2009 (9) TMI 898 - HC - VAT and Sales Tax

Whether the total amount of ₹ 5,79,06,193 was a turnover, which in fact had escaped assessment in terms of the original assessment order and if so, was required to be brought to tax and the assessee/dealer called upon to pay the commensurate tax liability, as it arises under the provisions of the Act? Held that - The assessing officer as well as the Additional Commissioner are very correct, in concluding that the assessee had in fact not come up with any supporting, clinching material to demonstrate that the assessee had actually utilized the turnover of iron and steel of the value of ₹ 5,79,06,193 and inspite of several opportunities, the assessee had not produced the books of accounts and evidences, before the assessing authority and in terms of the material subsequently placed before the Joint Commissioner (Appeals), the position did not improve in any manner. On the failure of the assessee to discharge the burden cast under section 6A, the value of the iron and steel acquired by it, has to be presumed to have been sold within the State and more so, the assessee itself being a dealer dealing with such products, the assessing authority and the Commissioner have rightly arrived at the proper conclusion. The Joint Commissioner was wrong in varying the order of the assessing authority. We do not find any question of law which is erroneously decided by the Additional Commissioner, as is sought to be made out in the questions of law raised in the memorandum of appeal. Appeal dismissed.

Issues Involved:
1. Jurisdiction under Section 22A of the Karnataka Sales Tax Act.
2. Evaluation of expert evidence and its adequacy.
3. Merits of the order under Section 22A of the KST Act.
4. Classification of purchase transactions as 'deemed sale'.
5. Utilization of iron and steel in the factory for construction of plant and machinery.

Detailed Analysis:

Jurisdiction under Section 22A of the Act:
The primary issue was whether the Additional Commissioner was justified in exercising revisional jurisdiction under Section 22A of the Karnataka Sales Tax Act. The appellant argued that the provisions allow for the review of only erroneous orders. The court found that the Additional Commissioner had a cogent, convincing, and legally acceptable reason for exercising his suo motu revisional jurisdiction. The Additional Commissioner concluded that the Appellate Commissioner's order was prejudicial to the interest of the Revenue and lacked substantial proof from the assessee regarding the utilization of the iron and steel in the plant's construction.

Evaluation of Expert Evidence and Its Adequacy:
The assessee presented various forms of evidence, including audited balance sheets, ledger account extracts, and certificates from the Department of Industries and Commerce. The Additional Commissioner found that these materials did not conclusively prove that the iron and steel were utilized in the construction of the plant and machinery. The court upheld this finding, stating that the material presented by the assessee was insufficient to demonstrate the actual use of the iron and steel in the plant's erection.

Merits of the Order under Section 22A of the KST Act:
The appellant contended that the Additional Commissioner summarily rejected the Appellate Commissioner's order without passing a reasoned order on merits as required under Section 22A of the Act. The court, however, found that the Additional Commissioner had thoroughly examined the facts and materials on record before setting aside the Appellate Commissioner's order. The court supported the Additional Commissioner's conclusion that the assessee failed to provide adequate proof of the utilization of iron and steel in the plant's construction.

Classification of Purchase Transactions as 'Deemed Sale':
The court examined whether the respondent-authority was justified in deeming the purchase transaction as a 'deemed sale' without substantial evidence. The court found that the burden was on the assessee to prove that the iron and steel were not sold but used for captive consumption. The court concluded that the assessee failed to discharge this burden, leading to the presumption that the goods were sold within the state.

Utilization of Iron and Steel in the Factory for Construction of Plant and Machinery:
The court scrutinized the evidence provided by the assessee, including photographs, auditors' reports, and statements, to ascertain if the iron and steel were used in the construction of the plant and machinery. The court noted that the assessee did not produce books of account or other substantial evidence to support its claim. The court upheld the Additional Commissioner's finding that the evidence was not sufficient to prove the utilization of iron and steel in the plant's construction.

Conclusion:
The court dismissed the appeal, affirming the Additional Commissioner's order, which restored the assessing authority's order. The court imposed a cost of Rs. 5,000 on the appellant, payable to the respondents. The court found no merit in the appellant's claims and concluded that the Additional Commissioner acted within his jurisdiction and based on substantial evidence.

← Previous Next →