2021 (3) TMI 525 - HC - VAT and Sales Tax

100% EOU - Shortage of stock - transit/handling losses of iron ore amounting to 5% of its total export clearances - whether it is within reasonable limits, despite there being no evidence submitted by the respondent to show the actual transit/handling losses? - validity of restriction of claim of transit/handling losses or iron ore to 0.92% and 1% of the Respondent's total export clearances, respectively based on the average transit/handling losses of iron ore claimed by leading mining companies such NMDC Ltd., and MSPL Ltd.? HELD THAT - From perusal of the order passed by the prescribed authority and the First Appellate Authority, it is clear that both the authorities have recorded a finding that transit / handling loss is inevitable while transportation of iron ore fines and lumps. It is well settled legal proposition that an order passed by an authority under one enactment cannot be basis for levying tax under another enactment specially when event and point of levy are different under those enactments. The point of levy of excise duty is removal of goods whereas, point of levy under the Act is on sale. Therefore, an order passed by the Excise Authority cannot lead to the conclusion that there was a sale leviable to tax under the Act. It is pertinent to note that transit / handling loss was claimed by the respondent approximately at the rate of 5% for a period of five years, which according to the finding recorded by the authorities under the Act at the rate of 1% per year was reasonable - there are no ground to interfere with the order passed by the tribunal. The substantial questions of law are answered against the petitioner and in favour of the respondent - Petition dismissed.

Summary

Issues:
1. Whether the Tribunal was right in setting aside the orders of the first appellate authority and the assessing authority?
2. Whether the Tribunal was right in holding that the transit/handling losses of iron ore claimed by the Respondent were within reasonable limits?
3. Whether the Tribunal was right in setting aside the orders restricting the claim of transit/handling losses of iron ore based on the average losses claimed by leading mining companies?

Analysis:

Issue 1:
The revision petition was filed against the order passed by the Karnataka Appellate Tribunal. The respondent, a 100% export-oriented unit dealing with iron ore, claimed exemption for export sales. The prescribed authority proposed treating transit/handling loss as suppressed taxable turnover based on a CBI report and an order by the Excise Authority. The First Appellate Authority, while acknowledging transit/handling loss as inevitable, partially allowed the appeal. The tribunal held that the claim for transit/handling loss in exempt export sales was reasonable and allowed the appeal. The petitioner argued that the tribunal's order was erroneous, but the High Court found no grounds to interfere.

Issue 2:
The respondent claimed a 5% transit/handling loss on total export sales over five years, while authorities found 1% per year reasonable. The prescribed authority and the First Appellate Authority accepted the inevitability of transit/handling loss in the nature of the respondent's business. The High Court emphasized that an order under one enactment cannot be the basis for levying tax under another enactment with different points of levy. As the respondent's claimed loss rate was consistent with the findings of the authorities, the High Court upheld the tribunal's decision.

Issue 3:
The tribunal's decision to set aside the orders restricting the claim of transit/handling losses was based on the reasonableness of the respondent's claim compared to industry standards. The High Court noted that the respondent's claimed loss rate was in line with the findings of the authorities, making it a reasonable claim. The High Court found no legal grounds to interfere with the tribunal's decision, leading to the dismissal of the petition.

In conclusion, the High Court upheld the tribunal's decision, finding the respondent's claim for transit/handling losses in iron ore exports to be reasonable and in accordance with industry standards. The High Court dismissed the petition, ruling against the petitioner and in favor of the respondent.