2014 (9) TMI 1162 - HC - VAT and Sales Tax

Reassessment of tax - year 2007-08 - evaded/unaccounted turn over - Held that - From a perusal of the order of the Tribunal what emerges is that the Tribunal had arrived at a wholly new finding of fact which has absolutely no foundation and therefore the Tribunal was clearly in error in treating the value of evaded/unaccounted turn over at ₹ 25,00,000/- - The order of the Tribunal is wholly illegal and without jurisdiction and is accordingly quashed - Revision allowed.

Summary

Issues:
1. Assessment of tax (central) under U.P. Trade Tax Act, 1948 for the year 2007-08.
2. Disputed turnover of menthol and imposition of tax at 10%.
3. Appeal process from assessing authority to Commercial Tax Tribunal.
4. Jurisdiction of Tribunal to enhance turnover value without foundation.
5. Application of relevant case laws to challenge Tribunal's decision.

Detailed Analysis:
1. The revision was filed under Section 11 of the U.P. Trade Tax Act, 1948 for assessing central tax for the year 2007-08 against the Commercial Tax Tribunal's order dated 5.6.2014. The case involved a registered dealer under the Central Sales Tax Act dealing with menthol supply, where the assessing authority imposed tax at 10% based on best judgment assessment, rejecting the cancellation claim of a menthol supply order amounting to Rs. 15,00,000. The issue focused on the treatment of menthol supply as inter State sale and central sale, resulting in disputed turnover and tax imposition.

2. The assessing authority disallowed the turnover of 2,500 kg of menthol worth Rs. 15,00,000 as inter State sale, which was returned by the buyer, leading to the imposition of tax. The revisionist challenged this decision through the appeal process, with the Tribunal eventually assessing unaccounted menthol value at Rs. 25,00,000 for central sale. However, the Tribunal's basis for arriving at this value was not adequately explained in the order, raising concerns about the justification for imposing additional tax at 10%.

3. The Tribunal's decision to enhance the turnover value without a clear foundation and proper explanation raised jurisdictional issues. The revisionist argued that the Tribunal exceeded its authority by increasing the turnover value when the matter was not raised by the Revenue in previous stages of appeal. The revisionist cited relevant case laws to support the argument that the Tribunal's jurisdiction was limited to issues raised before the lower authorities, emphasizing the need for a valid foundation to enhance turnover values.

4. The judgments referenced highlighted the importance of maintaining jurisdictional boundaries in tax assessment appeals, emphasizing that Tribunals cannot arbitrarily enhance turnover values without a proper basis or without the issue being in dispute before the lower authorities. The cases cited underscored the need for adherence to procedural fairness and the limitation of Tribunal's powers to prevent unjustified tax impositions.

5. Ultimately, the High Court quashed the Tribunal's order, deeming it illegal and without jurisdiction due to the lack of a valid foundation for enhancing the turnover value. The Court upheld the finality of the assessing authority's decision regarding the disputed menthol turnover, emphasizing the importance of procedural fairness and adherence to legal principles in tax assessment appeals.