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2010 (2) TMI 1102 - HC - VAT and Sales TaxWhether the Appel late Tribunal was right in holding that the authorities were not justified in forfeiting the tax amount under section 18AA of the KST Act in the absence of the dealer not establishing the passing of the burden of tax to the customers? Whether, in the facts and circumstances of the case, the sale price includes the tax element warranting the forfeiture of tax collected? Whether, in the facts and circumstances of the case, the Appel late Tribunal was justified in not following the law declared by the apex court in Mafatlal s case reported in 1996 (12) TMI 50 - SUPREME COURT OF INDIA ? Held that - Before an order of forfeiture can be made under section 18AA of the Act, it is necessary to have material to show that there has been unjust enrich ment or circumstances which are relevant for making an order of forfeiture should be clear and such material has to be on record before the concerned authority. In the face of the aforesaid opinion expressed by the Deputy Commissioner of Commercial Taxes, wherein the said authority is not sure as to whether sales tax was collected at all by the assessee and as to whether sale bills were inclusive of admissible tax, he could not have concluded that the assessee had an unjust enrichment and therefore order for forfeiture. In our view, the same cannot be held to be just and proper as the said order is based on mere surmises and conjectures. Thus it is just and proper to remand the entire matter to the assessing officer reserving liberty to the respondent to furnish all relevant materials before the assessing officer so that on consideration of the same, appropriate order can be passed under section 18AA of the Act in accordance with law.
Issues:
Challenge to order passed by Karnataka Appellate Tribunal regarding forfeiture of tax paid by the respondent under section 18AA of the KST Act. Analysis: The State challenged the Tribunal's decision to set aside the order forfeiting tax paid by the respondent on gutka sales. The State argued that the apex court's ruling in Kothari Products Ltd. case came after the assessments were finalized, justifying the forfeiture under section 18AA. The State contended that the Tribunal's decision resulted in revenue loss. On the contrary, the respondent's counsel argued that the State had no authority to levy tax on gutka, and the respondent had deposited the tax amount out of profits, thus entitled to a refund. The respondent claimed that the assessing authority and appellate authority were unjustified in passing the forfeiture order under section 18AA. The High Court examined the facts and found that no sales tax on gutka was collected by the respondent for the relevant years. Despite this, the respondent deposited tax amount due to Department's action. Following the apex court's decision, it was clear the State had no right to levy tax on gutka. The assessing authority's forfeiture order was based on the assumption of unjust enrichment, without concrete evidence. The Court held that the order lacked proper basis and was speculative, as there was no proof of tax collection by the respondent or entitlement to a refund. The Court emphasized the necessity of concrete evidence before passing an order of forfeiture under section 18AA. It noted the Deputy Commissioner's uncertainty regarding tax collection by the assessee, making the forfeiture order unjustified. The Tribunal's decision to order a refund lacked supporting material, leading the Court to remand the matter to the assessing officer. The Court allowed the respondent to provide relevant evidence for a lawful decision under section 18AA, without directly addressing the legal questions raised in the revision petition. In conclusion, the High Court remanded the case to the assessing officer for a proper decision based on concrete evidence, allowing the respondent to present relevant materials. The Court's decision focused on the lack of substantiated grounds for the forfeiture order and emphasized the importance of factual evidence in such matters.
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