2017 (10) TMI 884 - HC - VAT and Sales Tax

Valuation - soft coke/ special smokeless fuel - Assessing Officer imposed tax on the petitioner under the VAT Act by treating the price of coal to be of ₹ 7000/- per Metric Ton instead of assessing the tax based on the actual sale price and the price of coal indicated in the Sale order @ ₹ 1740/- per M.T. - Held that - if the transporter or the trader carries the identified goods at lesser price than the quoted minimum price, i.e. as indicated in the circular then an enquiry is conducted and if authenticity of rate claimed by the assessee is established then the price or rate claimed by the assessee can be accepted for imposition of duty/tax - In this case, if we go through the assessment order in question we find that merely because the price quoted in the invoice and the document produced by the assessee were lesser than the minimum price fixed in the circular the amount of excess tax was imposed. When the evidence as is available on record shows that the coal is purchased @ 1740 per M.T. merely because of a circular issued by the State of Bihar fixing the minimum price of certain commodity, which is not the foundation price or the price of the commodities but is only a price indicated on the basis of some exercise done to stop evasion of duty, in the absence of any material or cogent evidence available to show that the petitioner has tried to evade duty by under-pricing the price of coal the State Government cannot act in an arbitrary manner and impose duty based on such a circular. The circular may be used for the purpose of verification and curtailing evasion of duty and for checking under-valuation of goods in the check-post but merely on the basis of the circular without there being any specific evidence to show under price and ignoring the material available on record any action done for imposing tax in duty is unsustainable. Petition allowed - decided in favor of petitioner.

Summary

Issues:
Challenge to order imposing tax on petitioner under VAT Act based on circular fixing minimum price of coal.

Analysis:
The petitioner challenged an order imposing tax under the VAT Act by treating the price of coal at ?7000 per Metric Ton instead of the actual sale price of ?1740 per M.T. The petitioner contended that the tax was paid based on the actual purchase price and not the assumed minimum price from a circular. Reference was made to a previous judgment questioning a similar act by the Commercial Tax Department. The respondents argued that the price was fixed after technical evaluation. The Court sought clarification on the authority behind fixing prices in the circular, which was explained in a supplementary counter affidavit.

The circular dated 18.07.2013 was clarified to be a measure for software preparation to detect tax evasion and facilitate the Suvidha Scheme Software. The circular did not fix minimum prices for all commodities but aimed to prevent under-valuation. If goods were transported at prices lower than the minimum, an enquiry was conducted to verify authenticity. The Court noted that the petitioner produced evidence of purchasing coal at ?1740 per M.T., with documents showing tax deductions by the company and assessment by the Jharkhand Government based on the same price. The Court held that imposing tax solely based on the circular without specific evidence of under-pricing was arbitrary and unsustainable.

The Court allowed the writ petition, quashing the order imposing tax based on the circular and directing tax calculation at ?1740 per M.T. Any excess amount paid was to be refunded to the petitioner. The prayer to declare the circular ultra vires was not considered due to the GST Act coming into force. The writ petition was allowed and disposed of accordingly.