2009 (2) TMI 783 - HC - VAT and Sales Tax

Penalty levied under section 45A of the Kerala General Sales Tax Act, 1963 for alleged evasion of sales tax due for 2000-01 - whether assessee is entitled to rebate of tax to the extent paid in Kerala for the purchase of chassis as well as for the body built thereon? Held that - What is required to be proved for rebate is that the tax in fact is paid on chassis or body built thereon and the amount so paid. The payment of tax is obviously by body builder no matter whether it is recovered by the body builder from the assessee or not. However, without proof of payment of tax on the chassis and the body built thereon, the assessee is not entitled to rebate of tax. We clarify this position with direction to the assessing officer to modify the assessment after giving an opportunity to the assessee to produce documents pertaining to payment of tax on the body built on the chassis of each vehicle sold by the assessee. If the assessing officer has already modified the assessment granting exemption pursuant to the Tribunal s order, he shall rectify the assessment by following the above directions. In view of the direction issued by us, we direct the intelligence officer to reconsider the penalty orders also after receipt of revised order from the assessing officer, after giving the assessee an opportunity of being heard and to produce documents in the matter. If there is no scope for levy of penalty, then based on the revised order passed by the assessing officer, the intelligence officer will drop the proceedings for penalty. However, if there is no scope for levying penalty, he will issue notice to the assessee and issue fresh penalty orders.

Summary

Issues:
Penalty under section 45A of the Kerala General Sales Tax Act, 1963 for alleged evasion of sales tax due for 2000-01.

Analysis:
The judgment addressed the penalty levied on the assessee under section 45A of the Kerala General Sales Tax Act, 1963 for alleged evasion of sales tax due for 2000-01. The assessee, a dealer in automobiles, claimed exemption on the sales turnover of vehicles, arguing that the chassis and body built thereon had separately suffered tax. However, as no evidence was provided regarding the payment of tax for the body built on the chassis, the assessing officer imposed tax. The Tribunal accepted the assessee's claim for exemption but found it untenable as the relevant entry only allowed for a rebate of tax on the tax paid on chassis and body built thereon. The judgment clarified that the liability of the assessee to pay tax on the sales turnover of motor vehicles is absolute, and the assessing officer must grant rebate on tax paid if proof is provided. The assessee cannot claim second sale exemption on the vehicle by treating it as a second sale since the sale of the motor vehicle as a whole is considered the first sale in the State.

The judgment emphasized that the assessee is entitled to a rebate of tax to the extent paid in Kerala for the purchase of chassis and the body built thereon. The assessee must provide proof of payment of tax by the body builder for the body built on the chassis to claim the rebate. Even if the body builder did not initially collect tax, if proof of tax payment for each vehicle is produced, the assessee should receive the rebate. The judgment directed the assessing officer to modify the assessment after allowing the assessee to produce documents related to tax payment on the body built on the chassis of each vehicle sold. The intelligence officer was instructed to reconsider the penalty orders after receiving the revised assessment, providing the assessee with an opportunity to be heard and present relevant documents. If there is no basis for imposing a penalty, the proceedings will be dropped; otherwise, fresh penalty orders will be issued based on the revised assessment.