2022 (11) TMI 146 - HC - VAT and Sales Tax

Validity of assessment order - sale on loan transaction - alleged stock transfer effected by the Petitioner - petitioner was unable to produce any evidence as a conclusive proof - HELD THAT - The definition of 'sale' in Section 2(g) of the Central Sales Tax Act, 1956 has been given in a very wide interpretation - To hold to state that there was no sale on account of loan transactions, the documents of the petitioner should have clearly established the same. In this case, they have not established the same. The order of the Tribunal is well reasoned and does not suffer from any infirmity. It requires no interference. That apart, the Assesee has neither produced any contract nor the agreement to prove the contention that there was a loan transaction. The Tribunal being the ultimate fact finding authority, finding arrived by it cannot be interfered. The petition is dismissed.

Issues Involved:
1. Validity of the alleged stock transfer as a loan transaction.
2. Applicability of the amended provisions of Section 2(g) of the Central Sales Tax Act, 1956.
3. Imposition of penalty under Section 12(3) of the Tamil Nadu General Sales Tax Act, 1959.

Detailed Analysis:

1. Validity of the Alleged Stock Transfer as a Loan Transaction:
The petitioner challenged the assessment order dated 28.06.1996, which pertained to an alleged stock transfer. The petitioner claimed the transactions were loan transactions, but failed to produce conclusive evidence. The Appellate Assistant Commissioner partly allowed and partly remanded the case, noting that the appellants dispatched aluminium wire rods to dealers in Mysore and that the goods were returned in subsequent years, confirming the loan transaction. However, the Tribunal found no contract or repayment evidence, determining the transactions were independent and not linked by any valid document. Consequently, the Tribunal restored the assessing authority's order, rejecting the loan transaction claim.

2. Applicability of the Amended Provisions of Section 2(g) of the Central Sales Tax Act, 1956:
The petitioner argued that the Tribunal erroneously applied the amended Section 2(g) of the Central Sales Tax Act, 1956. They cited a Division Bench decision in State of Tamil Nadu vs. Pullicar Mills Limited, which concluded that loan transactions are not subject to sales tax under similar circumstances. The court in Pullicar Mills emphasized that a loan transaction does not involve a transfer of property in goods, thus not fitting the definition of "sale". However, the Tribunal in the present case found no documentary evidence supporting the loan transaction, thus affirming the assessment as a sale.

3. Imposition of Penalty under Section 12(3) of the Tamil Nadu General Sales Tax Act, 1959:
The petitioner contended that the penalty under Section 12(3) was unjustified, referencing the decision in Apollo Saline Pharmaceuticals (P) Limited v. Commercial Tax Officer, which held that penalties under Section 12(3) are not applicable to assessments based on accounts without additional material. The State argued that the Tribunal, as the ultimate fact-finding authority, found no error in the imposition of the penalty. The Tribunal noted discrepancies in the petitioner's stock book, suggesting the transfer was an interstate sale rather than a loan transaction.

Conclusion:
The court dismissed the writ petition, agreeing with the Tribunal's findings that the petitioner failed to substantiate the loan transaction claim with proper documentation. The Tribunal's decision to treat the transactions as sales and uphold the penalty was deemed well-reasoned and without infirmity. The court found no grounds to interfere with the Tribunal's conclusions, thus affirming the assessment and penalty.

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