2018 (4) TMI 647 - HC - VAT and Sales Tax

Validity of assessment order - second sales - machinery - under-assessment of tax - Held that - Section 10 contemplates that for the purpose of assessment of tax under the Act, the burden of proof that any transaction or turnover of a dealer is not liable to tax shall lie on such dealer. When exemption of tax on second sales is claimed by the assessee, it is for the assessee to establish that the transactions were bona fide on two aspects, namely, (i) that the purchases were made by the assessee and the goods so purchased had suffered tax already and (ii) that such purchases were made from the dealers whose registration were in force on the date of purchases. The respondent had proved with records, the sufferance of tax was in anterior sales within the state. The first appellate authority, after due verification of the connected records and other related materials, allowed the claim of the assessee, as second sales of machinery and the Tribunal, upon due consideration of the facts, has concurred. Tax case revision petition is dismissed

Summary

Issues:
1. Revision of Sales Tax Appellate Tribunal's order
2. Assessment of turnover and taxable turnover
3. Disallowance of second sales claim
4. Burden of proof on the dealer for tax exemption on second sales

Analysis:
1. The Tax Case Revision was filed to challenge the Sales Tax Appellate Tribunal's order. The respondent, a dealer in Cotton yarn, was initially assessed by the Commercial Tax Officer. The Additional Appellate Assistant Commissioner allowed the appeal filed by the respondent. The State then filed an appeal before the Tamil Nadu Sales Tax Appellate Tribunal, which dismissed the appeal.

2. The Assessing Authority had assessed the turnover and restricted the claim on second sales of machinery. The Tribunal considered the arguments from both sides. The Assessing Authority disallowed the claim of second sales of machinery based on the gross profit and value increment due to the use of spare parts. The Tribunal found that the Assessing Authority was not correct in restricting the second sales claim and assessing the differential value without proper records.

3. The respondent argued that they had sold old textile machineries, and the Assessing Authority had restricted the exemptions claimed for second sales of machinery. The Appellate Assistant Commissioner deleted the disallowance made by the Assessing Authority after thorough review of records and accounts.

4. The burden of proof for tax exemption on second sales lies with the dealer. The dealer must establish that the purchases were made from registered dealers and had suffered tax. The respondent provided records proving the sufferance of tax in anterior sales within the state. The Appellate Assistant Commissioner allowed the claim based on the verification of records. The Tribunal concurred with this decision, finding no perversity warranting interference.

5. The Court dismissed the Tax Case Revision petition, upholding the decisions of the lower authorities. The judgment emphasized the importance of proper documentation and burden of proof for claiming tax exemptions on second sales. No costs were awarded in this matter.