2019 (10) TMI 40 - HC - VAT and Sales Tax

Levy of Turnover tax - machinery and equipments - purchase suppression - whether these equipments were owned by the petitiomer and were being deployed in the business of piling and other civil works in different locations/projects or whether they constituted capital assets that were being sold, generating taxable turnover? HELD THAT - A declaration in Form F is required to establish stock transfer of goods under the CST Act. However, the production of an F form is not mandatory to establish the petitioners case. We are concerned with a State tax assessment where other materials are available to assist the officer in arriving at a proper conclusion regarding the true purpose abd purport of movement of goods. Thus, while a Form F would, had the same been filed in the CST assessment, support the petitioners stand, the absence of such Form cannot be fatal to the petitioners case if the petitioner is in a position to establish its case otherwise, on the basis of other evidences. The certificate of the Chartered Accountant has been rejected though unsupported no reasons have been attributed for such rejection. The reasoning in the order of assessment is not cast-iron as it should be particularly, in the light of some material that has been produced by the Assessee. It is too well settled a proposition that an order of assessment that casts a substantial liability upon an assessee should contain valid and acceptable reasons for effecting modifications/additions to the returned turnover and should speak for itself, in casting such liability - In the present case, the order of assessment is bereft of such reasoning. Petition remanded for fresh reconsideration.

Summary

Issues:
Impugned assessment under Tamil Nadu Value Added Tax Act, 2006 and Central Sales Tax Act, 1956 for the period 2010-11 based on audit findings of purchase suppression through check-post movements.

Analysis:
The petitioner, a dealer under the Acts, faced an assessment due to audit findings indicating unaccounted transactions. The revenue alleged purchase suppression based on check-post movements, proposing tax on certain transactions. The petitioner contended that the movements were for transferring machinery for works contracts, not sales generating taxable turnover.

The pre-assessment notice highlighted specific transactions allegedly escaping tax, which the petitioner disputed by providing supporting documents. The impugned order confirmed the proposals, prompting the petitioner to challenge it through writ petitions.

The respondent argued the writ lacked merit, emphasizing the availability of statutory appellate remedies and asserting no legal errors in the assessment. They insisted on the necessity of statutory forms for equipment transfers and questioned the absence of equipment reflection in the petitioner's balance sheet.

The court deliberated on whether the transferred equipment constituted the petitioner's assets used in business or were sold for taxable turnover. The petitioner presented evidence, including lorry receipts, statutory forms, and certificates, to support equipment transfers for internal use.

The Assessing Officer's reasoning, questioning the authenticity of the petitioner's documents, was found insufficient to establish purchase suppression. The absence of Form F declarations was not fatal to the petitioner's case if other evidence substantiated the purpose of equipment movements.

The court criticized the assessment order for lacking robust reasoning to justify tax liabilities. Consequently, the impugned order was set aside, directing the petitioner to appear before the Assessing Officer with evidence for a fresh assessment within four weeks.

In conclusion, the court's decision favored the petitioner, emphasizing the need for a well-founded assessment order and providing an opportunity for a fresh assessment based on proper evidentiary support.