2016 (11) TMI 1194 - HC - VAT and Sales Tax

Demand - the assessee was allowed exemption to the extent of the business carried on as per the registration with the KVIC. However, it was noticed that in the garb of the said certificate, the assessee also ventured in stone business which was not as per registration - Held that - Both the appellate authorities also took into consideration the notification of the Commissioner dt.26/05/1995 which clarified that there shall be no sales tax where such entities are registered with the KVIC and therefore, the assessee was under the bonafide belief that it was competent to have advantage granted by the KVIC to promote such entities and accordingly, both the appellate authorities taking into consideration the principles of promissory estoppel allowed the same. The Tax Authorities ought to allow benefits covered by such registration/norms and should not create such technicalities in rejecting the benefits - In so far as the sale through C Form is concerned, both the appellate authorities have also expressed that if the assessee produced the necessary C Form before the AO within the stipulated period, then the claim may be reconsidered by the AO and in my view, there is nothing adverse in it because the principles of natural justice demand that opportunity was to be allowed and it has been allowed and it was for the AO to take a decision after C Form is filed. Both the appellate authorities have come to a finding of fact based on the notification and circulars and therefore, I do not find any error, illegality or perversity in the order impugned so as to call for interference by this Court, particularly when it has been decided on a finding of fact based on the material available on record - revision petition dismissed.

Summary

Issues:
1. Disallowance of exemption claimed by the assessee for venturing into a business not covered by the registration with Khadi Village Industries Commission (KVIC).
2. Application of the principle of promissory estoppel in granting exemption benefits.
3. Consideration of the claim for sales through 'C Form' and the requirement of filing necessary documentation within a specified period.
4. Challenge by the Revenue against the decisions of the Deputy Commissioner (Appeals) and the Tax Board.

Analysis:
1. The case involved the disallowance of exemption claimed by the assessee for engaging in a business not covered by the registration with KVIC. The Assessing Officer found discrepancies in the assessee's activities, specifically in stone business, not covered by the KVIC registration. Consequently, the AO disallowed the claimed benefits, leading to the imposition of tax, interest, and surcharge. The Deputy Commissioner (Appeals) later considered the principle of promissory estoppel and the notification relied upon by the assessee to support the claim. The DC(A) allowed the relief, emphasizing the need for proper documentation and compliance with the registration terms.

2. The application of promissory estoppel played a crucial role in granting exemption benefits to the assessee. Both the DC(A) and the Tax Board upheld the claim based on the principles of promissory estoppel, considering the notification and circulars supporting the assessee's position. The authorities emphasized that the benefits under the KVIC registration should not be denied based on technicalities, and the Tax Authorities were expected to honor the advantages granted by such registrations without creating unnecessary obstacles.

3. The issue of sales through 'C Form' was also addressed in the judgment. The appellate authorities allowed the claim for sales through 'C Form' on the condition that the necessary documentation should be submitted within a specified timeframe. This requirement was seen as a matter of natural justice, providing the assessee with an opportunity to substantiate their claim. The decision to reconsider the claim based on the submission of the 'C Form' was deemed fair and in line with procedural justice.

4. The Revenue challenged the decisions of the DC(A) and the Tax Board, arguing that the assessee engaged in business activities beyond the scope of the KVIC registration. However, the Court, after considering the arguments and reviewing the orders and evidence on record, found no error, illegality, or perversity in the decisions of the lower authorities. The Court concluded that the findings were based on factual evidence and upheld the decisions, dismissing the revision petition for lacking merit.