2017 (8) TMI 141 - HC - VAT and Sales Tax

Stock transfer of inter-state sale - The specific case of the petitioner is that the goods which are in semi finished condition are stock transferred to their branch factory at Haryana where local purchases are made and the product is made into finished product and sold to the customers in Haryana who are three automobile giants in India - The allegation against the petitioner is that purchase orders are placed by the purchasers in Haryana, the entire manufacturing activities are carried out in Coimbatore transferred to Haryana where there is no manufacturing done and the goods are sold in Haryana and it is not a case of stock transfer but a case of interstate sale and the State of Tamil Nadu is eligible to tax the transaction. Held that - mere mentioning of the words that the particulars were incorrect or untrue is not sufficient and what is required to be done is to conduct an enquiry and unless details are found to be writ with fraud, misrepresentation or collusion or suppression of material facts, on a mere change of opinion, the findings could not be disturbed under Section 16 of the Act. The Appellate Authority applying the legal position in the case of Ashok Leyland Limited 2004 (1) TMI 365 - SUPREME COURT OF INDIA held that re-assessments were illegal and without jurisdiction. The Appellate Authority made an observation that there is a need to re-look at the contents of Form F and the provisions of Section 6(A)(2) of the CST Act, especially in view of the interpretation placed by the Hon ble Supreme Court in the case of Ashok Leyland Limited. This has led to the incorporation of sub-section (3) in Section 6(A) of the CST Act. However, the impugned assessments are much prior to the said amendment. The impugned re-assessment proceedings are without jurisdiction. In the light of the said conclusion, it is not necessary for any other exercise much less a fact finding exercise - petition allowed - decided in favor of petitioner.

Summary

Issues Involved:
1. Validity of the reassessment orders dated 05.03.2004.
2. Compliance with the Central Sales Tax Act (CST Act) and Tamil Nadu General Sales Tax Act (TNGST Act).
3. Legitimacy of stock transfer claims and Form F declarations.
4. Allegations of interstate sales versus stock transfer.
5. Jurisdiction and authority to reopen assessments.

Issue-wise Detailed Analysis:

1. Validity of the Reassessment Orders:
The petitioner challenged the reassessment orders dated 05.03.2004, which disallowed the exemption previously granted on the turnover relating to stock transfers. The court found that the reassessment orders were without jurisdiction, citing the decision of the Hon'ble Supreme Court in Ashok Leyland Limited vs. State of Tamil Nadu, which held that once Form F declarations are accepted and orders passed, they are conclusive and cannot be reopened except on grounds of fraud, misrepresentation, or collusion.

2. Compliance with the CST Act and TNGST Act:
The petitioner, a manufacturer of dashboard instruments, claimed compliance with the CST Act and TNGST Act by filing returns and Form F declarations for the assessment years 1995-96 and 1996-97. The court noted that the initial assessment orders accepted these declarations, and the petitioner had paid applicable taxes in Haryana. The reassessment was based on an inspection and subsequent recovery of slips, which the petitioner argued had no nexus with the assessment orders in question.

3. Legitimacy of Stock Transfer Claims and Form F Declarations:
The petitioner argued that the goods transferred from Coimbatore to Haryana were semi-finished and further processed in Haryana before being sold. The court emphasized that once Form F declarations are accepted, they are conclusive unless there is evidence of fraud, misrepresentation, or collusion. The court found no such allegations against the petitioner and noted that the Haryana authorities had verified and accepted the stock transfers.

4. Allegations of Interstate Sales versus Stock Transfer:
The respondents alleged that the transactions were interstate sales camouflaged as stock transfers, based on purchase orders and the nature of goods moved from Coimbatore to Haryana. The court, however, found that the initial assessments and subsequent verifications by Haryana authorities supported the petitioner's claim of stock transfers. The court highlighted that the reassessment orders did not provide sufficient evidence to disprove the accepted Form F declarations.

5. Jurisdiction and Authority to Reopen Assessments:
The court held that the reassessment orders lacked jurisdiction, referencing the Supreme Court's ruling that assessments based on Form F declarations cannot be reopened on mere change of opinion. The court noted that the reassessment was not supported by allegations of fraud, misrepresentation, or collusion, and thus, the original assessments should stand.

Conclusion:
The court allowed the writ petitions, quashing the reassessment orders dated 05.03.2004. The court reiterated that once Form F declarations are accepted, they are conclusive unless reopened on specific grounds such as fraud or misrepresentation. The court found no such grounds in this case and emphasized the importance of adhering to the legal framework established by the Supreme Court in similar matters. Consequently, the connected miscellaneous petitions were also closed.