2022 (1) TMI 156 - HC - VAT and Sales Tax

Levy of penalty U/s 15 A (1) (o) of UP Trade Tax Act - intent to evade payment of tax or not - Form -31 has been produced before the seizure order and the transaction is recorded in the books of account of both consignee and consignor - penalty at an excessive rate or not - HELD THAT - If the goods are purchased against Form 3-A the same are required to be sold in the same form and condition. If the goods so purchased against Form 3-A were even altered in the existing product it will take into sweep of a new product. The case in hand admittedly the body was mounted on the chassis and thereafter final bill was issued which itself is a violation of the Form 3-A. The benefit of Form 3-A can be availed from the payment of purchase documents only in the event the terms conditions thereon are satisfied. Necessary condition is required to be satisfied - In the case in hand it is admitted by the revisionist that final bill was issued after the body was mounted on the chassis which were purchased against Form 3-A. Therefore there is no doubt that the sale of chassis with mounted body made by the revisionist would be selling a product which is in different condition from the chassis or the body and thus the same would be liable to be purchase tax under section 3AAA of the Act. Other submission cannot be permitted to be raised in the revisioinal jurisdiction for the first time. Revision dismissed.

Issues Involved:
1. Legality of penalty under Section 15 A (1) (o) of UP Trade Tax Act.
2. Legality of tax levy under Section 3AAAA of the Act on purchases of chassis against Form 3-A.
3. Validity of agreements executed by the applicant with its customers.
4. Applicability of the decision of the Hon'ble Apex Court in the case of Vodafone and Tribunal in the case of M/s Soorajpur Kasna, Noida.
5. Compliance with remand order and direction issued by the appellate authority and judgment of the Rajasthan High Court in the case of Marudhara Motors Limited.
6. Tax liability on spare parts replaced against warranty claims.

Issue-wise Detailed Analysis:

1. Legality of Penalty under Section 15 A (1) (o) of UP Trade Tax Act:
The court examined whether the Tribunal was justified in confirming the levy of penalty despite the claim of no intention to evade tax. The revisionist, an authorized dealer of Tata Motors, sent chassis to Jabalpur for body mounting. The vehicles were intercepted without Form 31 or 32, leading to seizure and penalty imposition. The court noted that the revisionist issued Form C for lower tax rates and maintained ownership throughout the process. The court concluded that the actions indicated an intention to evade tax, justifying the penalty under Section 15 A (1) (o).

2. Legality of Tax Levy under Section 3AAAA of the Act on Purchases of Chassis against Form 3-A:
The revisionist argued that the chassis were sold in the same form and condition, merely with bodies mounted as requested by customers. The court found that the chassis were not sold in the same form, as mounting the body created a new commercial commodity. The court held that the revisionist's actions violated the conditions of Form 3-A, making them liable for tax under Section 3AAAA.

3. Validity of Agreements Executed by the Applicant with its Customers:
The revisionist presented agreements with customers to justify the body mounting process. The court observed inconsistencies in the dates and details of these agreements and invoices, indicating that the agreements were not genuine. The court concluded that these agreements could not be relied upon to escape tax liability.

4. Applicability of the Decision of the Hon'ble Apex Court in the Case of Vodafone and Tribunal in the Case of M/s Soorajpur Kasna, Noida:
The revisionist cited these cases to argue that tax planning agreements should not be taken adversely. The court did not find these precedents applicable, as the facts of the present case involved clear attempts to evade tax through misrepresentation of the sale process.

5. Compliance with Remand Order and Direction Issued by the Appellate Authority and Judgment of the Rajasthan High Court in the Case of Marudhara Motors Limited:
The court reviewed the compliance with the remand order and found that the revisionist failed to adhere to the directions. The court upheld the findings of the lower authorities, dismissing the revisionist's claims.

6. Tax Liability on Spare Parts Replaced Against Warranty Claims:
The revisionist argued that spare parts replaced under warranty should not attract tax, as they were reimbursed by Tata Motors through credit notes. The court referred to the Supreme Court's decision in Mohd. Ekram Khan & Sons and Maskat Motors Pvt. Ltd., which held that such transactions are taxable. The court dismissed the revisionist's argument, affirming the tax liability on spare parts replaced under warranty.

Conclusion:
Both Sales/Trade Tax Revision No. 970 of 2010 and Sales/Trade Tax Revision No. 343 of 2013 were dismissed. The court upheld the penalties and tax levies imposed by the lower authorities, finding that the revisionist's actions demonstrated an intention to evade tax and violated the conditions of Form 3-A. The court also found that the agreements presented by the revisionist were inconsistent and unreliable. The tax liability on spare parts replaced under warranty was affirmed based on existing legal precedents.

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