2020 (3) TMI 250 - HC - VAT and Sales Tax

Levy of Entry Tax on inter-state sale - Whether the respondents have failed to establish the liability of payment of entry tax from the dealer/purchaser and without proper consideration of the facts the same can be fastened on the manufacturer for that very transaction? - HELD THAT - After going through the books of account and other material it was discovered that the consideration paid by the assessee to the purchaser found its way to the Banks in Bareilly and on the basis of the facts it is concluded that the sale of the sugar by the assessee was infact intrastate sale and not a interstate sale which was validly subject to the entry tax. The said transaction was shown to be interstate sale only with a view to avoid taxation in the State of U.P. and therefore imposed entry tax on the said transaction and levied penalty on the fact that the said transaction was deliberately and wrongly recorded as interstate sale - The said transaction is an interstate sale was not liable for being brought under the Entry Tax Act. The issue as to whether the transaction was an intrastate sale or interstate sale is no longer open for the determination. For the same transaction by means of the impugned order the Tribunal has upheld the findings recorded by the Assessing Authority without taking into consideration the fate of the transaction and the orders passed with regard to the M/s Shudhodhak Enterprises and therefore the Tribunal has committed manifest error in recording finding in favour of the revenue. Revision allowed.

Summary

Issues:
1. Whether the liability of payment of entry tax can be fastened on the manufacturer for a transaction where the dealer/purchaser failed to establish the liability.
2. Whether the assessment of a transaction as an intrastate sale and imposition of entry tax and penalty on the manufacturer was justified.

Analysis:
Issue 1:
The revisionist, a Public Limited Company, challenged the order passed by the Commercial Tax Tribunal, Lucknow, and the rejection of the rectification application. The dispute centered on whether the respondents failed to establish the liability of payment of entry tax from the dealer/purchaser and wrongly imposed it on the manufacturer. The revisionist argued that the transaction was an interstate sale, supported by documents verifying the dealer's registration in Delhi. However, the assessing authority concluded it was an intrastate sale, leading to entry tax imposition.

Issue 2:
The assessing authority's decision was upheld by the First Appellate Authority, citing discrepancies in the purchaser's existence and the transaction's financial trail to a bank in Bareilly. The revisionist contended that the same transaction was deemed an interstate sale for the purchaser, M/s Shudhodhak Enterprises, in a separate case. The Commercial Tax Tribunal's order was challenged based on the established interstate nature of the transaction. The revisionist argued that the Tribunal erred in ignoring the previous judicial findings in favor of the purchaser and upholding the entry tax on the revisionist.

Judgment:
After thorough consideration, the Court found that the transaction was an interstate sale, as previously determined in the case of M/s Shudhodhak Enterprises. The Court emphasized that the issue of intrastate versus interstate sale had been conclusively settled by a previous judgment. The Commercial Tax Tribunal erred in upholding the entry tax on the revisionist without considering the finality of the previous decision. Consequently, the Court set aside the Tribunal's order and allowed the revision in favor of the manufacturer.