2016 (12) TMI 64 - HC - VAT and Sales Tax

Valuation - sale turnover - Section 62(6) of the KVAT Act - cost of the sale of items, other than liquor, would be approximately 50% and accordingly, the tax was assessed and penalty was also imposed at the rate of 10% - jurisdiction of revisional authority - Held that - The records show that the Assessing Officer assessed at the rate of 50% of the total sales without considering any margin of profit whereas the first appellate authority assessed at 10% by accepting the exempted figure of sales of liquor. Since the judicial scrutiny of the present appeal insofar as this Court is concerned has to be limited to the question of law and the fact finding inquiry cannot be undertaken by this Court. We find that the matter should be relegated to the revisional authority to undertake such exercise as it is the ultimate fact finding authority. Hence, we find it appropriate to interfere with the order of the revisional authority since no proper and satisfactory reasons are recorded to arrive at the factual conclusion as to whether figures arrived at by the assessing officer was correct or not and consequently, the finding recorded is without proper reasons being assigned by the revisional authority - the impugned order passed by the revisional authority is set aside and the matter is remanded to the revisional authority on the limited point of examination about the proportion of sale of food and drink items which is subject to VAT. After the aforesaid exercise is undertaken, the appropriate consequential order may be passed after giving an opportunity of hearing both sides and in accordance with law. Attachment of bank property - Held that - as such the tax liability is more than the amount recovered, but, on reasonable condition to deposit the amount or to furnish appropriate bank guarantee, the appellant may be permitted to operate the bank account - after the appellant furnishes bank guarantee of ₹ 2,50,000/-, he may be permitted to operate the bank account, subject to final order which may be passed by the revisional authority. Appeal disposed off - decided partly in favor of appellant, only on the issue of attachment of bank property.

Summary

Issues Involved:
1. Validity of the order passed by the revisional authority setting aside the order of the first appellate authority and restoring the assessment made by the Assessing Officer.
2. Determination of the correct sales turnover of food and drink items subject to VAT.
3. Freezing of the appellant's bank account and permission to operate it.

Issue 1: Validity of the order passed by the revisional authority:
The appeal was against the order of the Additional Commissioner of Commercial Taxes setting aside the first appellate authority's order and restoring the Assessing Officer's assessment. The revisional authority found that the first appellate authority accepted the appellant's figures without verifying the correctness of the sales turnover of food and drinks. The High Court observed that the revisional authority did not provide reasons for considering the assessing officer's determination of sales turnover as fair and reasonable. The Court stated that the matter should be referred back to the revisional authority for further inquiry to determine the appropriate percentage of sales of food and drink items subject to tax. The High Court set aside the order of the revisional authority and remanded the matter for a factual examination.

Issue 2: Determination of correct sales turnover of food and drink items:
The Assessing Officer had assessed the total sales at 50% without considering profit margins, while the first appellate authority accepted a 10% figure based on exempted liquor sales. The High Court noted that it cannot undertake fact-finding inquiries and limited its review to questions of law. The Court emphasized that the revisional authority is the ultimate fact-finding body and should determine the correct sales turnover percentage. Therefore, the High Court directed the revisional authority to conduct a detailed examination of the proportion of sales of food and drink items subject to VAT and make a decision after hearing both parties.

Issue 3: Freezing of the appellant's bank account and permission to operate it:
The appellant's bank account was frozen after the order of the revisional authority. The appellant requested the lifting of the freeze as an amount had already been recovered from the account. The High Court considered the circumstances and allowed the appellant to operate the bank account upon furnishing a bank guarantee of ?2,50,000. The Additional Government Advocate suggested permitting account operation on the condition of depositing the amount or providing a bank guarantee. The High Court granted permission to operate the account subject to the final order to be passed by the revisional authority.

In conclusion, the High Court allowed the appeal to the extent of setting aside the order of the revisional authority and remanding the matter for a detailed examination of the sales turnover of food and drink items subject to VAT. The Court also permitted the appellant to operate the bank account upon furnishing a bank guarantee, considering the circumstances of the case. No costs were awarded based on the facts and circumstances presented.