2009 (1) TMI 802 - HC - VAT and Sales Tax

Whether, on the facts and circumstances of the case the sales made by the assessee against ST-XXII forms to seven registered purchasing dealers were rightly disallowed under section 5(2)(a)(ii) of the Punjab General Sales Tax Act, 1948? Whether, on the facts and circumstances of the case, penalty was leviable under section 10(7) of the Punjab General Sales Tax Act, 1948? Held that - In the facts and circumstances of this case no fault can be found with the view taken by the Tribunal holding that the assessee was not entitled to the benefit of deduction under section 5(2)(a)(ii) of the Act in respect of the sales made to seven registered dealers by tendering ST-XXII form because the authenticity of these documents has been doubted. The dealer was confronted with the signatures of one Shri Rakesh Singla on the ST-I form which Shri Rakesh Singla had filed at the time of registration of his firm, namely, M/s. Rakesh Enterprises, Ludhiana. The signatures on the registration certificate did not tally with the ST-XXII declaration form submitted by the dealer. We are further of the view that the requirement of subjecting seven purchasing dealers to cross-examination would pale into insignificance on account of clinching facts. In such circumstances, the question No. 1 posed has to be answered against the dealer and in favour of the Revenue. As a sequel to the answer to the first question it follows that the answer to question No. 2 has to be against the dealer and in favour of the Revenue.

Summary

Issues:
1. Disallowance of sales made to registered dealers under section 5(2)(a)(ii) of the Punjab General Sales Tax Act, 1948.
2. Leviability of penalty under section 10(7) of the Punjab General Sales Tax Act, 1948.

Analysis:
1. The case involved the disallowance of sales made by the dealer to registered dealers under section 5(2)(a)(ii) of the Punjab General Sales Tax Act, 1948. The original assessment raised an additional demand, rejecting the dealer's claim for deduction from taxable turnover. The dealer failed to produce necessary account books and evidence to substantiate the sales claimed. The Tribunal found that the dealer had colluded with buyers to procure fake declarations, rendering the transactions invalid. The Tribunal affirmed the disallowance of the deduction under section 5(2)(a)(ii) for all seven dealers, as the transactions were fake and invalid. The court agreed with the Tribunal's findings, stating that the dealer failed to prove the authenticity of the transactions, leading to the disallowance of the deduction. The court held in favor of the Revenue, concluding that the dealer was not entitled to the benefit of deduction under section 5(2)(a)(ii) for the sales made to registered dealers.

2. The issue of the leviability of penalty under section 10(7) of the Punjab General Sales Tax Act, 1948 was also considered. The Assessing Authority had imposed a penalty, which was later reduced on appeal. The Tribunal sustained the penalty, finding that the dealer had connived to evade tax revenue by filing incorrect returns with bogus claims under section 5(2)(a)(ii). The court upheld the penalty under section 10(7), agreeing with the Tribunal's decision that the penalty was rightly levied due to the dealer's actions to evade tax obligations. Consequently, the court ruled in favor of the Revenue, affirming the imposition of the penalty under section 10(7) of the Act.

In conclusion, the court upheld the Tribunal's decisions regarding the disallowance of deductions under section 5(2)(a)(ii) and the levying of the penalty under section 10(7) of the Punjab General Sales Tax Act, 1948. The court found that the dealer's actions were aimed at evading tax obligations, leading to the disallowance of deductions and the imposition of the penalty. The judgment favored the Revenue in both aspects, emphasizing the importance of substantiating transactions and complying with tax laws to avoid penalties and disallowances.