2019 (3) TMI 1479 - HC - VAT and Sales Tax

Levy of sales tax - valuation - Sale taking place or not - transfer of goods to sister concern free of cost (Joint Venture partner) - Form XVII declaration - assessee s case is that the excise duty payable by the assessee for clearance of CO2 to TAC was alone collected and it was remitted to the Department including sales tax - Held that - The transaction between the assessee and TAC would qualify for a sale transaction, as defined under Section 2(n) of the Act. There has been transfer of the property in goods from the assessee to TAC and such transfer is in the course of business and it was for a consideration. Though the assessee may state that the consideration received is only to meet the central excise liability, it is still a consideration payable for the goods transferred - Further, the transaction would also fall within the definition of turnover as defined under Section 2(r), as goods have been supplied by the assessee to TAC and it has been for valuable consideration. The assessee s contention cannot be agreed upon that there was no sale. Though the assessee would contend that Form XVII declaration was filed without prejudice to their rights, having taken note of the factual situation involved in the case and the type of transaction, there is no doubt that the transaction is a sale transaction and the assessee is liable for payment of tax applying the definitions under the Act. The Assessing Officer, in the instant case, has adopted the second method under sub-Clause (ii) of Rule 6(b) by taking into consideration the valuation shown in the central excise invoices and alleged that the assessee had suppressed the basic value of CO2 and completed the assessment by demanding tax on the entire value of CO2 as per the central excise invoices. Under what circumstances, Section 12A could be invoked and what are the prerequisites? - Held that - The first and foremost pre-requisite is that the Assessing Officer should be satisfied that a dealer with a view to evade payment of tax, shown in his accounts sales or purchase of goods at prices, which are abnormally low comparing to the prevailing market rate of such goods. If the Assessing Officer is satisfied that the dealer has done so, then the Assessing Officer would be empowered to assess or re-assess the dealer to the best of his judgment, on the turnover of such sales or purchases, after making such enquiry as he may consider necessary and after giving the dealer a reasonable opportunity to show cause against such assessment - There is no iota of evidence produced by the Department to disbelieve the records produced by the assessee. The entire financials of TAC were produced to show that no other payment was made by TAC; the Chief Manager of the assessee has filed an affidavit; the copy of the annual report of TAC was produced. Thus, if the Assessing Officer did not have any material to show that the financials of the assessee were incorrect or false, the question of making a best judgment assessment that too invoking the power under Section 12A of the Act cannot be resorted to. The power under Section 12A is a power exercisable only upon satisfaction of the Assessing Officer that the assessee with a view to evade payment of tax, has shown to have sold/purchased goods at abnormally low prices compared to the prevailing market rate. Thus, merely by surmises and conjectures, the Assessing Officer cannot treat the value of CO2 for the purposes of calculation of central excise to be adopted as the sale price for the purposes of levy of sales tax under the TNGST Act. The assessee will be liable to pay sales tax on the amount collected towards the central excise duty component from TAC, which we have held to be a consideration, payable by TAC to the assessee for CO2 supply. The Assessing Officer is directed to redo the assessment in terms of the above direction - These tax case revisions are allowed - the substantial question of law is answered in favor of the assessee.

Issues Involved:
1. Whether the Sales Tax Appellate Tribunal committed an error in confirming the demand of sales tax on the full value indicated in the Central Excise invoices.
2. Whether the transaction between the assessee and TAC qualifies as a sale under the Tamil Nadu General Sales Tax Act, 1959.
3. Whether the Assessing Officer was justified in invoking Section 12A of the Act for best judgment assessment.
4. Whether the Assessing Officer had sufficient material to conclude that there was suppression of turnover by the assessee.

Detailed Analysis:

1. Whether the Sales Tax Appellate Tribunal committed an error in confirming the demand of sales tax on the full value indicated in the Central Excise invoices:
The petitioner (assessee) challenged the Sales Tax Appellate Tribunal's common order, which confirmed the demand of sales tax on the full value indicated in the Central Excise invoices raised on TAC. The assessee argued that they only collected the central excise duty component and not the full invoice value. The Tribunal, however, dismissed the appeals, leading to the present revisions before the High Court.

2. Whether the transaction between the assessee and TAC qualifies as a sale under the Tamil Nadu General Sales Tax Act, 1959:
The court examined the definitions of "sale" and "turnover" under Sections 2(n) and 2(r) of the Act. The agreement between the assessee and TAC indicated that CO2 was supplied free of cost, with only excise duty and sales tax being collected. Despite the assessee's contention that there was no sale, the court held that the transaction qualified as a sale since there was a transfer of property in goods for consideration, albeit the consideration was for excise duty.

3. Whether the Assessing Officer was justified in invoking Section 12A of the Act for best judgment assessment:
The court analyzed whether the prerequisites for invoking Section 12A were met. Section 12A allows for best judgment assessment if the Assessing Officer is satisfied that the dealer has shown sales at abnormally low prices to evade tax. The court found no satisfaction recorded by the Assessing Officer that the accounts were unreliable or that there was suppression of turnover. The Assessing Officer's reliance on suspicion and conjecture without concrete evidence was deemed insufficient for invoking Section 12A.

4. Whether the Assessing Officer had sufficient material to conclude that there was suppression of turnover by the assessee:
The court noted that the Assessing Officer did not have material evidence to disbelieve the records produced by the assessee, which included financials of TAC, affidavits, and annual reports. The court emphasized that mere suspicion does not amount to proof, and the charge of suppression requires strict evidence. The Assessing Officer's failure to record satisfaction and reliance on suspicion led the court to conclude that the best judgment assessment was not justified.

Conclusion:
The court allowed the tax case revisions, holding that the assessee is liable to pay sales tax only on the amount collected towards the central excise duty component from TAC. The Assessing Officer was directed to redo the assessment in accordance with this direction. The substantial question of law was answered in favor of the assessee, and no costs were imposed.

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