2019 (8) TMI 1097 - HC - VAT and Sales Tax

Liability of tax - Section 3-F of the U.P. Trade Tax Act - applicant having merely supply and services for setting up tele-networking system - HELD THAT - It does appear that part of the reasoning offered by the Tribunal is erroneous insofar as the Tribunal has observed that the transaction had to be bifurcated into two parts since the assessee was having a godown inside the State of U.P. and since the assessee s name was mentioned as the consigner in the excise documents. Clearly existence of the godown inside the State of U.P. was not decisive to determine whether the movement of the goods had been occasioned by a preexisting contract for sale of goods. Similarly mere mention of the assessee s name as the consignor of the goods was largely irrelevant. In face of such finding which have neither been shown to be erroneous nor perverse and in absence of the contract document itself being produced and further in absence of it being established before the authorities that the entire quantities of goods had been imported pursuant to pre-existing contract for sale of those goods inside the State of U.P. merely because the assessee had executed a single contract inside the State could not lead to the conclusion that all goods had been imported pursuant to that pre-existing contract for sale especially when undisputedly the assessee had sold/transferred some of those imported goods to outside the State of U.P. at Kerala and Haryana - In cases such as this the burden to establish that the particular/identified goods had been imported inside the State pursuant to a pre-existing contract rested on the assessee. The facts required to establish such a transaction were facts in the special knowledge of the assessee and those must have been shown to exist amongst others from the books of account and contract documents before benefit of Sections 3 4 and 5 of the Central Sales Tax Act 1956 could be availed. In the instant case the Tribunal has found absence of the books of accounts of the assessee. There is nothing on record wherefrom it may be inferred that the assessee had infact discharged its burden - As to the case set up under Section 3-F of the Act clearly it was for the assessee to have set up a case based on evidence to establish the same. It having not been done it is too late in the day to allow that case to be pleaded as in exercise of revisional jurisdiction the Court cannot set the clock back. Revision dismissed.

Summary

Issues:
1. Assessment under Section 3-F of the U.P. Trade Tax Act
2. Tax liability for supply and services for setting up tele-networking system

Analysis:

Issue 1: Assessment under Section 3-F of the U.P. Trade Tax Act
The revisions were filed against the Commercial Tax Tribunal's order rejecting the appeal for the A.Y. 1997-98 under the U.P. Trade Tax Act. The Tribunal dismissed the claim of inter-state sale of goods, stating that the goods were purchased by the assessee and then sold to M/s Escotel Mobile Communications Limited within the State of U.P. The applicant argued that the entire supply of goods to M/s Escotel was part of inter-state sales from Kerala, Delhi, and Karnataka. Additionally, it was contended that the contract for setting up a GSM network for M/s Escotel was a works contract subject to assessment under Section 3-F of the Act. However, the Tribunal found that there were multiple contracts in existence, and the burden to establish the goods were imported pursuant to a pre-existing contract rested on the assessee. The Tribunal concluded that the assessee failed to discharge this burden, and the revisions lacked merit.

Issue 2: Tax liability for supply and services for setting up tele-networking system
The applicant argued that the Tribunal erred in rejecting the claim that the transaction was not an inter-state sale, emphasizing a Supreme Court decision to support the argument. It was asserted that the goods were sold as part of a single contract to M/s Escotel, and the presence of a godown in U.P. and mention as consignor in excise documents were not decisive factors. However, the Tribunal found that the goods were imported from outside the State for execution of separate works contracts and that the assessee failed to establish that all goods were imported pursuant to a pre-existing contract for sale inside U.P. The Tribunal's findings were based on material and evidence on record, and the Court dismissed the revisions, stating that the case under Section 3-F of the Act should have been established with evidence at the assessment stage.

In conclusion, the High Court dismissed the revisions, emphasizing the importance of establishing the nature of transactions and burden of proof on the assessee. The Court upheld the Tribunal's findings based on the evidence presented and reiterated that belated claims cannot be entertained in revisional jurisdiction.