2008 (11) TMI 646 - HC - VAT and Sales Tax

Whether, on the facts and in the circumstances of the case, the Tribunal is correct in having allowed the appeal by relaying upon the decision in Steel Authority of India Limited v. State of Orissa reported in 1998 (2) TMI 556 - ORISSA HIGH COURT ? Whether the Tribunal could raise an extraneous issue that discrimination is exercised in not granting exemption on agricultural products of other States when such an issue is not at all existing in this case? Whether the Tribunal has erred in not considering the finding of the first appellate authority that in deciding the liability of tax upon the respondent the question whether the purchaser had paid tax or not is immaterial since coffee seeds are taxable at the point of first sale? Whether the consequent deletion of penalty levied under section 16(2) of the Tamil Nadu General Sales Tax Act, 1959 (the TNGST Act) is valid in law? Held that - The Tribunal ought not to have gone into the question whether there was discrimination on the ground of exemption on agricultural products of other States and agricultural products grown in our State. The question Nos. 1 to 3 therefore, will have to be answered in favour of the Revenue. As regards question No. 4, we find that apart from stating that the sale of coffee seeds for ₹ 3.25 lakhs was not accounted for by the assessee, there is no finding of wilfulness. So the deletion of penalty is not interfered with. The appeal is partly allowed.

Summary

Issues:
1. Tribunal's reliance on a specific decision for allowing the appeal.
2. Tribunal's consideration of an extraneous issue not relevant to the case.
3. Failure of the Tribunal to consider the first appellate authority's findings.
4. Validity of the deletion of penalty under section 16(2) of the TNGST Act.

Issue 1:
The Tribunal allowed the appeal based on the decision in Steel Authority of India Limited v. State of Orissa, which the Revenue challenged. The Revenue contended that the point of taxation cannot be shifted, emphasizing that the assessee must pay tax on the first sale. The Special Government Pleader cited the decision in Aspinwall and Co. Ltd. v. Commissioner of Income-tax to support this argument, asserting that the nature of the goods does not alter the tax incidence.

Issue 2:
The Tribunal delved into an irrelevant issue of discrimination regarding exemption on agricultural products from other states, which was not pertinent to the case. The court noted that this was an unnecessary consideration, and the questions raised by the Tribunal were not applicable to the facts of the case.

Issue 3:
The Tribunal failed to consider the findings of the first appellate authority regarding the liability of tax on the assessee. The appellate authority had dismissed the appeal, but the Tribunal overturned this decision without due regard to the previous findings. The court highlighted this oversight in the Tribunal's analysis.

Issue 4:
Regarding the deletion of the penalty under section 16(2) of the TNGST Act, the court found that there was no evidence of wilfulness in the failure to account for the sale of coffee seeds. As a result, the court upheld the deletion of the penalty, stating that without proof of wilfulness, the penalty could not be justified. The appeal was partly allowed on this ground, with no costs imposed.

In conclusion, the court addressed each issue raised in the tax case comprehensively. The judgment highlighted the errors made by the Tribunal in considering irrelevant issues, failing to uphold the findings of the first appellate authority, and the lack of evidence to support the penalty levied under the TNGST Act. The legal analysis provided clarity on the application of tax laws and relevant precedents, ensuring a fair and reasoned decision in the matter.