2016 (12) TMI 369 - HC - VAT and Sales Tax

Benefit of second sale exemption - Section 10 of the TNGST Act - the petitioner Agency was that they have failed to prove the movement of goods, with the details of freight paid, loading and unloading charges paid, way bill number with date, name and address of the transporters, etc. Further they have not produced any proof for the turnover for which they have claimed exemption and they refused to sign the statement including the stock reconciliation statement. The burden of proving that any transaction or any turnover of a dealer is not liable to tax lies on the dealer who is claiming exemption. Held that - the purchases effected from other companies i.e. other than SAIL have been denied the second sale exemptions. However, the Assessing Officer did not go into the merits of the assessment, but was solely carried away by the dispute with regard to the constitution of the petitioner and devoted much attention to the said contention and by over ruling the objections raised by the petitioner, confirmed the proposal in the pre-revision notice. Thus, the impugned orders are flawed for reasons that the merit of the assessments were not gone into by the Assessing Officer. So far as the constitution of the petitioner-M/s Steel Exchange House is concerned, various factual issues have been raised by the petitioner in the affidavits filed in support of the Writ Petitions which cannot be adjudicated in a Writ proceedings - the issue relating to the constitution of the erstwhile proprietary concern also requires to be considered afresh. Petition allowed by way of remand.

Issues Involved:
1. Legality of the assessment orders for the years 1999-2000 to 2003-2004.
2. Burden of proof for claiming second sale exemption.
3. Role and independence of the Assessing Officer.
4. Consideration of deviation proposals by higher authorities.
5. Validity of documents submitted by the petitioner.
6. Constitution of the petitioner firm in related cases.

Detailed Analysis:

1. Legality of the Assessment Orders:
The petitioner, a registered dealer under the Tamil Nadu General Sales Tax Act (TNGST Act) and Tamil Nadu Value Added Tax Act (TNVAT Act), challenged the assessment orders for the years 1999-2000 to 2003-2004. The orders were based on a D-3 proposal by the Enforcement Wing, alleging the petitioner failed to prove the movement of goods and produced false bills. The petitioner contended that the orders were unsustainable as they merely implemented the D-3 proposals without independent application of mind by the Assessing Officer.

2. Burden of Proof for Claiming Second Sale Exemption:
The petitioner argued that they had discharged the burden of proof under Section 10 of the TNGST Act by submitting comprehensive documents, including invoices, unloading vouchers, and declarations from suppliers like Steel Authority of India Limited (SAIL). The respondents countered that the petitioner failed to prove the physical movement of goods, which is essential for claiming second sale exemption.

3. Role and Independence of the Assessing Officer:
The court emphasized that the Assessing Officer exercises quasi-judicial functions and must act independently, without being influenced by superior authorities. The court cited several precedents, including Orient Paper Mills Ltd. v. Union of India, to highlight that instructions from higher authorities vitiate the assessment process. The court found that the impugned orders were passed mechanically, implementing the D-3 proposals without considering the petitioner's objections and documents.

4. Consideration of Deviation Proposals by Higher Authorities:
The court noted that the deviation proposals submitted by the Assessing Officer were rejected by the second respondent and the Joint Commissioner without proper consideration. The rejection was arbitrary and lacked reasoning, compelling the Assessing Officer to implement the D-3 proposals. The court held that this amounted to an abdication of the Assessing Officer's statutory duties.

5. Validity of Documents Submitted by the Petitioner:
The petitioner submitted voluminous documents to substantiate their claims, including declarations from SAIL confirming the transactions and tax payments. The court observed that these documents were not adequately considered by the Assessing Officer, who failed to provide cogent reasons for disbelieving the petitioner's transactions.

6. Constitution of the Petitioner Firm in Related Cases:
In related cases involving M/s Steel Exchange House, the court noted that the Assessing Officer focused on the constitution of the petitioner firm rather than the merits of the assessment. The court directed that the issue of the firm's constitution and the merits of the claims should be reconsidered afresh.

Conclusion:
The court allowed the writ petitions, set aside the impugned orders, and remanded the matter to the first respondent for fresh consideration. The Assessing Officer was directed to independently consider the objections and documents submitted by the petitioner, without being influenced by the D-3 proposals or the rejection of the arbitration claim. The court emphasized the need for a thorough and fair assessment process, in accordance with the law. No costs were imposed, and connected Miscellaneous Petitions were closed.

← Previous Next →