1981 (9) TMI 301 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of Section 3-AAA regarding tax liability on goods sold to a registered dealer.
2. Arbitrariness in the determination of turnover by the revising authority.

Analysis:

Issue 1: Interpretation of Section 3-AAA
The judgment involves a dispute regarding the tax liability on goods sold to a registered dealer, specifically focusing on the sale of cotton by the assessee. The revising authority had allowed a revision in favor of the assessee based on an interpretation of Section 3-AAA. Section 3-AAA establishes a presumption rule concerning the liability to pay tax on goods sold to consumers. It states that if goods liable to tax at the point of sale to a consumer are sold to a registered dealer who does not purchase them for resale within the state or outside in the same form and condition, then it is presumed to be a sale to the consumer unless a relevant declaration is produced by the selling dealer. In this case, the sale of cotton to the assessee was in question, and the liability to pay tax was determined to rest on the Kanpur dealer, not the assessee. The judgment clarifies that the provision does not prevent a registered dealer from purchasing taxable goods and reselling them but fixes the point of liability. Therefore, the revising authority did not err in concluding that the assessee was not liable to pay tax on the turnover of cotton.

Issue 2: Arbitrariness in Determination of Turnover
The second issue raised in the judgment pertains to the arbitrariness alleged in the determination of turnover by the revising authority. The argument presented was based on discrepancies in the disclosed turnover of bullion and the subsequent determination by the authority, as well as differences in the consumption of electricity for oil turnover calculation. While the discrepancy in the turnover of bullion was acknowledged, leading to a partial revision in favor of the assessee, the judgment notes that the technical argument lacked substance. The revising authority's determination of turnover, despite minor discrepancies, was not found to be arbitrary. It was emphasized that the authority was not debarred from determining the turnover based on the available information, even if certain technicalities were not met. Therefore, the revision for the assessment year 1969-70 failed, while the other revision saw a partial allowance with an adjusted turnover for bullion.

In conclusion, the judgment addresses the issues of tax liability interpretation under Section 3-AAA and the alleged arbitrariness in turnover determination, providing a detailed analysis of the legal principles and factual considerations leading to the decisions rendered by the court.