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2015 (7) TMI 897 - HC - VAT and Sales TaxDefault Assessment Orders - Sales in the course of import - inter-State sale or not - Section 9 (2) of the CST Act read with Section 32 and penalty assessment orders under Section 33 of the Delhi Value Added Tax Act, 2004 (DVAT Act) - Held that - the default assessment orders of the VATO give no indication of any detailed examination of the documents. It is not clear which document the VATO is referring to when he concludes that the description of the commodity is different or when he concludes that there is diversion of movement of goods from original destination to some other/different destination. Even the OHA and the AT make no reference to any particular transaction or document pertaining to inter-state sales and have simply repeated the reasoning of the VATO. At least the documents produced for the sample transaction concerning the PO placed on the Appellant by Ramgarh Chini Mills do not show that there is any diversion of the goods to some other destination. Also, if indeed it is correct that Duolite is the brand name for Cation or Anion resin, then the exemption cannot be denied on the ground of the description of the commodity not matching that mentioned in the PO. The Court finds that the general cursory approach of the authorities and the VATO, in particular, is unhelpful when the High Court is called upon to examine the correctness of their orders. They must reflect application of mind to the materials on record. Consequently, even in respect of the transactions of inter-state sales, the Court finds that the impugned order of the AT and the corresponding orders of the VATO and the OHA require to be set aside and the matters remanded to the VATO for a fresh determination - Matter remanded back.
Issues Involved:
1. Validity/admissibility of exemptions in respect of sales claimed to be high sea sales/sales in the course of import. 2. Admissibility of exemptions in respect of sales against E-1/C forms. Detailed Analysis: 1. Validity/Admissibility of Exemptions for High Sea Sales/Sales in the Course of Import: The Appellant, a registered dealer engaged in manufacturing and trading of Reverse Osmosis (RO) water purifying systems, was audited by the Trade and Tax Department, which noted discrepancies in their books of accounts and returns. The Value Added Tax Officer (VATO) issued default assessment orders, rejecting the Appellant's claim for exemptions on high sea sales and sales in the course of import. The VATO concluded that the transactions did not meet the conditions for exemption under Section 5(2) of the CST Act, as the agreements lacked clauses indicating that goods were imported specifically for the purchasers, and there was no privity of contract regarding the import aspect. The Appellant's objections were rejected by the Objection Hearing Authority (OHA), which noted that the Appellant initially claimed high sea sales but later contended these were sales in the course of import. The OHA found no integral connection between the sales and the import, as the agreements did not specify that the goods would be imported for the purchasers. The Appellate Tribunal (AT) concurred with the VATO and OHA, dismissing the appeals. The Court observed that the Appellant corrected its stand at an early stage, which was permissible. The legal position, as explained in K.G. Khosla & Co. (P) Ltd. v. Dy. Commr. of Commercial Taxes and other cases, requires an integral connection between the sale and the import. The Court found that the VATO, OHA, and AT did not examine the documents in detail to verify this connection. Consequently, the Court set aside the orders and remanded the matters to the VATO for a fresh determination based on the documents already on record. 2. Admissibility of Exemptions for Sales Against E-1/C Forms: The Appellant claimed exemptions for inter-state sales under Section 6(2) of the CST Act, arguing that the goods were sold in transit against E-1/C Forms. The VATO denied the exemptions, citing significant differences in the description of items in purchase and sales invoices and concluding that the transactions did not qualify as inter-state sales. The OHA and AT upheld the VATO's decision. The Court noted that the burden of proof was on the Appellant to show that the sales occasioned the movement of goods from one state to another. The Court found that the VATO, OHA, and AT did not provide a detailed examination of the documents to support their conclusions. The Court emphasized the need to verify if there was an inextricable link between the purchase and the subsequent sale, as explained in State of Karnataka v. Azad Coach Builders Pvt. Ltd. and other cases. The Court set aside the orders of the AT, VATO, and OHA, remanding the matters to the VATO for a fresh determination. The VATO was directed to examine each transaction with reference to the legal position and determine if the claim for exemption was justified. Conclusion: The Court set aside the impugned orders of the AT, VATO, and OHA, remanding the matters to the VATO for a fresh consideration based on the documents already on record. The VATO is to complete this exercise within six months, examining each transaction with reference to the legal position explained in the relevant decisions. The Court did not express any view on the merits of the contentions of the parties. The appeals and applications were disposed of accordingly.
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