2015 (10) TMI 225 - HC - VAT and Sales Tax

Evasion of tax - Levy of penalty - Undervaluation of goods - Held that - Sales made are a bulk sale and the market is a competitive market. Merely because the sales made to the Sahara Airlines is much lower price than the price at which it is sold at the restaurant is not a ground in itself that the price is undervalued. The contract is a written contract and the amounts received are also assessable to income-tax. Both, the petitioner and the Sahara Airlines are income-tax assessees and the payments are made by cheques. In that view of the matter the view taken by the assessing authority that the sale price is undervalued and that assessing the goods at the market value is untenable. - writ petition is of the year 2007 and it is admitted coming up for hearing after almost seven years. Therefore it is inequitable at this stage to drive the petitioner to have recourse to the remedy of appeal - Impugned order is set aside - Decided in favour of assessee.

Issues:
1. Disagreement over sales rates with sales tax authorities leading to undervaluation allegations.
2. Interpretation of "sale price" under section 2(44) of the Assam Value Added Tax Act, 2003.
3. Application of section 78 of the AVATAct for undervalued goods.
4. Comparison with the decision in Delux Wines case regarding market price determination.
5. Consideration of bulk sales and competitive market in determining undervaluation.
6. Appealability of the order and maintainability of the writ petition.
7. Justification for the levy of maximum penalty.

Issue 1: Disagreement over sales rates with sales tax authorities leading to undervaluation allegations:
The petitioner had a contract with Sahara Airlines for supplying food articles, with rates finalized and incorporated in the agreement. Sales tax authorities found the rates for sales to the airliner much lower than market value, alleging undervaluation and wilful tax evasion, leading to a maximum penalty. The petitioner challenged this order through a petition.

Issue 2: Interpretation of "sale price" under section 2(44) of the Assam Value Added Tax Act, 2003:
Section 2(44) of the AVATAct defines "sale price" as the consideration paid for a sale, excluding certain costs. This definition was crucial in determining the valuation of goods sold by the petitioner to Sahara Airlines.

Issue 3: Application of section 78 of the AVATAct for undervalued goods:
Section 78 of the AVATAct empowers authorities to purchase undervalued goods after providing a hearing to the owner. This provision was cited in the context of the alleged undervaluation of goods supplied to Sahara Airlines.

Issue 4: Comparison with the decision in Delux Wines case regarding market price determination:
Reference was made to the Delux Wines case, where the court discussed assessing authorities' discretion in determining turnover based on prevailing market prices, especially in cases where fixed prices were not regulated by law.

Issue 5: Consideration of bulk sales and competitive market in determining undervaluation:
The court considered the nature of sales as bulk sales in a competitive market, emphasizing that lower prices to Sahara Airlines did not automatically imply undervaluation, especially when transactions were documented and payments made through legitimate channels.

Issue 6: Appealability of the order and maintainability of the writ petition:
The respondent argued that the order was appealable, questioning the maintainability of the writ petition. However, the court acknowledged delays in the case and the possibility of substantive justice through the writ jurisdiction.

Issue 7: Justification for the levy of maximum penalty:
In assessing the levy of the maximum penalty, the court referred to the requirement of substantial reasons, citing a previous judgment. As no substantial reasons were presented in this case, the court allowed the petition, setting aside the impugned order.

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