2014 (5) TMI 175 - HC - VAT and Sales Tax

Exemption from Tax - Whether sale is Taxable for the purpose of granting exemption Held that - The mere fact that the department had cancelled the registration certificate of the vendors retrospectively per se would not be of any assistance to the Revenue to deny the second sale exemption - The cancellation of registration took effect from 1.4.90 and not prior to that period, which is relevant to the assessment under consideration viz., 1989-90 - There is hardly any material to show when the vendors started doing business as bill traders No justifiable reason found to deny the assessee s exemption granted originally - The assessment order merely pointed out to the assessee not maintaining separate stock account regarding interstate purchase and sales as a ground for denying the second sale exemption - In the absence of any specific case made out to doubt the claim of the assessee as regards the details on freight charges for taking delivery, no justification found in upholding the order of the Tribunal - The order of the Tribunal is set aside, thereby, the above Tax Case (Revision) is allowed Decided in favour of assessee.

Summary

Issues:
1. Allowance of Enhancement Petition by Appellate Tribunal
2. Confirmation of levy of tax on second sales exemption
3. Denial of second sales exemption based on retrospective cancellation of registration
4. Confirmation of tax levy on second sales at hands of petitioner
5. Denial of opportunity for cross-examination of sellers
6. Confirmation of tax levy on second sales of declared goods

Issue 1: Allowance of Enhancement Petition by Appellate Tribunal
The petitioner challenged the Appellate Tribunal's decision to allow the Enhancement Petition filed by the State, despite the first appellate authority already allowing the respective portion after detailed discussion. The Tribunal upheld the State's petition, leading to the petitioner questioning the correctness of this decision.

Issue 2: Confirmation of Levy of Tax on Second Sales Exemption
The Appellate Tribunal confirmed the levy of tax on second sales exemption for the sale of declared goods based on the cancellation of the seller's registration certificate with retrospective effect. The petitioner contested this decision, arguing against the confirmation of tax liability solely on the grounds of registration cancellation.

Issue 3: Denial of Second Sales Exemption based on Retrospective Cancellation of Registration
The Tribunal negated the second sales exemption by relying on the retrospective cancellation of the registration certificate of the seller. However, the petitioner cited legal precedents to argue that such cancellation should not affect the exemption granted to them, especially when acting in good faith based on valid registration.

Issue 4: Confirmation of Tax Levy on Second Sales at Hands of Petitioner
The Tribunal upheld the tax levy on second sales of declared goods by placing the tax liability on the petitioner, even though the sellers were registered dealers. The petitioner contested this decision, highlighting the responsibility of the sellers and the lack of opportunity for cross-examination.

Issue 5: Denial of Opportunity for Cross-Examination of Sellers
The Tribunal denied the petitioner the opportunity for cross-examination of the sellers, shifting the responsibility onto the petitioner to bring the sellers for questioning. This denial of cross-examination was a point of contention for the petitioner in challenging the Tribunal's decision.

Issue 6: Confirmation of Tax Levy on Second Sales of Declared Goods
The Tribunal confirmed the tax levy on second sales of declared goods, despite the commodity being taxable at a single point tax as established by legal precedents. The petitioner raised concerns over the shifting of the point of levy and the applicability of such taxation in their case.

In conclusion, the High Court set aside the Tribunal's order, allowing the Tax Case (Revision) in favor of the petitioner, emphasizing the lack of justification in denying the exemption granted originally.