2009 (10) TMI 874 - HC - VAT and Sales Tax

Reassessment orders - Whether the rate of tax originally charged was proper and as the declarations were supplied to him by the purchasing dealer, he was obliged to accept the said declarations? Held that - In the present case, undisputedly the goods were supplied by the petitioner and he had charged the concessional rate of tax in view of the declaration supplied by the purchasing dealer. If that be so then the original assessment made by the assessing authority was absolutely justified and the assessment could not be reopened on the basis of an audit objection. The approach of the authority that particular items are not included in the entry, therefore, the concessional rate would not be applicable, could not be used as a handle against the petitioner for reopening of the assessment. For the reasons aforesaid, we are of the opinion that the orders of reassessment passed by the assessing officer and confirmed by the revisional authority are bad. The said orders deserve to be and are accordingly quashed.

Summary

Issues:
Challenge to reassessment order under Commercial Tax Act for the period between 2000-01, challenge to revisional order for the same period, challenge to coercive recovery proceedings under M.P. Land Revenue Code, 1959.

Analysis:
The petitioner, a supplier of transformers and spare parts, challenged a reassessment order dated November 28, 2005, passed under section 28(1) of the Commercial Tax Act for the period between 2000-01. The petitioner contended that the tax was paid at a concessional rate as per declarations furnished by the Madhya Pradesh Electricity Board, which invited tenders for supply of transformers. The assessment order initially accepted the concessional rate, but an audit objection led to the case being reopened. The petitioner argued that he was obliged to accept the declarations provided by the Board and challenged the subsequent revision petition which directed him to pay tax at a higher rate.

The crux of the issue revolved around the interpretation of section 9 of the Commercial Tax Act, which governs the levy of tax and application of concessional rates. The petitioner argued that once the purchasing dealer furnishes a declaration in form No. 32, the selling dealer is obligated to accept it, and the liability to pay tax rests with the purchasing dealer if the declaration is found to be incorrect. The government advocate, on the other hand, contended that the selling dealer must verify the validity of the declaration to avoid tax liability.

Referring to the case law of Chunni Lal Parshadi Lal v. Commissioner of Sales Tax, the court held that a declaration issued by the purchasing dealer provides an irrebuttable presumption for the selling dealer. The court emphasized that the taxing authority cannot go beyond the declaration in form No. 32 and cannot question its correctness or truthfulness. It was established that the liability to pay tax shifts to the purchasing dealer if the goods are not used for the specified purpose, as per section 21 of the Act.

The court also analyzed rule 67, which mandates selling dealers to accept declarations furnished by purchasing dealers without refusal. The responsibility to issue a certificate in accordance with the Act, Rules, or notifications lies with the purchasing dealer, not the selling dealer. The court concluded that the original assessment made by the authority based on declarations provided by the purchasing dealer was justified, and the reassessment orders were quashed. The writ petition was allowed with no costs awarded.