2018 (11) TMI 214 - HC - VAT and Sales Tax

Estimation of sales turnover - Demand on the basis of electricity consumption - Whether after accepting the principle that electricity consumption could not form the basis of making best judgment assessment the tribunal could have denied the consequential relief to the assessee by noticing variation in monthly consumption of electricity? - Held that - While the quantum of enhancement may not be interfered with in revisional jurisdiction on an appraisal of facts and evidence, however, where the principle of law stands well settled the taxing authorities and appellate authorities have to accept the same and apply it with clarity and consistency in all assessment proceedings and not to seek or make variations contrary to the principle unless necessary distinguishing facts or circumstances are shown to exist to justify departure from the principle. In the facts of this case, in absence of any material either in the shape of excise documents or other material to establish suppression of turnover, no part of the enhancement could have been sustained on account of the fluctuations in electricity consumption as that would be contrary to the principle itself. In absence of unexplained or glaring excess consumption of electricity or any corroborative material to support the enhancement of turnover, the enhancement sustained by the Tribunal has no legs to stand. Revision allowed - decided in favor of assessee.

Summary

Issues:
Best judgment assessment under the U.P. Value Added Tax Act, 2008 for the assessment year 2012-13.

Analysis:
The judgment revolves around the best judgment assessment conducted under the U.P. Value Added Tax Act, 2008 for the assessment year 2012-13. The applicant, a registered dealer engaged in the manufacture and sale of M.S. Ingots, filed a return admitting a tax liability of &8377;2,73,67,026.60 for the year in question. However, the assessing authority rejected the return and proceeded to make a best judgment assessment by enhancing the disclosed turnover of M.S. Ingots and the estimated purchase of raw material. The applicant challenged this assessment through appeals.

The first appeal partially allowed relief to the assessee, followed by a further appeal to the Tribunal, which also partly allowed the appeal and reduced the disputed tax amount. The crux of the matter lies in the Tribunal's acceptance of the principle that electricity consumption cannot be the sole basis for determining the estimated turnover. The Tribunal acknowledged the lack of material to establish suppression of actual manufacturing or turnover of M.S. Ingots, yet it denied full relief to the assessee based on fluctuations in monthly electricity consumption.

The applicant argued that without any evidence of concealed clearance or excess consumption of electricity, the estimation of turnover cannot be justified. Legal precedents were cited to support this argument, emphasizing the need for clarity and consistency in applying established legal principles in assessment proceedings. The respondent, on the other hand, contended that best judgment assessments involve some guesswork and defended the minor enhancement based on fluctuating electricity consumption.

Ultimately, the High Court held that in the absence of material to support the enhancement of turnover, particularly regarding electricity consumption, the Tribunal's decision was deemed unsustainable. The court emphasized the importance of adhering to established legal principles unless compelling distinguishing facts justify deviation. Consequently, the question of law was answered in favor of the assessee, and the revision was allowed with no order as to costs.