2021 (12) TMI 844 - HC - VAT and Sales Tax

Evasion of tax - sales suppression - inter-state sale or not - Section 3 of the Central Sales Tax Act, 1956 - HELD THAT - Admittedly, the petitioner is a registered dealer under the TNGST and CST Acts and an assessee on the file of the second respondent herein. It could be seen that in respect of the assessment years in question, the second respondent passed the orders treating the amounts mentioned in the quotations recovered from the petitioner, as sales suppression and imposing tax at 10% along with penalty under section 9(2) of CST Act r/w Section 16 of the TNGST Act. On appeal, the said assessment orders were set aside by the First Appellate Authority, after holding that if the transaction was to be treated as an inter state sale in terms of Section 3(a) of the CST Act, there must be a sale of goods and movement of such goods from the one state to another, as a result or as an integral part of the sale, whereas, in this case, there was no proof available with respect to delivery of goods. In the absence of any material evidence with respect to movement of goods, the quotations recovered from the business place of the petitioner, cannot be treated as sales. Hence, there was no inter-state sale taken place, as rightly held by the first Appellate Authority. This court has no hesitation to set aside the orders passed by the Tribunal - Petition allowed.

Summary

Issues:
Challenging assessment orders regarding sales suppression and penalty for Assessment Years 1997-98, 1998-99, and 1999-2000.

Analysis:
The petitioner, a manufacturer and dealer in Rig Spares, had incriminating documents seized by officials, leading to allegations of sales suppression. The respondent proposed tax estimation for the alleged suppressed sales. The petitioner contended that the quotations issued were for potential buyers and not all would materialize into sales. Despite objections, the assessment orders confirming tax and penalty were passed on 28.06.2002.

The petitioner appealed these orders before the Appellate Assistant Commissioner, Erode, and the appeals were allowed on 05.12.2002. The Appellate Authority highlighted the lack of evidence regarding interstate sales and the failure to prove taxable sales under the CST Act. The burden of proof was emphasized to lie with the Assessing Authority. Consequently, the taxable turnover was ordered to be deleted, and assessments were set aside.

The Revenue challenged the Appellate Authority's orders before the Tamil Nadu Sales Tax Appellate Tribunal. The Tribunal, considering the recovered incriminating documents, reversed the Appellate Authority's orders on 25.01.2008, leading to the current writ petitions.

The High Court analyzed the essential ingredients of an interstate sale under Section 3 of the CST Act, emphasizing the requirements of a sale of goods, interstate movement, and a link between the sale and movement. Finding no evidence of goods movement, the Court agreed with the Appellate Authority that the quotations did not constitute inter-state sales. Referring to a previous Division Bench decision in a similar case, the Court set aside the Tribunal's orders, stating the lack of grounds for reversing the Appellate Authority's findings.

In conclusion, the High Court allowed the writ petitions, setting aside the Tribunal's orders and restoring the Appellate Assistant Commissioner's orders. No costs were awarded, and the connected Miscellaneous Petitions were closed.