2017 (6) TMI 29 - HC - VAT and Sales Tax

Whether in the facts and circumstances of this case the sale was exempted under section 6(2) of the Central Sales Tax Act, 1956 being an inter state sales under Section 3(b) of the said act? - Held that - The mere mention of the appellant i.e. the purchaser in that sale as belonging to Ahmedabad does not establish an inter-state sale. However, the invoice must be read with the lorry receipt. The LR refers to the lorry/truck number, the date of the transaction and indicates that the goods were to be transported from Rajasthan to Punjab. The sale, therefore, was in the course of inter-state trade or commerce. Whether the subsequent sale, namely, the sale between the appellant and M/s S.T.Cottex Exports Pvt. Ltd. conforms to the type of second sale referred to in Section 6(2)? - Held that - The subsequent sale referred to in section 6(2) must be a sale during the movement of the goods effected by the transfer of documents of title to such goods to a registered dealer. In other words the subsequent sale must be during such movement i.e. movement caused by the first sale and must be effected by the transfer of documents of title to such goods to a registered dealer. It is not sufficient if the subsequent sale is effected by transfer of documents of title to such goods. It is also necessary that this second sale must be subsequent to the first sale and the subsequent sale must be during the movement of the goods under the first sale. It is true that no tax is payable in respect of these transactions under the Punjab Vat Act. However, the mis-declaration in respect of the consignment would invite the penalty under Section 51(7)(b) nevertheless. Section 51(7)(b) would come into operation, if it is found that there has been an attempt to avoid or evade the tax due or likely to be due under this Act . It is necessary to to remand the matter even to avoid the liability under section 51(7)(b) of the Punjab Value Added Tax Act, 2005 on the ground that in any event there was no intention to avoid or evade the tax. Appeal allowed by way of remand.

Summary

Issues Involved:
1. Exemption of sale under Section 6(2) of the Central Sales Tax Act, 1956.
2. Justification of the Tribunal's decision on the attempt to evade tax.
3. Questioning the nature of the transaction under Section 51(7) of the Punjab Value Added Tax Act, 2005.

Issue-wise Detailed Analysis:

1. Exemption of Sale under Section 6(2) of the Central Sales Tax Act, 1956:
The appellants argued that the sale was exempt under Section 6(2) of the Central Sales Tax Act, 1956, as it was an inter-state sale under Section 3(b). The appellants purchased 90 bales of cotton from M/s Nav Durga Industries and resold them to M/s S.T. Cottex Exports Pvt. Ltd., claiming it was an "E-1 sale against 'C' Form." The consignment was checked in Punjab, and the Excise and Taxation Officer suspected it was not a genuine E-1 sale. The Assistant Excise and Taxation Commissioner (AETC) imposed a penalty, which was upheld by the Deputy Excise and Taxation Commissioner (DETC) and the Tribunal. The court examined Sections 3 and 6(2) of the Central Sales Tax Act, noting that the first sale must occasion the movement of goods from one state to another, and the subsequent sale must occur during such movement. The court found that the facts did not clearly establish compliance with Section 6(2), warranting a remand for further evidence.

2. Justification of the Tribunal's Decision on the Attempt to Evade Tax:
The appellants contended that the Tribunal erred in holding that there was an attempt to evade tax. The court noted that the Tribunal upheld the DETC's remand order, allowing the appellants to present further evidence. The court presumed in favor of the appellants that there were two sales but emphasized that both sales must conform to Section 6(2) requirements. The court found that the sale between M/s Nav Durga Industries and the appellants occasioned the movement of goods from Rajasthan to Punjab, but the subsequent sale's timing and nature were disputable. The court concluded that the remand was justified to protect the appellants' rights and allow them to establish their case.

3. Questioning the Nature of the Transaction under Section 51(7) of the Punjab Value Added Tax Act, 2005:
The appellants argued that the nature of the transaction could not be questioned under Section 51(7) of the Punjab Value Added Tax Act, 2005. The court noted that Section 51(7)(b) allows imposing a penalty if there is an attempt to avoid or evade tax due or likely to be due under the Act. The court emphasized that the mis-declaration of the consignment could invite a penalty under Section 51(7)(b), even if no tax was payable under the Punjab VAT Act. The court highlighted that the section is preventive, aiming to avoid tax evasion. The court found that the remand was necessary to determine whether there was an intention to avoid or evade tax and to allow the appellants to argue against the penalty under Section 51(7)(b).

Conclusion:
The court upheld the Tribunal's decision to remand the matter to the Assistant Excise and Taxation Commissioner for further examination of the facts and evidence. The court emphasized that the remand protected the appellants' rights and allowed them to establish their case, including the nature and timing of the transactions. The court also noted that the appellants could argue against the penalty under Section 51(7)(b) of the Punjab VAT Act upon remand. The appeal was disposed of, and the question of law was answered in favor of the respondent.