2022 (2) TMI 852 - HC - VAT and Sales Tax

Levy of purchase tax at 2% on the value of gold jewellery - it was the case of the petitioner that they had received the goods from three persons for safe custody and displaying in its business premises and there was no purchase attracting liability under section 7A of the TNGST Act - HELD THAT - In the present case, after verification of the accounts for the years 1996-97 and 1997-98 and memorandum of declaration of deposit and refund of gold ornaments produced by the petitioner, it was found by the assessing officer that the dealer had received gold ornaments to the weight of 1900 grams from 3 persons on 28.11.1996; the receipt of such gold ornaments was entered in the regular stock book at page 47 / Vol.II on 28.11.1996; and the goods so received were sent for conversion and manufacture of new jewels along with the dealer's other purchases of old gold jewels. Further, the contention of the petitioner that the ornaments were received as deposit for show purpose, was not accepted by the assessing officer, taking note of the liberty granted to convert the gold ornaments into new one by melting process. Having regard to the admitted fact that though the petitioner said to have received 1900 grams of gold ornaments from 3 persons for deposit purpose on 28.11.1996, they had not declared the said fact of deposit before the Enforcement wing officials on 07.01.1997 and that, they admitted the entire stock of gold ornaments to be its own stock only at the time of inspection; and no separate stock book was maintained by the petitioner for such deposit, this court finds no reason to differ with the view so taken by the Tribunal - the contention raised on the side of the petitioner that there was no purchase of gold jewellery by the assessee, but only a deposit or loan of such jewellery from the relatives and the same does not attract the levy of purchase tax under section 7A of the Act, cannot be accepted. This court holds that the Tribunal has rightly restored the order of the assessing officer and set aside the order of the appellate authority and hence, the order of the Tribunal does not require any interference - Petition dismissed.

Summary

Issues:
Levy of purchase tax on gold jewellery under TNGST Act - Validity of assessment order - Interpretation of possession and conversion of gold jewellery for tax liability.

Analysis:
1. Levy of Purchase Tax: The petitioner, a dealer in gold and silver jewellery, challenged the assessment order imposing purchase tax at 2% on 1900 grams of gold jewellery valued at ?7,22,000 for the assessment year 1996-97. The Appellate Authority modified the order, but the Tribunal restored the assessing officer's decision. The key contention was whether the gold received by the petitioner for safe custody and display without purchase was liable for tax under section 7A of the TNGST Act.

2. Petitioner's Argument: The petitioner argued that the gold received was not purchased but deposited for safekeeping, as evidenced by agreements and account statements. The petitioner contended that the assessing officer erred in concluding purchase suppression. The Appellate Authority's modification was overturned by the Tribunal, leading to the writ petition before the High Court.

3. Respondent's Argument: The Special Government Pleader for Taxes maintained that the petitioner converted the deposited gold into new jewellery for sale, thus attracting tax liability under section 7A. The respondent emphasized that the stock books did not differentiate between deposited and purchased gold, supporting the assessing officer's decision upheld by the Tribunal.

4. Court's Analysis: After reviewing the submissions and evidence, the court examined whether the gold received by the petitioner constituted a purchase under the TNGST Act. The court noted that the petitioner's receipt of 1900 grams of gold was treated as a purchase since the gold was used in manufacturing new ornaments for sale, making it taxable under section 7A.

5. Assessing Officer's Findings: The assessing officer found that the petitioner received gold ornaments from three individuals, entered them in the stock book, and used them in manufacturing new jewellery. Despite the petitioner's claim of deposit for display, the assessing officer deemed the gold as purchases for business use, leading to the tax liability.

6. Tribunal's Decision: The Tribunal, after detailed analysis, upheld the assessing officer's order, stating that the petitioner's failure to declare the gold as a deposit immediately after inspection raised doubts. The Tribunal rejected the deposit theory, concluding that the gold was purchased for business purposes, aligning with the assessing officer's view.

7. Court's Conclusion: The High Court concurred with the Tribunal's decision, emphasizing that the petitioner's failure to declare the gold as a deposit during inspection and the absence of a separate stock book for deposits supported the tax liability under section 7A. Consequently, the court dismissed the writ petition, upholding the Tribunal's order and denying any interference.

In summary, the judgment addressed the dispute over the taxability of gold jewellery received by the petitioner, ultimately affirming the assessing officer's decision upheld by the Tribunal, based on the interpretation of possession and conversion of gold jewellery for tax purposes under the TNGST Act.