2015 (5) TMI 1150 - HC - VAT and Sales Tax

Re-opening of reassessment proceedings - C-Forms - The stand of the State that the petitioner firm was assessed at the rate of 2% as the petitioner firm submitted C-Form(s) in respect of interstate sale of crude soya oil, but after verification from the concerned State it was found that number of C-Forms were not issued in favor of the petitioner purchaser or the C-Form found to be not genuine and, therefore, reassessment was done and the petitioner has been assessed @ of 5% along with three times penalty of the tax. Held that - It is the duty of the petitioner to prove the bonafides on his part that he took all necessary steps to prove the validity of the C-Forms received from the purchaser. The connivance of the petitioner is clear from the act that no specific document has been annexed or has been submitted during the reassessment proceeding stating that he has inquired from the purchaser about the validity of the C-Form. As per original record, here is a huge scam in respect of C-Form submitted by the company like petitioner and similarly other situated companies who are in the business of crude soya oil, cotton seed oil and doing refinery business and due to bogus Forms / non-verified C-Form, the State of Madhya Pradesh suffered a loss of more than ₹ 200 crores. The fact that number of C-Forms were found fake as the same were not issued by the concerned department and rest of the C-Forms were not verified on the basis of verification report, we are of the view that no case to interfere with the order of reassessment and penalty, as prayed is made out - petition dismissed - decided against petitioner.

Issues Involved:
1. Validity of C-Forms submitted by the petitioner.
2. Imposition of Central Sales Tax and penalty under Section 21(2) of M.P. VAT Act, 2002, read with Section 9(2) of the Central Sales Tax Act.
3. Reassessment proceedings initiated by the respondents.
4. Genuineness of transactions and the petitioner's liability for false or forged documents.

Detailed Analysis:

1. Validity of C-Forms Submitted by the Petitioner:
The petitioner, M/s. Indian Soya Industries Ltd., submitted C-Forms for the assessment periods 2006-07, 2007-08, and 2008-09. The respondents, based on information from various state tax authorities, found discrepancies in the C-Forms. Several C-Forms were not issued by the respective departments, and there were significant differences in the amounts mentioned. The respondents verified the C-Forms and found them to be either not issued or bogus, leading to reassessment of the petitioner's tax liability.

2. Imposition of Central Sales Tax and Penalty:
The respondents imposed Central Sales Tax and a penalty under Section 21(2) of the M.P. VAT Act, 2002, read with Section 9(2) of the Central Sales Tax Act. The penalty was equal to 3.5 times the assessed tax, resulting in substantial demands against the petitioner. The reassessment was based on the verification that the C-Forms submitted were invalid, leading to the imposition of tax at a higher rate of 5% instead of the concessional rate of 2%.

3. Reassessment Proceedings:
The reassessment proceedings were initiated after the respondents received information from state tax authorities indicating that the C-Forms submitted by the petitioner were not genuine. A show cause notice was issued to the petitioner, and after providing an opportunity to respond, the reassessment order was passed. The petitioner failed to prove the validity of the C-Forms, leading to the reassessment and imposition of penalty.

4. Genuineness of Transactions and Petitioner's Liability:
The petitioner argued that the transactions were genuine and that they obtained the C-Forms in good faith from the purchasing dealers. The petitioner contended that they should not be held liable for any false or forged documents used by the purchasing dealers. However, the court found that the petitioner did not take necessary steps to verify the validity of the C-Forms and failed to provide any specific documents or evidence to prove their validity during the reassessment proceedings. The court emphasized that it was the petitioner's duty to ensure the genuineness of the C-Forms.

Conclusion:
The court dismissed the writ petitions filed by the petitioner, holding that the reassessment and imposition of penalty were justified. The court referred to a similar case, M/s. Sarvottam Vegetables Oil Refinery Pvt. Ltd. v. State of M.P. & Ors., where it was held that the petitioner would lose the benefit of the deduction claimed and was liable to pay the difference in tax. The court found no merit in the petitioner's arguments and upheld the reassessment order and penalty imposed by the respondents. The petitions were dismissed with no order as to costs.

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