2008 (8) TMI 819 - AAAR - VAT and Sales Tax

Issues Involved:
1. Classification of transactions as inter-State sales or consignment transfers.
2. Validity of documentary evidence submitted by the appellant.
3. Imposition and quantum of penalty under section 9(2) of the CST Act read with section 7A(2) of the APGST Act.

Detailed Analysis:

1. Classification of Transactions:
The primary issue was whether the transactions claimed by the appellant as consignment transfers to agents in other States were in fact inter-State sales. The assessing authority disallowed the appellant's claim for exclusion of consignment transfers amounting to Rs. 5.84 crores, treating them as inter-State sales and subjecting them to tax at 10 percent due to the absence of "C" forms. The Appellate Tribunal partially allowed, dismissed, and remanded parts of the appeal.

The appellant submitted "F" forms and sale pattis to support its claim, but the assessing authority, based on reports from sales tax officials of other States, concluded that the consignment transfers were in reality inter-State sales. The reports revealed discrepancies such as incorrect RC numbers, non-existent agents, and denial of transactions by alleged agents.

The Tribunal's failure to record definite findings after referring to inquiry reports was noted. Instead, the Tribunal made an omnibus observation that the appeal on the turnover of Rs. 2,60,13,401 was dismissed due to conclusive departmental inquiries and insufficient documentary evidence by the appellant.

2. Validity of Documentary Evidence:
The Tribunal discussed item-wise the contents of inquiry reports and remarks made by the assessing authority. However, it did not record definite findings for each item. The Tribunal's order was criticized for its lack of detailed discussion and reasoned findings.

For example, in Item No. 10 (Swastik Traders, Kolhapur), the assessing officer found that no dealer by the name was doing business in oils, and the F form and other documents were deemed bogus. The appellant did not challenge this finding, and the Tribunal confirmed the order.

In some cases, such as Item No. 11 (Sri Jayashakti Rice & Oil Mill, Salem), the appeal was allowed to the extent of Rs. 2.50 lakhs as the agent received 22 out of 23 consignments. In other cases, such as Item No. 12 (Gauri Shankar Oil Mills, Salem), the rejection of the appellant's claim was justified due to the agent's denial of transactions.

In several instances, the reports from sales tax officials were found to be insufficient to conclusively negate the appellant's claim. For example, in Item No. 17 (Kamachi & Co., Erode), the appeal was allowed due to the lack of verification of records of the dealers at the other end.

3. Imposition and Quantum of Penalty:
Penalty was levied under section 9(2) of the CST Act read with section 7A(2)(i) of the APGST Act for furnishing false declarations/certificates. The Tribunal confirmed the levy of penalty at three times the tax due on the disallowed turnover.

The appellant's counsel cited the Supreme Court judgment in State of Madhya Pradesh v. Bharat Heavy Electricals to argue that the assessing authority has discretion to levy lesser penalty. However, the Tribunal held that the production of false documents justified the imposition of penalty of three times the tax due, even if construed as a discretionary maximum.

The penalty of Rs. 78,04,020 was demanded by the second respondent based on the Tribunal's order. However, due to a totalling mistake, the disallowed turnover was actually Rs. 2,55,57,389. The penalty was recalculated accordingly, and the relief granted in the appeal against assessment resulted in the deletion of Rs. 37,46,079 from the penalty due.

Conclusion:
The appeals were partly allowed, with the appellant receiving relief of Rs. 1,24,86,934 over and above what the Tribunal allowed/remanded. The penalty was adjusted based on the corrected turnover figures. The judgment emphasized the need for detailed findings and reasoned conclusions in tax assessment appeals.

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