2018 (5) TMI 279 - HC - VAT and Sales Tax

Denial of exemption - penalty u/s 9(2A) of the Central Sales Tax Act, 1956 read with Section 12(3) of the Tamil Nadu General Sales Tax Act, 1959 - whether the Tribunal is legally correct in not affirming the order of the first appellate authority even while the goods sent to outside the state had not been sold by the agent in the order state in the same form in which they were received but manufactured into entirely new goods and then sold? - Whether the order of the Tribunal in deleting the consequential penalty is legally sustainable? - Tax Case Revision is dismissed.

Summary

Issues Involved:
1. Legality of Tribunal's decision on consignment transfer exemption.
2. Legality of Tribunal's decision on deleting the consequential penalty.

Detailed Analysis:

1. Legality of Tribunal's Decision on Consignment Transfer Exemption:

The respondent, a manufacturer of MS ingots, claimed consignment transfer exemption for the assessment year 1992-93. The Assessing Authority disallowed this exemption and levied a penalty under Section 9(2A) of the Central Sales Tax Act, 1956, read with Section 12(3) of the Tamil Nadu General Sales Tax Act, 1959. The Appellate Assistant Commissioner remanded part of the turnover for reassessment, which was again taxed and penalized by the Assessing Authority. The Tribunal ruled in favor of the assessee, leading to the state's revision petition.

The state's primary contention was that the goods sent on consignment (MS ingots) were converted into a different product (CTD bars) by the agent, thus violating the conditions for consignment transfer exemption. The Tribunal, however, held that the submission of Form F declarations was sufficient proof of consignment transfer, irrespective of the subsequent conversion of goods.

The Tribunal referenced Rule 3-A(d) of the Central Sales Tax (Tamil Nadu) Rules, 1957, which requires principals claiming exemption on consignment sales to maintain copies of bills issued by agents. The Tribunal found that the appellant had complied with this requirement and had provided all necessary documentation, including Form F and transport particulars, thereby discharging their burden of proof under Section 6-A of the Central Sales Tax Act.

2. Legality of Tribunal's Decision on Deleting the Consequential Penalty:

The Tribunal also addressed the penalty imposed by the Assessing Authority. The penalty was originally levied because the goods were not sold in the same form as received and there was no proof of tax payment in the other state. The Tribunal found these reasons insufficient for disallowing the exemption and imposing penalties.

The Tribunal cited the case of P. Dhandapani & Co. vs. State of Tamil Nadu, stating that the production of Form F and transport records is sufficient to claim exemption. The Tribunal concluded that the conversion of goods by the agent did not alter the nature of the consignment transfer and that there was no legal requirement for the principal to prove tax payment in the other state.

The Tribunal also noted that the assessment was not a best judgment assessment and that the total turnover was based on the books of accounts, as per the decision in Appollo Saline Pharmaceuticals Limited vs. State of Tamil Nadu, which ruled that penalties under such circumstances are not justified.

Conclusion:

The High Court upheld the Tribunal's decision, dismissing the state's revision petition. The Court affirmed that the Tribunal was correct in granting the consignment transfer exemption and deleting the consequential penalty, as the assessee had complied with all legal requirements and the reasons provided by the Assessing Authority for disallowing the exemption and imposing penalties were not sustainable under the law.