2011 (1) TMI 1252 - HC - VAT and Sales Tax

Whether in the instant case, it cannot be said that the demand made by the respondent in Indian currency towards imports cannot be considered as part of purchase price due to increased payment and therefore, he set aside the order passed by the appellate authority and restored the order passed by the assessing officer? Held that - From the material on record, it is not clear, what was the purchase price on the day the order was placed. It is also not clear what is the amount paid by the bank and what is the exchange rate on the date of such payment. In the absence of that crucial material it is not possible to come to any conclusion in that regard. We see full force in the submission made by the learned Government Advocate. Therefore, it would be appropriate to set aside all these orders and remand the matter back to the assessing officer so that the appellants would be free to place all relevant materials and then the assessing officer shall pass appropriate orders after carefully going through the said material. That would meet the ends of justice. Appeal allowed by way of remand.

Summary

Issues:
Assessment of tax on the difference in amount due to currency fluctuation in an import transaction.

Analysis:
The appellant, engaged in wood business, imported timber logs from a foreign seller, leading to a difference in the amount paid due to fluctuation in the US dollar. The assessing officer insisted on taxing this difference, which the appellant contested, citing it as a currency variation, not part of the purchase price. The appellate authority agreed with the appellant, ruling that the differential amount paid was not a purchase cost but a currency fluctuation, not to be included in the taxable amount. However, the Additional Commissioner of Commercial Taxes, exercising suo motu power, reversed this decision, stating that any increase due to fluctuation must be borne by the importer, leading to the restoration of the assessing officer's order.

The appellant argued that as the payment was made by the bank through a letter of credit, any difference in price due to currency fluctuation should not be considered turnover for tax purposes. The Government Advocate contended that crucial details regarding the purchase price, actual payment, and exchange rates were not provided, necessitating a remand to the assessing officer for a thorough review based on all relevant material.

Ultimately, the High Court allowed the appeal, setting aside all previous orders and remanding the matter back to the assessing officer. This decision allows the appellant to present all necessary material to support their case, ensuring a comprehensive assessment based on complete information.