2002 (10) TMI 771 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to penalty under section 45-A of Kerala General Sales Tax Act for unaccounted sale of goods; Dispute over agency transaction vs. purchase and sale; Burden of proof on petitioner to establish agency relationship; Lack of evidence supporting agency claim; Consideration received by petitioner; Lack of agency agreement or correspondence; Failure to prove inter-State sale; Reduction of penalty to 50% of tax amount.

Analysis:
The petitioner contested the penalty imposed under section 45-A of the Kerala General Sales Tax Act for unaccounted sale of goods, specifically plastic chairs sold to a school in Kerala. The department alleged the petitioner failed to account for local sales and evade tax, resulting in the penalty of Rs. 75,800. The petitioner claimed to act as an agent of the manufacturer, Nilkamal Plastics Ltd., denying direct purchase and resale. However, the authorities found no concrete evidence supporting the agency claim, emphasizing the absence of an agency agreement or correspondence appointing the petitioner as an agent.

During the proceedings, the petitioner failed to produce substantial evidence to substantiate the agency relationship, as required by Explanation 5 to section 2(xxi) of the Act. The burden of proof rested on the petitioner to demonstrate the absence of purchase and sale transactions, which was not met. The consideration received by the petitioner from the supplier indicated a purchase and resale scenario, triggering the presumption of two sales. The lack of documentation, such as a purchase order or evidence of commission received, further weakened the petitioner's case for agency.

Despite citing legal precedents and arguing for the transaction's classification as an inter-State sale, the petitioner could not establish the agency relationship or disprove the unaccounted purchase and sale. Consequently, the penalty was reduced to 50% of the tax amount due to the absence of clear evidence of tax evasion. The judgment highlighted the importance of substantiating claims of agency with concrete evidence, underscoring the necessity of proper documentation to support such assertions in tax-related disputes.

In conclusion, the court dismissed the petitioner's challenge to the penalty under section 45-A, emphasizing the failure to prove the agency relationship and the unaccounted purchase and sale of goods. The reduction of the penalty to 50% of the tax amount served the interest of justice in the absence of conclusive evidence supporting the petitioner's claims. The judgment underscored the significance of meeting the burden of proof in establishing agency transactions and the repercussions of inadequate documentation in tax-related legal proceedings.