2019 (2) TMI 200 - HC - VAT and Sales Tax

Assessment u/s 3-F on estimation basis - audited balance sheet and other accounts had been maintained in the ordinary course of business - Held that - It is clear that the books of accounts of the assessee had been accepted by the assessing officer. Once those books of accounts were accepted, clearly there was no room to invoke the provisions of Section 3-F(3) of the State Act - To allow the assessing officer to both accept the books of accounts and yet disbelieve part thereof would be to allow self-contradicted findings to arise and exist in the assessment order - answered in favor of the assessee. Whether the goods can be treated as steel structure or steel structural? - Held that - It does not stand established from the record if any tax liability has been created in excess of 4 percent on any goods falling under the scheme of Sections 14 and 15 of the Central Act. Perusal of the assessment order discloses, the higher tax liability was created with respect to items - tower components and galvanized components etc. The Tribunal has made reference to the same and observed there is no error in the quantification of that tax liability. Nothing has been shown to exist on record to establish that those items were of the description as may satisfy the language of Section 14(iv) (v) of the Central Act. In absence of any material being shown to the Court, the findings recorded by the Tribunal and the lower authorities, though not very happily worded, yet do not call for any interference in exercise of its limited jurisdiction of revision, by this Court - answered against the assessee. Revision allowed in part.

Summary

Issues:
1. Assessment based on estimated basis despite maintaining audited balance sheet.
2. Classification of goods as steel structure or steel structural.

Analysis:

Issue 1: Assessment based on estimated basis
The revision was pressed on two questions of law regarding the justification of confirming the assessment under Section 3-F on an estimated basis despite maintaining audited balance sheets. The assessee, a government corporation, was awarded a contract by another government corporation for a specific project. The assessee claimed that certain materials were procured from a third party under specific terms and conditions, with invoices submitted for payment. The assessing officer accepted the audited books of accounts but disallowed part of the labor expenses claimed by the assessee. The Tribunal upheld the disallowance, citing excessive labor charges and applied Section 3-F(3) of the Uttar Pradesh Trade Tax Act to approximate the deduction. The Tribunal also reasoned that imported tower components and accessories were not declared goods, subjecting them to tax as unclassified goods. The Court held that once the books of accounts were accepted, there was no justification to disallow any part of the labor expenses. The assessing officer could not accept the books of accounts and yet disallow any part of the expenses recorded therein without further inquiry.

Issue 2: Classification of goods
Regarding the classification of goods as steel structurals under the Central Sales Tax Act, the assessee argued that even if imported, the tax rate should not exceed 4 percent as per the Act. The Tribunal found that certain tower components and accessories were not declared goods under the Act and imposed a higher tax rate on them. The Court noted that no tax liability exceeding 4 percent was imposed on goods falling under the relevant sections of the Act. The Tribunal's findings, though not ideally phrased, did not warrant interference as no material was presented to establish the items' classification under the Act. Consequently, the Court ruled in favor of the assessee on the first question and in favor of the revenue on the second question, partially allowing the revision.

In conclusion, the judgment addressed the issues of assessment methodology and goods classification under the relevant tax laws, emphasizing the importance of accurate assessment based on accepted books of accounts and proper classification of goods for tax purposes.