2018 (8) TMI 2 - HC - VAT and Sales Tax

Imposition of tax - income on account of hire charges received by the Company for furniture supplied to the residences of the employees - contention of the assessee is that in fact it is a loan to the employees for the purpose of purchase of furniture - Whether the Tribunal was right in affirming the tax imposed on the income on account of hire charges received by the Company for furniture supplied to the residences of the employees? - Held that - If it were a loan it should have been disbursed so but the specific contract reveals that the assessee retained the ownership of the furniture and also received hire charges for the same. The three purchase vouchers in the name of the assessee produced by the assessee itself goes against its contention that it was a mere loan. The assessee had been supplying furniture to its employees and also had been taking hire charges for the same which definitely comes within the ambit of a transfer of right to use and we do not find any reason to interfere with the order of the AO as approved by the Tribunal - levy of tax upheld. Whether levy of tax on transfer of furniture to employees is liable to be taxed being a second sale? - Held that - The assessee had produced before the Tribunal three invoices which indicated purchases from a manufacturer of furniture. The Tribunal only to that extent granted relief insofar as the second sale was absolved from liability to tax. The assessee did not produce any evidence to indicate that the other furniture supplied to its employees and later purchased by them had suffered tax at the earlier point - demand upheld. Equipment charges received by the assessee from its contractors - Whether the Tribunal was correct in having sustained levy of tax on equipment charges being charges on hire received from contractors for permission to use heavy equipments like cranes for the purpose of execution of the contract? - Held that - Only certificate of registrations have been produced as Annexures-D16 to D-19 which do not indicate that the assessee had used its own employees in operation of the said vehicles registered with the Motor Vehicles Department. Further it is seen from the submission of the assessee before the appellate authority as extracted in the memorandum that there is a specific contract between the assessee and the contractors and the conditions of contract facilitates such hiring for speedy completion of the job. In that case the terms of the contract would have indicated as to under whose control the cranes were even when it was hired. The assessee failed to produce such a contract before any of the fact finding authorities - demand upheld. Form-18 and SRO forms - Ought not the Tribunal verified Form-18 declarations and SRO forms produced before it and allowed the exemption claimed to the extent of the turnover reflected in such forms? - Held that - There is no explanation as to why these Forms were not produced before the AO. We also do not see any production of these documents before the Tribunal as is seen from the extract of the appeal memorandum either as extracted by the Tribunal or by the assessee in the memorandum of revision. The claim with respect to Form-18 also does not hold any credence insofar as the perusal of the same as produced at Annexures-D13 D14 and D15. Annexures-D13 does not have a date and Annexure- D14 is not filled up in the blank portions and Annexure-D15 again is one issued on 13.11.2001 - the prayer for reconsideration by the Tribunal is rejected. Whether the Assessing Officer (AO) was right in having imposed tax at the rate of 30% for bitumen and Special Boiling Point Spirit (SBPS) for which tax is only 24%? Has not the Tribunal erred in not having considered the specific submission made before it? - Held that - The Tribunal has extracted the said grounds but has not answered it - The correct rate of bitumen and SDPS will be verified by the AO and the modifications if any required would be made - matter on remand. Whether the Tribunal was correct in having sustained levy of interest as made in the assessment order? - Held that - There can be no doubt that it is from the date of return and if the assessee has any complaint regarding the computation they have to necessarily approach the AO - there is no substantial question of law raised in S.T.Rev.No.86 of 2012; but however leaving the assessee to agitate before the AO on the correct rate to be applied on bitumen and SDPS as also the computation of interest. Whether the inclusion of water cess in the turnover for the purpose of levying purchase tax under Section 5A on the water supplied by the Irrigation Department to the revision petitioner is justified? - Held that - The cess payable under the circumstances of a local authority supplying water to a person carrying on a specified industry is by the industry who consumes and uses such water supplied. The Explanation to Section 3 also brings in consumption of water within the ambit of the description supply of water . Hence the cess is on the supply of water which has to be levied at the time of supply and the charge is on the person who uses such water. In the present case it is the Irrigation Department which supplies water for a price and hence the turnover also includes water cess. The water cess is a component that can be legitimately included in the aggregation of the consideration for the transfer of the goods - decided against assessee. Whether the stock transfer supported by F-Forms were rightly rejected for reason only of the assessee failing to establish the movement of goods outside the State? - Held that - When F-Forms are supplied and the consignor is asked to prove the transport of goods it is the duty of the assessee to establish such transport since F-Form is only one mode of evidence to establish the inter-State transfer of goods on consignment - decided against assessee. Revisions dismissed - part matter on remand.

Summary

Issues:
1. Assessment of tax on hire charges for furniture supplied to employees
2. Tax on transfer of furniture to employees
3. Levy of tax on equipment charges received from contractors
4. Verification of Form-18 declarations and SRO forms for exemption claimed
5. Correct rate of tax on bitumen and Special Boiling Point Spirit (SBPS)
6. Levy of interest in the assessment order
7. Inclusion of water cess in turnover for levying purchase tax
8. Rejection of stock transfer supported by F-Forms

Analysis:

1. Assessment of tax on hire charges for furniture supplied to employees:
The assessee claimed that the hire charges for furniture were a loan to employees, but the contract indicated otherwise. The ownership of the furniture remained with the assessee, and hire charges were collected, falling under the transfer of right to use. The Tribunal's decision to levy tax on such transfers was upheld.

2. Tax on transfer of furniture to employees:
The Tribunal absolved the second sale of furniture from tax liability as evidence of tax payment at an earlier stage was lacking. The assessee failed to prove that tax was paid on the furniture supplied to employees and later purchased by them, leading to no interference in the Tribunal's decision.

3. Levy of tax on equipment charges received from contractors:
The equipment charges received by the assessee from contractors were contested, claiming the equipment was hired out to facilitate contract execution. Lack of evidence, such as a specific contract indicating control over the equipment, led to the Tribunal's decision being upheld.

4. Verification of Form-18 declarations and SRO forms for exemption claimed:
The forms produced before the Tribunal were dated long before assessment completion, with no explanation for non-production before the Assessing Officer. Lack of authentication and credibility in the forms led to rejection by the AO, upheld by the Court due to being factual issues.

5. Correct rate of tax on bitumen and SBPS:
The Tribunal did not address the issue of the correct tax rate, leaving it for verification by the AO. The Court found no substantial legal question, advising the assessee to address this matter with the AO.

6. Levy of interest in the assessment order:
Interest computation from the date of return was deemed correct, with any complaints regarding computation to be raised with the AO. No substantial legal question was identified in this regard.

7. Inclusion of water cess in turnover for purchase tax:
The water cess paid under the Water Cess Act was considered part of turnover for purchase tax. The Court disagreed with the assessee's argument, citing relevant case law and holding in favor of the Revenue.

8. Rejection of stock transfer supported by F-Forms:
The failure to establish the movement of goods outside the State based on F-Forms led to rejection of the stock transfer. The Court upheld this decision against the assessee, emphasizing the need to provide evidence of goods transport.

In conclusion, the Court dismissed the revisions, allowing the assessee to address the issues related to tax rates and interest computation with the AO. Each issue was analyzed based on legal interpretations and factual evidence presented during the proceedings.