2019 (4) TMI 235 - HC - VAT and Sales Tax

Levy of tax - purchase of wheat - Correctness of disclosed purchases made by the applicant from the registered dealers - Held that - The order passed by Tribunal dated 08.02.2019 is unsustainable as it has not recorded any finding to the affect the ground taken by the department regarding the survey made on 23.05.2015 and, further, the findings recorded by the Tribunal to the extent that as the selling dealer has not disclosed the sale for the month of April, May and June 2015 in his return, the purchases so made by the revisionist shall be held to be from the unregistered dealer. As the tribunal is the last fact finding court, it should have recorded specific finding for arriving at such conclusion. The order passed by Tribunal dated 08.02.2019 is set aside and the matter is remanded back with the direction to the tribunal to decide the case afresh on merits - revision allowed by way of remand.

Summary

Issues:
Assessment of tax on purchases made by a registered dealer, discrepancy in wheat quantity during survey, treatment of purchases from registered dealers as unregistered, validity of tribunal's decision based on non-disclosure of sales by selling dealer.

Analysis:
The revisionist, a registered dealer operating a Flour Mill, faced an assessment issue for the assessment year 2015-16 related to the tax exemption on items manufactured. The dispute arose from the difference in wheat quantity estimated during a survey by the department and the quantity recorded in the account books. The assessing authority imposed tax on purchases from four registered dealers, treating them as unregistered, while acknowledging the registration of the fifth dealer. The first appeal favored the revisionist, accepting the disclosed turnover. The department's second appeal to the Commercial Tax Tribunal raised concerns about the survey discrepancies and non-disclosure of sales by selling dealers.

The tribunal's decision to allow the department's appeal was based on the non-disclosure of sales by the selling dealer for specific months, leading to the treatment of the revisionist's purchases as from an unregistered dealer. However, the tribunal's approach was criticized for not addressing all grounds raised by the department and lacking specific findings. The absence of detailed reasoning in the tribunal's decision rendered it unsustainable, emphasizing the need for specific findings on crucial aspects.

Legal precedents, such as the judgment in the case of On Quest Merchandising India Pvt. Ltd., were cited to highlight the importance of bona fide transactions between registered dealers and the consequences of non-deposit of collected tax by the selling dealer. The judgment emphasized that denying Input Tax Credit to purchasing dealers should not be the default approach, and collusion between parties should be addressed through appropriate legal provisions.

In light of the above analysis, the High Court set aside the tribunal's order and remanded the matter for a fresh decision, directing the tribunal to consider the legal principles outlined in the On Quest Merchandising India Pvt. Ltd. case. The revision was partly allowed, highlighting the significance of thorough consideration of all legal aspects and specific findings in tax assessment disputes.