2014 (9) TMI 465 - HC - VAT and Sales Tax

Imposition of penalty - inter-state sale of DEPB licences - fraud - Whether in the facts and circumstances of present case the Haryana Tax Tribunal Chandigarh has correctly passed the present order by holding that the impugned transaction is an inter-State sale when the Department has failed to show movement of goods from one State to another - Held that - The plea of the appellant that there is no supporting evidence to disbelieve and reject the registered dealer local sales allegedly made by the appellant and to turn those sales to inter-State sales is again a misnomer. Not only the Assessing Officer during reassessment proceedings but even the first and the second appellate authorities have meticulously evaluated the entire facts and have come to a firm conclusion that sales of the DEPB licences made by the appellant during both assessment years i.e. 2000-01 and 2001-02 are in fact inter-State sales notwithstanding colour of RD sales having been given to such sales by the appellant. Even when reappraisal of the facts available on the paper book is made result is no different. On August 1 2000 a demand of 39, 017 was raised vide debit note by M/s. Anuj Jain and Sons (HUF) Delhi on M/s. Samsung Electronics India Ltd. Noida on account of service charges for arranging transfer of first four licences in the table as above. When the information given in the tabular form as above is evaluated in this context it transpires that value of these four licences was 1, 30, 35, 637. Commission of M/s. Anuj Jain and Sons Delhi in the shape of service charges turns out to be 0.30 per cent. It is thus clear that the service provider charged service charges for transfer of first four DEPB licences. So far as other two licences sold to M/s. Laxmi Enterprises Delhi are concerned no particulars of service provider were supplied by the appellant. appellant had not shown any sale having been made by it to those parties from whom it had received these payments. Conversely no payment had been received from the dealers to whom the sales of licences were alleged to have been made by the appellant - On perusal of the paper book it becomes apparent that these sales were made by the appellant in fact directly to M/s. Samsung Electronics India Ltd. Noida and M/s. Laxmi Enterprises Delhi in assessment year 200001 and to M/s. Honda Siel Cars India Limited Noida in the assessment year 2001-02 and the purchasers shown in the original assessment order viz. M/s. Krishna Enterprises for the assessment year 2000-01 and M/s. Sai Industries for the assessment year 2001-02 in fact were only names of traders which names were used as camouflage and subterfuge. All the circumstances including the transactions conducted through banking channels reveal that the payments were made direct to the appellant by M/s. Samsung Electronics India Ltd. Noida and M/s. Laxmi Enterprises Delhi (for the assessment year 2000-01) and M/s. Honda Siel Cars India Limited Noida (for the assessment year 2001-02) who were located outside the State of Haryana. It is further clear that intermediaries viz. M/s. Krishna Enterprises and M/s. Sai Industries for the year 2000-01 and 2001-02 respectively had been interpolated by the appellant merely as masks to cover up direct sales made by it with dealers outside the State of Haryana. It may be pointedly noticed that during the reassessment proceedings the Assessing Officer had found large scale fraud by the appellant. Nonetheless he confined himself to institution of penalty proceedings in terms of section 8 of the State Act and section 9(2) of the Central Act. When the entire factual matrix with attending circumstances unfolds itself it turns out to be a case of cheating right from the very beginning in which the appellant had clearly contrived and confabulated with M/s. Samsung Electronics India Ltd. Noida and M/s. Laxmi Enterprises Delhi as also with M/s. Honda Siel Cars India Limited Noida to give colour of registered dealer sales to the inter-State sales by using names of M/s. Krishna Enterprises and M/s. Sai Industries Faridabad as a subterfuge in defrauding and cheating the revenue. It is also clear that documents such as debit notes and ST-15 forms were contrived as valuable securities when these documents in fact were not even backed by the transactions which these documents projected to be representing. Thus it is a case of forging of documents to represent non-existent fraudulent transactions whereas actual transactions were different and distinct from these purported sales and in fact had nowhere been depicted in such documents. Decided against assessee.

Summary

Issues Involved:
1. Whether the order passed by the Haryana Tax Tribunal is erroneous and unsustainable in law and fact.
2. Whether the Tribunal's order is based on perverse and erroneous legal reasoning.
3. Whether the Tribunal ignored principles of natural justice.
4. Whether the Tribunal relied on findings from the previous assessment year without considering the current year.
5. Whether the impugned transaction is an inter-State sale under section 3 of the Central Sales Tax Act.
6. Whether the Department failed to show movement of goods from one State to another.
7. Whether the Tribunal ignored documentary evidence indicating transfer of DEPB licenses.
8. Whether there was a violation of natural justice in the Tribunal's proceedings.
9. Whether the Tribunal was justified in upholding the order of the Joint Commissioner without reasons.

Detailed Analysis:

1. Erroneous and Unsustainable Tribunal Order:
The appellant contended that the Tribunal's order was erroneous and unjust. The court found that the reassessment orders for 2000-01 and 2001-02 were based on verified data showing that the sales of DEPB licenses were inter-State sales, not local sales as claimed by the appellant. The Tribunal's order was upheld as it was based on substantial evidence.

2. Perverse and Erroneous Legal Reasoning:
The appellant argued that the Tribunal's legal reasoning was flawed. The court noted that the Tribunal had meticulously evaluated the entire facts and concluded that the sales were inter-State. The Tribunal's reasoning was found to be sound and based on a thorough examination of the evidence.

3. Ignoring Principles of Natural Justice:
The appellant claimed that the Tribunal ignored principles of natural justice. However, the court found that the appellant was associated with the reassessment proceedings and had the opportunity to present information. The Tribunal did not violate natural justice principles.

4. Reliance on Previous Assessment Year:
The appellant argued that the Tribunal relied on findings from the previous assessment year without considering the current year. The court found that the Tribunal had considered all relevant facts and circumstances for both assessment years and had rightly concluded that the sales were inter-State.

5. Inter-State Sale under Section 3 of the Central Sales Tax Act:
The appellant contended that the transactions did not satisfy the conditions of an inter-State sale under section 3 of the Central Sales Tax Act. The court found that the sales were indeed inter-State, as payments were received from entities outside Haryana, and the local dealers were used as a facade.

6. Movement of Goods from One State to Another:
The appellant argued that the Department failed to show movement of goods from one State to another. The court found that the payments received by the appellant from entities outside Haryana clearly indicated inter-State transactions.

7. Ignoring Documentary Evidence:
The appellant claimed that the Tribunal ignored documentary evidence indicating the transfer of DEPB licenses. The court found that the documents presented by the appellant were fraudulent and created to mask the actual inter-State sales.

8. Violation of Natural Justice:
The appellant argued that there was a violation of natural justice as the Joint Commissioner did not record reasons in the order. The court found that the appellant was given ample opportunity to present its case during the reassessment proceedings, and there was no violation of natural justice.

9. Justification of Tribunal's Order:
The appellant contended that the Tribunal was unjustified in upholding the Joint Commissioner's order without reasons. The court found that the Tribunal's order was based on a thorough evaluation of facts and evidence, and the Joint Commissioner's order was rightly upheld.

Conclusion:
The court dismissed all four appeals, upholding the Tribunal's order. The court emphasized that the appellant had engaged in fraudulent transactions to avoid tax and had used local dealers as a cover for inter-State sales. The court suggested that the taxation authorities consider penal action against such fraudulent activities to maintain trust and compliance with tax laws.