2014 (8) TMI 541 - HC - VAT and Sales Tax

Discrepancy in stock - Whether the learned Tribunal is right in upholding demand of tax and penalty on the premise that the appellants had sold out the goods without recording the same in books of accounts - Held that - Entire issue is based on appreciation of materials on records. One conclusion by the Tribunal, the final fact finding authority, and what was not seriously disputed by the assessee was that there was excess stock worth ₹ 8.82 lakhs in the books of accounts. On that basis, the authorities as well as the Tribunal confirmed the demand of the tax. We see no question of law arising. The counsel, however, submitted that the stock in the books of accounts and that found during the visit match, except for its valuation. The same was, therefore, only due to error. However, admittedly, the value added tax would be paid on the valuation of the goods cleared. When there was variation of valuation for the purpose of payment of value added tax as compared to the physical stock even at the time of the visit by the authorities, the liability to pay the differential tax cannot be avoided - Decided against assessee.

Summary

Issues:
1. Upholding demand of tax and penalty for goods sold without recording in books of accounts.
2. Validity of order passed on assumption basis without evidence of illicit clearance of goods.
3. Burden of proof on Revenue to show goods were cleared illicitly without tax payment.

Analysis:
1. The assessee, a manufacturer dealer of tiles, faced a provisional assessment due to a discrepancy of Rs. 8.82 lakhs in stock during a visit by Gujarat Value Added Tax authorities. The final assessment demanded Rs. 4,30,365 as tax, interest, and penalty. The Tribunal upheld the demand, emphasizing that excess stock in books implies goods sold without proper recording, violating statutory provisions. The Tribunal rejected the argument that stock differences alone cannot lead to evasion, stressing the importance of accurate bookkeeping to prevent tax malpractice.

2. The Tribunal's decision was based on the fact that excess stock was found during the visit, despite the appellant's claim of matching stock but with valuation discrepancies. The Tribunal confirmed the tax demand due to variations in valuation for tax payment compared to physical stock, holding the appellant liable for the differential tax. The judgment highlighted that the Tribunal's factual findings were undisputed, emphasizing that no legal question arose from the case. The appellant's argument of valuation errors was dismissed, reinforcing the obligation to pay tax based on actual goods valuation.

3. The judgment focused on the Tribunal's role as the final fact-finding authority and the undisputed excess stock worth Rs. 8.82 lakhs in the books of accounts. The decision underscored that the liability to pay differential tax arises when there are valuation differences between physical stock and tax payment valuation. The dismissal of the Tax Appeal affirmed the Tribunal's decision, emphasizing the legal obligation to pay tax based on actual goods valuation, irrespective of valuation errors or discrepancies in stock records.