2023 (8) TMI 310 - HC - VAT and Sales Tax

Rectification of order - It is submitted that the petitioner may be asked to file a rectification application under Section 84 of the Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act) as made applicable to assessment under provisions of the Central Sales Tax Act, 1956 (CST Act) - HELD THAT - The Assessing Authority has wide powers to reopen the assessment under Section 27 in the circumstances specified in sub clause(3), on the ground of discovery of new facts or revision by a higher authority on the ground that the findings of the Assessing Authority are contrary to law. Such re-assessment or revision may be done in accordance with the provisions of the General Sales Tax law of the state. As per decision of the Hon'ble Supreme Court in Ashok Leyland Limited vs. State of Tamil Nadu and Another, 2004 (1) TMI 365 - SUPREME COURT , an Assessing Officer can reopen the assessment if it is found that there was a jurisdictional error committed and the order passed under retain Sub-Section (2) of Section 6A was found to be illegal or void ab initio or otherwise voidable - as per this decision, the Assessing Authority would derive jurisdiction to reopen of the assessment only under those circumstances and not otherwise. A reading of the notice issued to the petitioner on 30.12.2021, indicates that it proceeds on the assumption that generally cars with high value are transferred to sales Depots on stock transfer basis only after getting confirmed booking from the customers or making financial arrangement from financial companies. There is a fallacy in this approach. The view that since, the value of the cars manufactured by the petitioner was high and are sold only after getting financial arrangement and confirmed order from financial companies is also based on an assumption, presumption and conjectures. Thus, the conclusion that the cars were transferred to the petitioners's branches based on pre-confirmed order or prior order and therefore, the value of stock transfer was not eligible for exemption under Section 6A, and liable to tax did not give an authority to reopen the assessment. Reading of the impugned order makes it clear that the notice was passed on assumption, presumption and conjecture. There were no material that was available on the date when a revision notice dated 30.12.2021, based on which the assessment could be re-opened. In fact, the notice itself calls upon the petitioner to furnish the purchase orders/stock transfer note received from other branches with documentary evidence for the value of stock transfer for the aforesaid value. If there were no purchase orders, questioning of furnishing non existing purchase order also does not arise. Merely because the petitioner has sold one of the car which was stock transfered, for which the petitioner produced Form F was later sold as an interstate sale and produced Form C and sold as an inter-state sale, ipso facto would not mean that all the eleven stock transferred cars were sold in the course of inter-state sale. To hold that there was an inter-state sale, the twin test as recognized by the Hon'ble Supreme Court in the State of Tamil Nadu vs. The Cement Distributors Private Limited. 1975 (3) TMI 104 - SUPREME COURT , has to be satisfied - The settled view of this Court is that if the movement of goods from one State to another is the result of a covenant or an incident of the contract of sale ten the sale is an inter-state sale. The petitioner has also showed that ten of these cars were given to its own employees and were later transferred to them on written down value after use. Thus, there is no scope for interfering inter-state sale. At best, there could be first sale in the State of Haryana where ten of the cars which were stock transferred were later sold to the petitioners' own employees after use. Petition allowed.

Summary

Issues Involved:
1. Maintainability of the writ petition.
2. Correctness of the assessment under Section 6A of the CST Act.
3. Reopening of assessment based on assumptions and presumptions.

Summary:

1. Maintainability of the Writ Petition:
The respondent argued that the writ petition is not maintainable, relying on previous court decisions that the correctness of Form F cannot be determined under Article 226 of the Constitution of India. The petitioner was advised to file a rectification application under Section 84 of the Tamil Nadu Value Added Tax Act, 2006 (TN VAT Act).

2. Correctness of the Assessment under Section 6A of the CST Act:
The court examined the law relating to stock transfer and interstate sales, referencing the Supreme Court's decision in Ashok Leyland Limited vs. Union of India and Others, which clarified that Section 6-A of the CST Act does not create a conclusive presumption. The burden of proof lies on the dealer to show that the movement of goods was otherwise than as a result of sale. The court noted that the assessment could be reopened if there was a jurisdictional error or if the order was void ab initio.

3. Reopening of Assessment Based on Assumptions and Presumptions:
The court found that the notice issued to the petitioner was based on assumptions and conjectures regarding the high value of cars and their transfer based on pre-confirmed orders. The notice lacked jurisdictional facts and was not supported by any material evidence. The court emphasized that assessment cannot be done by sampling and each transaction must be individually examined. The petitioner had provided evidence that the cars were transferred to its employees and later sold at written down value, negating the claim of interstate sale.

Conclusion:
The court concluded that the impugned orders were unsustainable due to the lack of jurisdictional facts and the improper basis for reopening the assessment. The writ petitions were allowed, and the impugned orders were quashed. No costs were imposed, and connected miscellaneous petitions were closed.