2017 (3) TMI 211 - HC - VAT and Sales Tax

Set-off u/r 44 of the Gujarat Sales Tax Rules, 1970 - proof of payment - whether while claiming the set off u/r 44 of the Rules, 1970, Form No.40 signed by the dealer, produced by the purchaser can be said to be conclusive proof of payment of tax by the dealer? Held that - considering the proviso to Rule 44 of the Rules, 1970, if the assessee proves to the satisfaction of the Commissioner that the relevant tax leviable under the Act has been paid or has become payable on an earlier transaction on the same goods and produces a certificate in Form 40 issued by the dealer from whom such goods were purchased by the assessee, stating inter alia that the sale of the same goods has been or will be included in his turnover of sales and the amount of tax payable, if any, by him under the Act, on such turnover has been or as the case may be, will be paid within the time laid down in rule 31, the assessee/purchaser shall be entitled to set off of such tax paid by the original dealer - the onus is upon such assessee who claims set off, to prove to the satisfaction of the Commissioner that the tax of which the set off is claimed has been paid by the original dealer from whom he has purchased the goods. As with respect to other two transactions the learned Tribunal has remanded the matter to the first Appellate Authority which according to the appellant are similar to that of other three transactions for which the learned Tribunal has rejected the appeal and the order with respect to other two transactions has attained the finality, we deem it fit to remand the matter to the adjudicating Authority to consider the set off claimed by the assessee in light of the observations made hereinabove i.e. the assessee has to prove to the satisfaction of the adjudicating Authority / Commissioner that the tax has been paid by the original dealer and that the assessee is also required to produce certificate in Form 40 issued by the dealer. As observed hereinabove when the aforesaid twin conditions are satisfied, then and then only the assessee shall be entitled to the set off, otherwise not. Appeal allowed in part and part matter on remand.

Summary

Issues Involved:
1. Whether the Tribunal erred in confirming the disallowances under Rule 44 of the Gujarat Sales Tax Rules, 1970, due to the retrospective cancellation of the dealer's registration.
2. Whether submitting Form 40 signed by the dealer can be considered conclusive proof of tax payment by the dealer while claiming the set off under Rule 44 of the Rules, 1970.
3. Whether the onus is on the Assessing Officer to verify tax payment after the submission of Form 40 by the purchaser.

Issue-wise Detailed Analysis:

1. Tribunal's Error in Confirming Disallowances Due to Retrospective Cancellation of Dealer's Registration:
The appellant, a purchaser engaged in reselling and exporting castor oil, claimed set off under Rule 44 of the Gujarat Sales Tax Rules, 1970, for purchases from five dealers. The Assessing Officer rejected the set off for purchases from three dealers, citing that the original dealer, Shreeji Agro, had not paid the tax and its registration was canceled ab initio. The Tribunal partly allowed the appeal but confirmed the rejection of the set off for purchases from three dealers, while remanding the matter for reconsideration for the other two dealers. The appellant contended that the Tribunal should have also remanded the matter for the three dealers, as Form 40 was submitted for all transactions, and the original dealer's registration cancellation should not impact the set off claim.

2. Form 40 as Conclusive Proof of Tax Payment:
The appellant argued that submitting Form 40 should be considered conclusive proof of tax payment by the dealer. The Tribunal, however, held that Form 40 alone is not sufficient to establish tax payment. Rule 44 requires the assessee to prove to the satisfaction of the Commissioner that the tax has been paid by the original dealer and to produce a certificate in Form 40. The Tribunal's contradictory findings on this issue led to the remand of the matter for two dealers but not for the three others. The court emphasized that the submission of Form 40 cannot be considered conclusive proof and that the onus remains on the assessee to prove actual tax payment by the original dealer.

3. Onus on Assessing Officer to Verify Tax Payment:
The appellant contended that once Form 40 is submitted, the onus shifts to the Assessing Officer to verify whether the tax has been paid by the original dealer. The court rejected this argument, stating that Rule 44 clearly places the burden on the assessee to prove tax payment and to produce Form 40. The Tribunal's remand for the two dealers was based on the need for further inquiry by the Assessing Officer, but the court clarified that the primary responsibility lies with the assessee.

Conclusion:
The court held that while claiming set off under Rule 44, the assessee must satisfy the Commissioner by producing relevant material to prove that the tax has been paid by the original dealer and must also produce Form 40. The court remanded the matter to the adjudicating authority to reconsider the set off claims for all transactions, emphasizing that the twin conditions of proving tax payment and submitting Form 40 must be met for the set off to be granted. The appeal was partly allowed, and the adjudicating authority was directed to complete the exercise within three months. The court did not express any opinion on the merits of the set off claim.