cause why the order should not be revised. The revisional authority set aside the initial assessment order and remanded the matter for fresh assessment.

2. Burden of proof regarding stock transfers vs. inter-State sales:
The assessee argued that the burden of proving stock transfers was discharged by producing form "F" declarations, which should suffice unless proven false by the Revenue. However, the court held that under Section 6-A(1) of the CST Act, the burden of proof lies on the dealer to prove that the movement of goods was occasioned otherwise than by way of sale. The court emphasized that the production of form "F" declarations alone does not conclusively establish the nature of the transaction, and the assessing authority is entitled to verify the correctness of the particulars contained in the declarations. The court cited the Supreme Court's decision in Ashok Leyland Ltd. v. State of Tamil Nadu, which clarified that the assessing authority could reopen the acceptance of form "F" declarations if obtained by fraud, collusion, or misrepresentation.

3. Requirement and duration for maintaining books of accounts:
The appellant contended that it was not required to maintain books of accounts beyond the statutory period prescribed under Rule 26(10) of the Karnataka Sales Tax Rules, 1957, which mandates preservation for five years. The court acknowledged this rule but held that as a prudent businessman, the appellant should have preserved the documents until all proceedings, including appeals and revisions, were completed. The court referenced the decision in Commissioner of Sales Tax v. Ramdas Laxmidas, which stated that while the statutory obligation to preserve records ends after the prescribed period, prudence dictates maintaining them until all related proceedings conclude.

4. Authority and jurisdiction of the revisional authority:
The revisional authority issued a notice proposing to revise the first appellate authority's order, which had set aside the assessment order. The revisional authority deemed the first appellate authority's order erroneous and prejudicial to the Revenue's interest, as it granted exemption without verifying the transactions. The court upheld the revisional authority's jurisdiction to review and revise orders that are erroneous and prejudicial to the Revenue, emphasizing that the burden of proof regarding the nature of transactions lies with the dealer.

Conclusion:
The court dismissed the appeal, affirming the revisional authority's decision to set aside the first appellate authority's order and restore the assessment order. The court reiterated that the burden of proof for stock transfers lies with the dealer and that the assessing authority is entitled to verify the correctness of form "F" declarations. The court also emphasized the importance of maintaining records until all proceedings are concluded, even beyond the statutory period.

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