2011 (4) TMI 1228 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Disallowance of Input-Tax Credit (ITC)
2. Levy of Tax on Unrecorded Sales
3. Levy of Purchase Tax
4. Levy of Interest
5. Imposition of Penalty

Detailed Analysis:

1. Disallowance of Input-Tax Credit (ITC):
The petitioner-company challenged the disallowance of ITC by the Sales Tax Officer, arguing that all necessary stock registers and production registers were produced. The Tribunal found that the petitioner maintained all relevant registers to ascertain purchases, sales, manufacture, and stock of goods. It was noted that the assessing officer did not prescribe any specific manner for maintaining these records in writing. The Tribunal concluded that maintenance of a stock register does not fall within the accepted principles of accountancy and that the petitioner-company complied with the requirements. Consequently, the Tribunal found no reason to disallow the ITC claimed by the petitioner.

2. Levy of Tax on Unrecorded Sales:
The Sales Tax Officer treated Rs. 51,04,220 as unrecorded local sales made to unregistered dealers. The petitioner argued that this discrepancy was due to differences in foreign currency exchange rates at the time of raising invoices and receiving payments. The Tribunal found substance in the petitioner's submission and directed the Sales Tax Officer to re-examine the documents and verify the exchange rates at the time of invoicing and payment receipt to determine the accuracy of the claim.

3. Levy of Purchase Tax:
The petitioner disputed the levy of purchase tax on goods purchased from unregistered dealers, arguing that such goods were used in the manufacturing process and should not attract purchase tax. The Tribunal examined the provisions of section 12 of the VAT Act as it prevailed at the material time and concluded that the petitioner was liable to pay purchase tax on purchases from unregistered dealers. However, the Tribunal noted that the Sales Tax Officer levied a flat rate of 12.5% without determining the tax rate for individual items. The Tribunal directed a re-calculation of the purchase tax, considering the specific tax rates for different items.

4. Levy of Interest:
Interest was levied on the tax payable under sections 16 and 17 of the VAT Act. The petitioner argued that no interest was leviable as the alleged tax liability was not admitted. The Tribunal directed that since the discrepancy in sales figures due to exchange rate differences needed re-examination, the question of interest levy should also be re-examined. However, interest on the sale of the trimming machine was upheld, subject to re-calculation based on the actual date of sale.

5. Imposition of Penalty:
The Tribunal did not interfere with the imposition of a penalty of Rs. 5,000, finding it appropriate under the circumstances.

Conclusion:
The Tribunal set aside the assessment order dated January 28, 2010, and directed a fresh assessment with specific instructions:
1. Allow the ITC disallowed by the Sales Tax Officer.
2. Re-examine the difference between the return figure and balance sheet figure.
3. Re-calculate the purchase tax considering the specific tax rates for different items.
4. Examine the entitlement of ITC on purchase tax in light of relevant provisions.
5. Re-determine the interest based on the re-examination of the sales discrepancy.
6. Complete the fresh assessment by July 31, 2011, ensuring all relevant records are produced and verified.

The petition was disposed of with no order as to costs.