2008 (11) TMI 649 - HC - VAT and Sales Tax

Whether the order of the Appellate Tribunal is correct in reversing the order of the Appellate Assistant Commissioner and sustaining the levy of tax on the alleged sales turnover of gold jewellery in assessment year TNGST 1996-97, when the alleged excess gold jewellery of 16.428 kgs seized by the Directorate of Revenue Intelligence of the Income-tax Department on January 30, 1997 were returned to the petitioner only on March 17, 1998? Whether the Appellate Tribunal being a final fact-finding authority is correct in sustaining the levy of tax on the alleged sales turnover of gold jewellery when the fact remains that the alleged excess stock seized on January 30, 1997 was returned to the petitioner only on March 17, 1998 and so the petitioner would not have effected sales out of the alleged excess stock during the assessment year 1996-97 itself? Whether the Appellate Tribunal is correct in sustaining the levy of purchase tax under section 7A on the gold jewellery brought from other State on approval receipt? Whether the Appellate Tribunal is correct in invoking section 7A of the TNGST Act when there was no proof to show that gold jewellery brought from other States were manufactured out of the worn-out jewellery obtained from undisclosed sources? Whether the Appellate Tribunal is correct in sustaining the levy of penalty under section 12(3)(b) of the TNGST Act in the absence of a best of judgment assessment? Held that - The very documents were produced by the assessee before the assessing authority as well as before the Appellate Assistant Commissioner as is evident from the averments in the respective orders of the assessing authority as well as appellate authority. The said fact is also found from the grounds of appeal filed by the Department before the Tribunal wherein they have clearly admitted about the receipt of the jewellery on March 17, 1998. In such circumstances, we are of the considered view that the Tribunal was not justified in setting aside the finding with regard to suppression of turnover. Accordingly, the substantial questions of law Nos. 1 and 2 are decided in favour of the assessee and against the Department. As it was evident that the assessee was liable for purchase suppression and as such the assessing authority was justified in making the assessment on the ground of such wilful suppression and the said finding was set aside by the Appellate Assistant Commissioner without any basis. In such view of the matter, we do not find any reason to disagree with the order of the Tribunal setting aside the finding with regard to the purchase omission. Accordingly, the substantial question of law Nos. 3 and 4 are decided against the assessee and in favour of the Department. As there was no sales suppression as found by the Appellate Assistant Commissioner, penalty is confirmed only to the extent of purchase omission and as indicated in the order of the assessing authority and accordingly the last substantial question of law is answered partly in favour of the assessee and partly in favour of the Department. The assessing officer is directed to re-determine the penalty as indicated above.

Summary

Issues:
1. Reversal of order by Appellate Tribunal on levy of tax on gold jewellery turnover
2. Correctness of levy of purchase tax on gold jewellery brought from other State
3. Invocation of section 7A of TNGST Act without proof on gold jewellery source
4. Sustaining penalty under section 12(3)(b) without best judgment assessment

Analysis:
1. The case involved a dispute regarding the levy of tax on alleged sales turnover of gold jewellery for the assessment year 1996-97. The Appellate Tribunal reversed the Appellate Assistant Commissioner's order and upheld the tax levy. The petitioner argued that the excess gold jewellery seized in January 1997 was returned in March 1998, making sales during the assessment year unlikely. The High Court found in favor of the assessee, stating that the Tribunal erred in setting aside the finding of sales suppression, as the jewellery was returned after the assessment year, absolving them from the offense.

2. The Appellate Assistant Commissioner reduced the purchase omission by 50% despite lack of evidence proving the jewellery was received on approval basis. The High Court disagreed with this decision, noting that statements from jewellers indicated no supply to the assessee, justifying the assessing authority's assessment based on wilful suppression. Consequently, the Court ruled against the assessee on the issue of purchase tax on gold jewellery brought from other states.

3. The Tribunal's decision to uphold the penalty under section 12(3)(b) was partially affected by the finding of no sales suppression. The High Court confirmed the penalty only to the extent of purchase omission, directing the assessing officer to re-determine the penalty accordingly. This issue was decided partly in favor of the assessee and partly in favor of the Department.

4. In conclusion, the High Court allowed the tax case in part, favoring the assessee on the sales turnover issue but ruling against them on the purchase tax and penalty matters. The judgment provided a detailed analysis of each issue raised, clarifying the legal reasoning behind the decisions made by the Appellate Assistant Commissioner, Appellate Tribunal, and the assessing authority.