2014 (4) TMI 329 - HC - VAT and Sales Tax

Levy of sales tax turnover - shame transactions for obtaining loan from bank - Whether Tribunal was justified in ignoring the evidences to show that there was no sale Held that - The Revenue does not dispute the fact that there is a charge sheet filed by the CBI authorities as against the Indian Bank in granting loans or offering discounting on sham documents - yet the Tribunal rejected the assessee s case on the ground that no reliance could be placed on the charge sheet to decide whether there was sale transaction or not Thus, with the proceedings still pending before the Criminal Court on the allegation of fictitious loan transaction dealt with by the Bank and one of the parties being the assessee, no hesitation in setting aside the order passed by the Tribunal insofar as the appeals filed by the assessee are concerned. In the case of one of the group concern relating to a similar transaction, the Sales Tax Appellate Tribunal noted that in the proceedings initiated by the Central Bureau of Investigation against Indian Bank Authority, in the charge sheet filed it was stated that there was no genuine transaction in all these cases and no goods as per LC documents were actually procured/supplied/transported. Based on the proceedings thus taken, the Tribunal held that there was no real business transaction and the entire transaction was false and forged. Thus, the asessement in that case was set aside. There is no justification to draw a different conclusion as far as the present case is concerned. Accordingly, all the Tax Case (Revisions) stand allowed and the order of the Sales Tax Appellate Tribunal is set aside. - Decided in favor of assessee.

Summary

Issues:
Assessment of sales tax based on suppressed sale transactions; Burden of proof on the assessee to establish no sale occurred; Validity of invoices for bill discounting purposes; Consideration of evidence by the Appellate Tribunal; Conformity of penalty imposed without considering factual aspects.

Analysis:
The High Court of Madras reviewed a case involving the assessment years 1991-92, 1992-93, and 1993-94, where the assessee, a dealer in cine raw films, contested the imposition of sales tax on transactions deemed as suppressed sales. The assessee argued that the bills in question were raised solely for bill discounting purposes and did not involve actual sale transactions. The Revenue claimed the assessee had purchased raw films from various entities, asserting the existence of sales. The First Appellate Authority found no concrete evidence of sales, highlighting technical defects in the Revenue's case and emphasizing the lack of material linking the transactions to concluded sales, leading to the assessments being set aside.

Upon appeal, the Sales Tax Appellate Tribunal upheld the assessment, shifting the burden of proof to the assessee to establish the non-sales nature of the transactions. The Tribunal disregarded intrinsic evidence supporting the sales tax liability, leading to the rejection of the assessee's claim and sustaining the assessment. The Tribunal also dismissed the relevance of a charge sheet filed by CBI authorities regarding transactions with a bank, stating it was unsound to rely on it for assessing the transactions.

The High Court scrutinized the case, considering confirmation letters from Indian Bank and suppliers, affirming the bill discounting nature of the transactions. The Court noted the absence of raw films during inspection, affidavits from suppliers, and ongoing criminal proceedings related to the transactions. The Court found merit in the assessee's contentions, criticizing the Tribunal's failure to address these crucial aspects and setting aside the Tribunal's order. Reference to a similar case where the Tribunal nullified assessments under comparable circumstances further supported the Court's decision to allow the Tax Case Revisions and overturn the Tribunal's order, without imposing costs.