2010 (3) TMI 1033 - HC - VAT and Sales Tax

Reassessment proceedings initiated for the assessment year 2002-03 under the proceedings of section 21 of the U.P. Trade Tax Act, 1948 read with section 9(2) of the Central Sales Tax Act Held that - On facts it is clear that the matter, which had been sent for verification under the remand order dated March 10, 2006, was concerned with stock transfers made to seven depots worth ₹ 63,26,28,594. Upon remand an order was passed on March 12, 2007 in which the assessing authority having verified the form F supplied by the assessee had come to the conclusion that the forms F amounting to 131 numbers were all found to be genuine and correct. The value of these forms added up to the value of ₹ 63,26,28,594. Thus, there is no doubt that the remand order dated March 10, 2006 and the order dated March 22, 2007 relate to the same transactions, which have been duly verified. Insofar as the question of the initiation of section 21 proceedings is concerned, I am of the view that the proceedings were not justified because during the pendency of the original assessment proceedings under section 7 of the Act it could not be said that any turnover had escaped assessment as contemplated by section 21 of the Act. In favour of assessee.

Summary

Issues:
Reassessment proceedings initiated under section 21 of the U.P. Trade Tax Act, 1948 read with section 9(2) of the Central Sales Tax Act for the assessment year 2002-03.

Analysis:

1. The assessee contested the reassessment proceedings initiated by the respondents under section 21 for the assessment year 2002-03. The assessee, engaged in the manufacture and sale of Indian-made Foreign Liquor (IMFL), claimed exemptions for stock transfers amounting to Rs. 63,26,28,594. The Trade Tax Tribunal remanded the case for verification of forms F related to these transfers. Subsequently, a notice under section 21 was issued, leading to a final order confirming the correctness of the forms F. The assessee argued that once forms F were verified and accepted, no further proceedings under section 21 could be initiated, citing legal precedents. The Tribunal's decision dismissing the second appeal raised questions regarding the legality of the initiation of section 21 proceedings during the pendency of the original assessment. The High Court, following legal precedent, held that the initiation of section 21 proceedings was not justified as no turnover had escaped assessment during the original proceedings.

2. The High Court examined whether the Commercial Tax Tribunal and the Joint Commissioner were justified in not adjudicating the validity of initiating section 21 proceedings, a crucial matter raised by the assessee. The Court found that the initiation of section 21 proceedings lacked justification due to the absence of any material indicating escaped turnover during the original assessment. Citing a Division Bench decision, the Court ruled in favor of the assessee, setting aside the Tribunal's order.

3. The Court further analyzed whether the Tribunal's decision to uphold the Joint Commissioner's order remanding the matter was justified. The assessee had fulfilled the requirements under section 6A of the Central Sales Tax Act by submitting verified forms F, which were not questioned for genuineness. The Court agreed with the assessee's contention that no further inquiry or investigation was warranted once the forms F were found to be genuine and correct. The Court, following legal precedents, held that the verified forms F entitled the assessee to exemptions under the Central Sales Tax Act, thereby setting aside the Tribunal's order and ruling in favor of the assessee.

4. The High Court addressed the contention raised by the learned standing counsel regarding the submission of assessment orders from different states. The counsel argued that the absence of these orders justified the initiation of section 21 proceedings. However, the Court found that the verified forms F sufficed for granting exemptions under the Central Sales Tax Act, and the absence of assessment orders did not warrant further proceedings under section 21. The Court, after considering all arguments and perusing the record, allowed the revision in favor of the assessee, setting aside the Tribunal's order.