2010 (9) TMI 999 - HC - VAT and Sales Tax

Whether, on the facts and circumstances of the case, the proceedings initiated against the appellant under section 18B of the Karnataka Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1979 are void ab initio in view of the fact that the goods had become part of local stock of the consignor, who is also a registered dealer under the said Act, before they were transported outside the State? Whether, on the facts and circumstances of the case, the respondent has committed an error in ignoring the submission of the appellant that the provisions of section 18B of the Karnataka Tax on Entry of Goods Act, 1979 are not applicable to the facts of the present case? Whether, on the facts and circumstances of the case, the respondent is right in rejecting the contention of the appellant that the proceedings initiated against the appellant under section 18B of the Karnataka Tax on Entry of Goods Act, 1979 is void ab initio in view of Explanation to the said section according to which hirer of the goods vehicle is presumed to be its owner and not the registered owner of the vehicle? Whether, on the facts and circumstances of the case, the respondent is erred in not appreciating the fact that for the purpose of Explanation to section 18B of the Karnataka Tax on Entry of Goods Act, 1979, consignor of the goods cannot be considered as the hirer of the goods vehicle and the said word, hirer is applicable to only a transporter who obtains goods vehicle on hire in case he does not own a goods vehicle? Whether, on the facts and circumstances of the case, the respondent is justified in drawing a presumption that the goods in question have been sold inside the State for the only reason that the transit pass has not been surrendered at the exit check-post inspite of the fact that the assessing authority of the consignor has in his assessment order passed under the provision of the Karnataka Sales Tax Act, 1957 given a finding that the very same goods as that involved in the present case have been transported out of the State of Karnataka? Held that - When once by way of rebuttable evidence, the appellant relies upon the assessment order pertaining to M/s. Vivek Petro, in the absence of the Department establishing that the consignment in question did not move outside the State, revisional authority was not justified in setting aside the orders of the appellate authority. As a matter of fact, the revisional authority did not even discuss what was the rebuttable evidence relied upon by the owner of the vehicle and whether the order of the assessing authority had reached finality or not. The learned Government Advocate is fair enough to bring to our notice that the order of assessment pertaining to M/s. Vivek Petro was the subject-matter of suo motu revision under section 21, but the revisional authority confirmed the said order of assessment of the assessing officer. When once the order of assessment of M/s. Vivek Petro has reached finality, it would not be open to the Department to say that the presumption under sub-section (3) of section 18B is still available and the same is not rebutted. In view of the above discussion and reasoning, we are of the opinion, the appeal deserves to be allowed. Appeal is allowed setting aside the order of the revisional authority dated October 23, 2008

Summary

Issues:
1. Validity of proceedings under section 18B of Karnataka Tax on Entry of Goods Act, 1979
2. Error in ignoring appellant's submission on the inapplicability of section 18B
3. Rejection of contention regarding the presumption of the hirer of goods vehicle
4. Interpretation of the term 'hirer' under section 18B
5. Justification of presumption of goods being sold within the State based on transit pass surrender

Issue 1:
The court examined the validity of proceedings under section 18B of the Karnataka Tax on Entry of Goods Act, 1979, concerning the transportation of goods by a registered dealer. The appellant, a transporter, contested the imposition of tax and penalty due to the non-surrender of a transit pass at the exit check-post. The appellate authority ruled in favor of the appellant, citing evidence of goods movement outside the State. However, the revisional authority set aside the appellate order, leading to the court's detailed analysis of the legal provisions and evidence presented.

Issue 2:
The court addressed the error in ignoring the appellant's submission on the inapplicability of section 18B to the case. The appellant argued that the consignor and consignee being the same entity ensured compliance with transit pass requirements for goods transport from Mangalore to Pondicherry. The court emphasized the need to establish the movement of goods outside the State to rebut the presumption of sale within the State, highlighting the importance of evidence and procedural compliance.

Issue 3:
Regarding the presumption of the hirer of the goods vehicle under section 18B, the court analyzed the role of the consignor in ensuring compliance with transit pass regulations. The appellant contended that the consignor's representative managed the formalities at check-posts, emphasizing the consignor's responsibility for transit pass handling. The court examined the rebuttable nature of the presumption and the burden of proof on the party contesting the tax assessment.

Issue 4:
The interpretation of the term 'hirer' under section 18B was crucial in determining the liability for tax and penalty. The court discussed the appellant's reliance on the consignor's assessment order and the Revenue's investigation into the consignor's business activities. The court highlighted the assessing authority's satisfaction with the consignor's compliance and the absence of evidence supporting the goods being sold within the State, emphasizing the importance of factual findings in tax assessments.

Issue 5:
The court evaluated the justification for presuming that goods were sold within the State based on the non-surrender of the transit pass at the exit check-post. The appellant's reliance on the consignor's accounting practices and the absence of evidence indicating internal sales supported the court's decision to allow the appeal. The court set aside the revisional authority's order, emphasizing the finality of the consignor's assessment and the need for proper evidence in tax assessments.

In conclusion, the court allowed the appeal, overturning the revisional authority's decision and ordering the refund of any recovered amounts to the appellant within a specified timeframe.