2013 (4) TMI 529 - HC - VAT and Sales Tax

Claim of exemption on consignment sales disallowed - non maintenance of all the records as required under Rule 4(3-A) of Central Sales Tax (Tamil Nadu) Rules - Whether the Tribunal was correct in restoring the order of the assessing authority who has disallowed the claim of exemption on consignment sales & in respect of rate of tax adopted at 10.05% - Held that - As per the decisions of Tata Engineering and Locomotive Co. Ltd. Versus Assistant Commissioner of Commercial Taxes, Jamshedpur and Another 1970 (3) TMI 104 - SUPREME COURT OF INDIA AO has not examined individual transactions. Assessing Authority referred to few instances and drew inference that the entire transactions were inter-State sale. It is not known whether the Assessee filed the statutory declaration and whether any enquiry was held in respect of individual transaction. The Assessing Authority came to the conclusion on the basis that the entire goods sent as consignment were sold as one lot within a couple of days which cannot be done unless or otherwise there is a pre-existing order for the goods and that loads have been moved upon specific orders only. Thus without examining the individual transactions, the entire transactions was treated as inter-State sale falling under Rule 4(3-A) of CST (TN) Rules. Tribunal has referred to number of decisions and extensively extracted the decisions. But the Tribunal has not examined the facts in the light of the principles laid down by the Hon ble Supreme Court in various decisions. Tribunal being final authority of facts, it ought to have considered the facts in the light of the findings of the Assessing Authority and the contra view taken by the Appellate Authority and therefore, the order of the Tribunal cannot be sustained. The assessment order shows that Assessing Authority has not held an enquiry as to individual transactions. Applying the ratio of the above decisions of the Hon ble Supreme Court, the assessment order cannot be sustained and the matter is remitted back to the Assessing Authority for fresh consideration based on decisions of the ASHOK LEYLAND LIMITED V. STATE OF TAMIL NADU AND ANOTHER (1) TMI 365 - SUPREME COURT OF INDIA . Tax Case (Revision) is allowed. The order of Tribunal set aside and the matter is remitted back to the Assessing Authority.

Issues Involved:
1. Whether the Tribunal was correct in restoring the order of the assessing officer who disallowed the claim of exemption on consignment sales.
2. Whether the Tribunal was correct in restoring the rate of tax adopted at 10.05%.
3. Whether the Tribunal was correct in restoring the penalty levied under Section 9(2) of the CST Act read with Section 12(3) of the TNGST Act.

Detailed Analysis:

1. Exemption on Consignment Sales:

The Assessee, a registered dealer under TNGST and CST Acts, reported a taxable turnover and claimed exemption on consignment sales made through agents in another state. The Enforcement Wing Officers inspected the Assessee's premises and found non-maintenance of required records under Rule 4(3-A) of the Central Sales Tax (Tamil Nadu) Rules. The Deputy Commercial Tax Officer disallowed the claim for exemption on consignment sales, holding that the transactions were inter-State sales as the goods moved upon specific orders. The Appellate Assistant Commissioner (CT) allowed the appeal, stating that there was no established link between the buyer and the Assessee, and individual transactions were not verified. The Tribunal, however, restored the Assessing Authority's order, finding a direct nexus between the sale and the movement of goods.

The High Court noted that the principles of inter-State sales require a direct nexus between the sale and the movement of goods from one state to another. The Assessee failed to maintain records as per Rule 4(3-A) and did not produce written contracts. The Court emphasized that each transaction must be verified to conclude whether it was a consignment sale or an inter-State sale, as per the Supreme Court's decision in Tata Engineering and Locomotive Co. Ltd. v. Assistant Commissioner of Commercial Taxes, Jamshedpur and another. The Assessing Authority did not examine individual transactions but inferred inter-State sales based on a few instances. The Tribunal did not properly consider the facts in light of the Supreme Court's principles, leading the High Court to remand the matter back to the Assessing Authority for fresh consideration.

2. Rate of Tax:

The Assessee contested the rate of tax adopted at 10.05%, arguing that the Department had clarified that up to March 31, 1992, the rate of tax would be the basic rate of the TSGST Act without surcharge and additional sales tax. The High Court did not specifically address this issue in the detailed analysis, as the primary focus was on the nature of the transactions (consignment sales vs. inter-State sales) and the verification process.

3. Penalty Levied:

The Assessing Authority levied a penalty under Section 9(2) of the CST Act read with Section 12(3) of the TNGST Act. The Tribunal restored this penalty, but the Assessee argued that the principles laid down by the Supreme Court in Jayaraj Nadar & Sons should apply, where the turnover as per accounts was accepted, and only the exemption on consignment sales was disallowed. The High Court's remand for fresh consideration implies that the penalty issue would also need to be re-evaluated based on the proper classification of transactions.

Conclusion:

The High Court allowed the Tax Case (Revision), set aside the Tribunal's order, and remitted the matter back to the Assessing Authority for fresh consideration. The Assessing Authority is directed to re-examine each transaction individually, in light of the Supreme Court's decision in Ashok Leyland Limited v. State of Tamil Nadu and another, and afford sufficient opportunity to the Assessee.

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