2020 (10) TMI 1288 - HC - VAT and Sales Tax

Concessional rate of tax - inter-state sales - sale of goods effected to the Lakshadweep Islands through a dealer authorized by the Lakshadweep Administration - deduction permissible on damaged goods - there is no allegation of unaccounted sale or stock difference - Section 6(1) of the KVAT Act and Rule 12C of the KVAT Rules - HELD THAT - What is produced along with it is an Application to Export made by the dealer to the Port Officer at Calicut. The Application to Export is not a document similar to a shipping bill. It does not evidence the movement of goods from the Port at Calicut to Lakshadweep. It is at best a desire expressed by the purchasing dealer, the fulfillment of which is the essence of the concession granted. Further, it has to be noticed that though there is a recital in Form No.42 that the purchasing dealer is recognized by the Administrator, UT of Lakshadweep, there is nothing produced to evidence the same - there can be no concessional rate claimed by the revision petitioner on the facts of these years since there is no document produced which could prove the movement of goods to the Islands, as would a shipping bill - issue regarding concessional rate of tax, is answered against the assessee and in favour of the revenue. Allowance claimed on the damaged goods - HELD THAT - Despite the stock details having been tabulated in the Annexures produced, as the learned Government Pleader alertly points out, the claim was not substantiated with records, ledgers or books of accounts before the fact finding authorities - the fact finding authorities, including the Tribunal has recorded that nothing is produced to substantiate the claim. Even then, 50% of what was claimed was allowed presumably on realisation of the basis of such damage occasioned for reason of lumping of cement due to exposure to natural elements - the issue is not answered, for it being not a question of law. Petition disposed off.

Summary

Issues:
1. Concessional rate of tax on sale of goods to Lakshadweep Islands through authorized dealer.
2. Deduction permissible on damaged goods.

Analysis:
1. The judgment involves two revisions concerning assessment years 2007-08 and 2008-09, focusing on the concessional tax rate for sales to Lakshadweep Islands and deduction for damaged goods. The primary issues revolve around compliance with Section 6(1) of the KVAT Act and Rule 12C of the KVAT Rules. The court re-framed the questions to address whether the Tribunal was justified in rejecting the concessional tax claim and if addition of sales turnover for damaged goods is justifiable without evidence of unaccounted sales or stock differences.

2. The court heard arguments from both parties, emphasizing substantial compliance with the rules. The appellant's counsel cited relevant cases to support their position, highlighting the minimal nature of the damage claim. Conversely, the State argued that there was insufficient evidence to prove movement of goods to the Islands or substantiate the deduction for damaged goods.

3. The court examined the provisions of Section 6(1) and Rule 12C, which outline the conditions for claiming exemptions or reduced tax rates for sales to specific entities. Rule 12C mandates the submission of Form No.42, signed by the buyer, along with shipping documents attested by Port authorities. These requirements aim to ensure goods are intended for use in the Islands and not resold within Kerala.

4. Referring to previous judgments, the court disagreed with the interpretation that direct sales to the Lakshadweep Administration exempted the need for shipping documentation. The court emphasized that the rules do not differentiate purchasers, stressing the importance of proving goods' transportation to the Islands to qualify for concessional rates.

5. Applying the legal interpretation to the case, the court found the appellant's contentions untenable. The documents provided did not sufficiently demonstrate the movement of goods to the Islands, as required by Rule 12C. Consequently, the court ruled against the appellant on the concessional tax rate issue.

6. Regarding the deduction for damaged goods, the court noted the lack of substantiating records before the authorities. While a partial allowance was made, the court declined to grant further deductions without additional evidence. The court refused to address this issue as a question of law.

7. Ultimately, the court dismissed the appeals, with each party bearing their respective costs. The judgment underscores the importance of strict compliance with statutory requirements for concessional tax rates and deductions on damaged goods in sales transactions to specific entities like Lakshadweep Islands.