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2012 (2) TMI 457 - HC - VAT and Sales TaxWhether in the facts and circumstances, the Tribunal is right in holding that there is no under invoicing under section 12A of the Tamil Nadu General Sales Tax Act in respect of sales made to the sister concern of the assessee? Held that - We are not inclined to remit the matters and we hold, on the given facts and circumstances of the case, the application of section 12A read with rule 18C is not justified and the Tribunal is right in setting aside both the orders, accepting the case of the assessee. The substantial question raised in the revisions is answered in the negative, i.e., against the Revenue and in favour of the assessee.
Issues Involved:
1. Whether the Tribunal is right in holding that there is no under-invoicing under section 12A of the Tamil Nadu General Sales Tax Act in respect of sales made to the sister concern of the assessee? Detailed Analysis: Issue 1: Under-invoicing under Section 12A of the Tamil Nadu General Sales Tax Act The Revenue questioned the Income-tax Appellate Tribunal's order regarding the assessment years 1993-94 and 1994-95, focusing on whether there was under-invoicing in sales to the assessee's sister concern. The respondent-assessee, a dealer in suitcases and briefcases, reported turnovers of Rs. 1,61,49,148 and Rs. 1,94,78,389 for the respective years. Upon inspection, it was found that all sales were made to their sister concern, Tvl. Safari Sales Limited, and discrepancies were noted between the first sale by the manufacturer and the second sale by the marketer. The assessing officer, after deducting various elements, found a difference exceeding 15% between the first and second sale prices and issued a notice to the assessee. Unsatisfied with the objections, the officer assessed additional tax dues. The Appellate Assistant Commissioner confirmed this, but the Sales Tax Appellate Tribunal allowed the appeals, holding that section 12A read with rule 18C was not applicable. Legal Provisions and Interpretation Section 12A allows assessment if a dealer shows sales at abnormally low prices to evade tax, requiring the assessing authority to make an enquiry and provide the dealer an opportunity to show cause. Rule 18C outlines factors for determining prevailing market prices and mandates examining reasons for price variations, including relationships between parties and additional costs incurred by subsequent sellers. The court referred to the case of Jayalakshmi Traders v. Government of Tamil Nadu, which clarified that section 12A is a machinery provision intended to verify the accuracy of returns and prevent tax evasion by comparing declared prices with market prices. The provision does not interfere with the sale transaction but ensures true and bona fide price representation. Compliance with Section 12A and Rule 18C The court noted that the assessing officer did not fully comply with section 12A and rule 18C. The officer acknowledged the inability to compare products due to differences in quality, size, and pattern, and failed to consider the assessee's objections regarding sales to other entities at similar prices. The Tribunal rightly held that without proper assessment, the orders of the assessing officer and the Appellate Assistant Commissioner could not be sustained. Tribunal's Decision and Court's Conclusion The Tribunal allowed the appeals without remitting the matters for further consideration, given the specific objections raised by the assessee that were not addressed by the assessing officer. The court agreed, emphasizing that the provisions of rule 18C were not strictly followed, and thus, section 12A could not be applied. The court also referenced the Madhya Pradesh High Court's decision in Narbada Ice Factory v. Commissioner of Sales Tax, which held that non-compliance with similar provisions invalidated the assessment. Final Judgment The court concluded that the Tribunal was correct in setting aside the orders of the assessing officer and the Appellate Assistant Commissioner. The substantial question of law was answered in favor of the assessee, and both tax case revisions were dismissed without costs.
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