2010 (8) TMI 858 - HC - VAT and Sales Tax

Disallowance of the exemption given on transit sales - Held that - The impugned orders are liable to be quashed however with liberty given to the Revenue to proceed against the purchaser-dealer for any contravention in the manner known to law.

Summary

Issues:
Challenge to reassessment orders disallowing exemption on transit sales.

Analysis:
The petitioner, a registered dealer in papers and boards, filed writ petitions to quash reassessment orders disallowing exemption on transit sales for the assessment years 2001-02 and 2003-04. The assessing authority initially allowed the exemption based on E1 and C forms obtained from the seller and purchaser. However, the authority later disallowed the exemption, alleging the C form from the purchaser was false. The petitioner contended that they were not responsible for false documents produced by the purchaser and argued that the exemption should not be disallowed for genuine transactions. The assessing and appellate authorities upheld the disallowance, citing the false C form. The petitioner challenged these decisions, emphasizing they had no control over the purchaser's actions post-transaction.

The court noted that the petitioner was granted concession based on genuine documents provided by both parties. The disallowance of exemption due to the purchaser's alleged fraud, without evidence of petitioner's involvement, was deemed unjust. Reference was made to previous court orders emphasizing that sellers are not obligated to verify the authenticity of forms like C form post-transaction. The court highlighted the seller's entitlement to the benefit of concessional tax rates if acting in good faith on the buyer's representations. The court set aside the reassessment orders and additional tax demands, directing the Revenue to take action against the purchaser for any legal violations.

In conclusion, the court allowed the writ petitions, quashing the impugned orders and closing the connected petitions without costs. The judgment reiterated that sellers cannot be penalized for buyers' false declarations post-transaction, emphasizing the need for Revenue to pursue action against the purchaser for any legal breaches.