2006 (2) TMI 617 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of turnover for exemption claimed by the assessee based on second sales, discrepancy in accounts leading to best judgment method assessment, treatment of added turnover for tax exemption, interpretation of evidence requirement for tax exemption on suppressed turnover.

Analysis:
The assessee, a dealer in iron and steel, declared a turnover for a specific year, seeking exemption for the entire turnover as second sales, having already suffered first point tax. However, a shortage of winding wires was discovered during a shop inspection, leading to the rejection of accounts and completion of assessment through best judgment method. The assessing authority added an amount to the conceded turnover, which was not granted exemption due to lack of evidence showing tax payment at the first sale point within the state.

The appeal process involved the Deputy Commissioner (Appeals) upholding the addition but ruling it as non-taxable turnover, hence exempt from tax. The Sales Tax Appellate Tribunal later affirmed the addition, stating that no tax could be levied on the added turnover as it represented exempted turnover. The Revenue challenged these decisions, arguing that the suppressed turnover should not be entitled to exemption without evidence of tax payment.

The legal dispute centered on whether the suppressed turnover had indeed suffered tax at the first sale point within the state. The court emphasized the burden of proof on the assessee to demonstrate tax exemption eligibility for the turnover not disclosed. Citing previous judgments, the court reiterated that the burden lies on the dealer to prove that the turnover is not taxable, especially when originating from unaccounted purchases.

Ultimately, the court found that the assessee failed to provide evidence that the suppressed turnover had incurred tax at the first sale point. As the accounts did not reflect any tax payment on the added turnover, the court concluded that the appellate authority and the Tribunal erred in granting exemption based on the conceded turnover's tax payment. Consequently, the court allowed the tax revision, overturning the decisions of the appellate authority and the Tribunal, and reinstated the assessing authority's order. The judgment favored the Revenue, emphasizing the importance of evidence in establishing tax liability on turnover.