2008 (3) TMI 646 - HC - VAT and Sales Tax

Order of assessment - Revision rejected - Held that - Finding the assessment to be made without actual sales taking place within the State of Madhya Pradesh, this petition is allowed. Orders impugned passed by the assessing authority levying commercial tax on the aforesaid twelve transactions as contained in annexure P4 dated April 29, 2005 and affirmed by the revisional authority vide annexure P7 dated December 5, 2005, and the consequential action taken for recovery of the tax so assessed are quashed.

Summary

Issues:
Liability to pay commercial tax on transactions indicated in form 75s.

Analysis:
The petitioner challenged the orders passed by the assessing authority and revisional authority regarding the liability to pay commercial tax on transactions made during a specific period. The petitioner, a company owned by the Government of Tamil Nadu, is engaged in the manufacturing and sale of medicines. The petitioner explained that certain sales were made directly from the head office at Chennai to purchasers in different parts of the State, including Chief Medical Officers at Central Railways Hospitals in Jabalpur and Bhopal. The petitioner argued that these were inter-State sales and not liable for tax in Madhya Pradesh under relevant statutory provisions.

During assessment proceedings, the Commercial Tax Department questioned transactions recorded in form 75s not maintained in the petitioner's Bhopal office's sale records. The petitioner clarified that some transactions involved exempted vegetable seeds and others were direct sales from Chennai to Central Railway Authorities in Jabalpur and Bhopal. The petitioner contended that these transactions fell under the purview of the Central Sales Tax Act and were not taxable in Madhya Pradesh.

The Government Advocate argued that all sales were made from Bhopal and were taxable, contrary to the petitioner's claims. The assessing authority and revisional authority upheld the tax assessment, leading to the petitioner's challenge. The court analyzed the statutory provisions, including exemptions under Schedule I of the Madhya Pradesh Commercial Tax Act and the Central Sales Tax Act, to determine the petitioner's liability.

Upon reviewing the form 75 transactions, the court found that sales of vegetable seeds were exempt from tax. Transactions directly made from Chennai to Central Railways Hospitals were considered inter-State sales and not subject to Madhya Pradesh tax. The court emphasized that sales outside Madhya Pradesh in the course of inter-State trade were exempt from tax under section 79 of the Commercial Tax Act. The authorities' conclusion that sales occurred in Bhopal based on form 75 issuance was deemed flawed and without proper basis.

The court ruled in favor of the petitioner, stating that the tax assessment was erroneous as the sales did not take place within Madhya Pradesh. The orders levying commercial tax on the transactions were quashed, and the recovery actions were annulled. The petition was allowed with no costs awarded.

In conclusion, the judgment clarified the liability of the petitioner regarding commercial tax on specific transactions, emphasizing the statutory provisions governing inter-State sales and exemptions. The court's detailed analysis highlighted the incorrect assessment by the authorities and granted relief to the petitioner based on the absence of taxable sales within Madhya Pradesh.