2014 (9) TMI 1258 - HC - VAT and Sales Tax

Fixation and estimation of turn over of purchase and sale of rice - levy of tax on purchase as well as on the alleged sale of rice without any observation for giving benefit of Section 13 of the Act - HELD THAT - The turnover of purchase so fixed comes to about 2.5 times of the amount mentioned in the loose parcha which is proportionate to the period for which the business has been done by the applicant. Thus, there is no substance in the submissions of the learned counsel for the applicant, that the purchase turn over determined by the authorities is excessive - As per Section 4 of the Act, the tax is payable on the taxable turnover of sale of goods under the Act. Rice is a commodity which is specified in Entry-52 of Part-A of Schedule-II of the Act, and is liable to tax at the rate of 4%. Section 13 of the Act, provides that a credit of the amount as input tax credit to the extent of full amount of tax on purchases shall be allowed, if the purchased goods are resold. Since, the turnover of purchase and sale in respect of the same rice has been determined and as such if the applicant first deposits the amount of tax determined on purchases of goods then in that event, an input tax credit may be allowed to him against the liability to tax on the sale turnover of such rice. This credit shall be available to the applicant as per provisions of Section 13 read with Section 2(p) of the Act. This revision is partly allowed - the matter is remanded back to the assessing authority to recompute the amount of tax and raise a fresh demand against the applicant.

Summary

Issues:
1. Justification of fixation and estimation of turnover of purchase and sale of rice by the Tribunal.
2. Levying tax on purchase and sale of rice without considering the benefit of Section 13 of the Act.

Analysis:
1. The applicant argued that the loose parcha found at the business premises, containing details of rice purchase, did not belong to him as he deals in exempt Murmure, not rice. The applicant challenged the imposition of tax based on this loose parcha. The Standing Counsel contended that the applicant failed to rebut the presumption that the loose parcha belonged to him, justifying the determination of evaded rice purchases. The authorities, including the Tribunal, upheld this finding, considering the turnover of purchase proportionate to the business period.

2. The Court noted that rice falls under taxable goods and is subject to a 4% tax rate. Section 13 of the Act allows input tax credit on purchased goods if resold. The Court directed the applicant to deposit the determined tax on rice purchases to avail input tax credit on the subsequent sale of rice. The Court partially allowed the revision, answering the first issue in favor of the revenue and the second issue in favor of the assessee, directing the reassessment of tax considering the input tax credit.

Conclusion:
The Court upheld the determination of evaded rice purchases based on the loose parcha, finding the turnover proportionate to the business period. It directed the applicant to pay the tax on purchases to claim input tax credit on subsequent rice sales. The matter was remanded to the assessing authority for reassessment in light of the Court's observations, partially allowing the revision.