2019 (3) TMI 1715 - AT - VAT and Sales Tax

Composition scheme - suppression of sales - rejection on the ground of certain transactions were traced from the computer of appellant which were not matching with its books of accounts - HELD THAT - It is apparent that suppression of sale is the reason for the cancellation of permission of composition. However, surprisingly the order of cancelling of permission for composition was passed on 28.08.2018 though the assessment orders alleging suppression of sales were passed subsequently on 19.09.2018 - the permission for composition has been cancelled before any decision regarding the suppression of sales was taken. Considering the above stated facts and reasons such pre-judgment in a case where the permission is cancelled with retrospective effect having huge financial implication on the dealer is not fair, reasonable and legal. The permission for composition is directly related to the decision regarding liability of the appellant in assessments. The learned Officer had cancelled the permission for composition even before framing the assessment order against the appellant. We believe that the First Appellate Authority was supposed to consider all the aspects before reaching to the conclusion regarding the suppression of sales by the appellant and rejecting the present Second Appeal in case of appellant. The order of cancelling the permission for composition and the First Appeal order confirming the same are hereby quashed and set aside, lump-sum permission of appellant under Section 14D is hereby restored with effect from 01.04.2015 - appeal allowed.

Summary

Issues:
Appeal against cancellation of composition permission under GVAT Act, 2003 due to alleged suppressed sales.

Analysis:
1. The appellant challenged the order of the First Appellate Authority which confirmed the cancellation of the composition permission granted under Section 14D of the VAT Act. The cancellation was based on alleged suppressed sales traced from the appellant's computer not matching with its books of accounts.

2. The appellant, a restaurant owner, contended that it regularly filed returns and paid tax based on the composition permission. Despite a surprise visit and subsequent inspection, the State Tax Authority raised disputes regarding certain transactions not recorded in the books of accounts.

3. The appellant provided explanations and made substantial payments before any formal order was issued against it. It submitted written responses and evidence to support its claims that the alleged suppressed sales were not actual sales, contesting the proposed tax liability.

4. Following a suggestion by the State Tax Officer, the appellant cooperated by depositing additional amounts. However, the permission for composition was cancelled on grounds of suppressed sales without proper consideration of the appellant's defense.

5. The appellant argued that the cancellation of composition permission was premature and influenced by pre-judgment, affecting subsequent assessment orders and appeals. The appellant emphasized the need for a fair assessment process before canceling the composition permission.

6. The Government Representative justified the cancellation, citing assessment orders alleging suppressed sales and substantial demands raised against the appellant. The Representative argued that the appellant breached the conditions of the composition permission.

7. The Tribunal noted the sequence of events where the cancellation of composition permission preceded the assessment orders alleging suppressed sales. It deemed such pre-judgment unfair and legally questionable, especially considering the financial impact on the appellant.

8. After thorough consideration, the Tribunal allowed the Second Appeal, quashing the cancellation of composition permission and restoring the appellant's lump-sum permission under Section 14D with effect from 01.04.2015. The case was remanded for further assessment proceedings to determine the appellant's liability for the relevant period under the VAT Act.