2009 (1) TMI 788 - AAAR - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction of Reassessment Proceedings
2. Nature of Transactions: Stock Transfers vs. Inter-State Sales
3. Validity of Penalty Imposed

Summary:

1. Jurisdiction of Reassessment Proceedings:
The appellant contended that the reassessment was without jurisdiction as the inspection took place before the original assessment order, and no fresh material came to light thereafter. The Tribunal noted that the original assessment order was not filed, and it was unclear if the original assessing authority had the seized material. Section 16 of the TNGST Act, read with section 9(2) of the CST Act, was deemed wide enough to confer jurisdiction for reassessment based on adverse material gathered by inspecting officials.

2. Nature of Transactions: Stock Transfers vs. Inter-State Sales:
The appellant claimed exclusion of turnover u/s 6A of the CST Act, asserting the transactions were stock transfers, not inter-State sales. The Tribunal found that the head office received orders from branches indicating supply details and payments, suggesting a direct link between goods movement and delivery to ultimate purchasers. The Tribunal concluded that the transactions were inter-State sales, not stock transfers, as the goods moved pursuant to prior contracts with pre-determined buyers. However, the Tribunal noted that the assessing authority's broad generalization that all goods were sold to Hatsun Milk Foods Ltd. was incorrect. The Tribunal directed the assessing authority to ascertain the exact turnover related to transactions with Hatsun Milk Foods Ltd. and treat it as inter-State sales.

3. Validity of Penalty Imposed:
The penalty was levied under section 12(3)(b) of the TNGST Act, which was incorrect as it applies to original assessments. The correct provision was section 16(2) of the TNGST Act, applicable to reassessment of escaped turnover. The Tribunal found that the crucial ingredients of section 16(2) were not satisfied, as there was no non-disclosure of turnover by the appellant. The entire turnover was disclosed, and the appellant's claim of stock transfers, though not accepted, did not amount to wilful non-disclosure. The penalty was set aside in full.

Conclusion:
The appeal against reassessment was partly allowed, dismissing the turnover indicated in paras 9 and 10. The appeal concerning the levy of penalty was allowed in full. The assessing authority was directed to recompute the taxable turnover under the CST Act in light of the order and reissue the demand accordingly.