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1. Cancellation of
Registration
Failure to apply for fresh
registration under the VAT Act within the time stipulated by the Rules had led
to cancellation of Registration certificate. As neither the Rules nor the Act
had provided for such a penal consequence, the cancellation of RC was struck
down.
Alfine Knit P. Ltd. (2009) 21 VST 359 (Mad.)
2. Eligibility Certificate –
Withdrawal
The Supreme Court held that
non disclosure of the fact that the unit was situated on agricultural land was
a material concealment and misrepresentation which could entail withdrawal of
Eligibility Certificate. Since the Scheme had provided for withdrawal of the
benefits in the event of concealment of material facts, reliance by the
assessee on section 19 of the Punjab General Clauses Act was misplaced – the
section merely embodies a rule of construction which can be displaced to the
extent, the provisions, the Scheme and the object of any particular statute
indicates a contrary intention.
State of Haryana vs. Baldev
Spinners P. Ltd. (2009) 21 VST 463 (SC)
3. Incentive Schemes –
Consequences of discontinuation of business
In pursuance of Sales Tax
Incentive Scheme for Wind Power Generation, 1993, tax incentives in the nature
of exemption or deferment of payment of sales tax were liable to be withdrawn
for not keeping the wind farm/windmills in operation for a continuous period
of six years after commissioning them. Where interruption was caused by
cyclone which caused massive destruction, the withdrawal under Clause f of the
Scheme was held to be unjustified as the discontinuance was neither deliberate
nor due to gross negligence on the part of the industrial undertaking. The
fact that one of the windmills, which had been duly insured, had been
commissioned immediately upon getting the insurance claim revealed that the
petitioner had no dishonest intention to commit breach of any of the
conditions on which the benefit had been availed of by it under the scheme. It
was a well-settled legal position that a person could not be constrained to do
something which was impossible. If it appeared that the performance of the
formalities prescribed by a statute had been rendered impossible by
circumstances over which the persons interested had no control, those
circumstances would be taken as a valid excuse. That when the State was
inclined to give some benefit to a tax-payer, the terms or provisions of the
policy should be interpreted in a liberal manner and with an intention to see
that the purpose for which the policy was framed was fulfilled.
Rolcon Engineering Co. Ltd.
vs. State of Gujarat (2009) 21 VST 118 (Guj.)
4. Incentive Schemes –
Discontinuation of business and responsibility of the unit
Withdrawal of tax incentives
consequent upon destruction of windmill due to massive cyclone was held to be
unjustified going by Rolcon’s case cited supra. The Government had passed a
resolution for continuation of benefits if the Windmill was recommissioned
within 12 months from the date of cyclone. However, considering the factors
like shock, arranging for finance and the normal period necessary for
installation of a new windmill after clearing up the debris of the windmill
destroyed in the cyclone, the time limit was relaxed and refixed at 24 months.
The court proceeded to observe that every such affected unit was bound to
discharge its liability under the scheme, as mere destruction of the windmill
could not absolve such a unit from discharging its liability under the Scheme
and that units which recommenced should discharge their liability for the
balance period in accordance with the other conditions stipulated by the
scheme and that units recommencing after the specified period should pay
interest.
Elecon Engineering Co. Ltd.
vs. State of Gujarat (2009) 21 VST 132(Guj.)
5. Inter-State Sales or
Branch Transfer?
The assessee had in its
possession orders booked by various parties with the branches outside the
State, indicating, inter alia, the date on which the supplies had to be made
available in the other States, the variety to be supplied and also the
quantities. Against such orders the head office received payment in advance.
The assessee thereafter transferred the stock to the branches and the entire
goods received by the branch office, without getting unloaded, were
immediately transferred to the buyer who in turn, delivered the goods to the
ultimate consumers. The assessee was aware of the parties/buyers in the other
State to whom they were moving the goods as the cartons carried endorsements
“Party on …. Date). In the absence of any explanation, the endorsement could
not be considered to be innocuous and it could be reasonably inferred that
they were firm orders. Therefore, inter-State movement was held to be pursuant
to contracts of sale and the F forms relating thereto were rejected. However,
as it was not a case of wilful non-disclosure of turnover but a case of a
claim being disallowed, the penal provisions of section 16(2) of the TNGST Act
were not attracted and penalty levied was set aside.
Atlantic Foods vs. State of
Tamil Nadu & Ors (2009) 21 VST 311 (CSTAA)
6. Local Sales or
Inter-State Sales?
In a case where sales made by
locally and the buyer had dispatched the goods to a place outside the State
the onus was on the Department to establish that the sales inter-State sales.
The place of payment of price was not of much consequence in deciding the
question. The goods sold were ascertained goods in a deliverable state and the
property therein passed to the buyer immediately on the delivery of the goods
to him. Merely because that person who took delivery of the goods had
consigned the said goods to his principal outside the State, the purchase of
the goods would not make the transaction of sale one of inter-State sales.
State of A.P. vs. Computer
Graphics P. Ltd. (A.P.) 21 VST 43 (A.P.)
When the actual movement of
goods was at the instance of the purchaser and the part played by the dealer
was only delivery of the articles at the place of business of the dealer, it
could not be said that there was an inter-State trade warranting payment of
Central Sales Tax. The dealer should have undertaken the task of supplying the
articles in the business place of the purchaser in different States for the
purpose of the Central Sales Tax Act. If purchasers from neighbouring States
come and effect purchases from the dealer and take articles to their home
State on their own, it could not be said that there was an element of
inter-State sale in the transaction. Therefore the paramount consideration in
the matter of inter-State sale is the contract as well as the movement of
goods and mere billing in the name of the consumers from other States did not
give rise to an inference that the transactions were inter-State sales liable
for payment of tax under the Central Sales Tax Act.
Saraswathi Agencies vs. Sales
Tax Appellate Tribunal, Chennai (2009) 21 VST 200 (Mad.)
In a case where buyers of
goods were obliged under terms of an Agreement to take goods outside the State
to their respective allotted territories and sell the goods at prices fixed by
the assessee, submit Monthly statements of Stock and Market Reports to the
assessee, the sales were held to be inter-state sales although the sales were
“Ex-works” and transportation was on behalf of the buyers.
DCM Ltd. vs. CST, Delhi
(2009) 21 VST 417 (SC)
7. Penalty proceedings
The Kerala High Court ruled
that penalty proceedings being distinct from assessment proceedings,
jurisdiction to levy penalty for evasion of tax was not affected by the fact
that regular assessment proceedings were pending. Findings in assessment
proceedings were anyways not conclusive and would tantamount to a piece of
evidence and the authority deciding on penalty was required to consider the
material afresh before imposing penalty.
J & J Timbers vs.
Intelligence Office (2009) 21 VST 377 (Ker).
8. Recovery of tax –
Priority of Banks / Financial institutions over State’s Statutory dues?
The Supreme Court had held
that statutory dues under the Bombay Sales Tax Act, 1959 (BST Act) and Kerala
General Sales Tax Act, 1963 (KGST Act) were recoverable by the State
Governments on first priority even before Banks and Financial Institutions
(secured creditors). The Recovery of Debts due to Banks and Financial
Institutions Act, 1993 and Securitization & Reconstruction of Finance Assets
and Enforcement of Security Interest Act, 2002 were enacted by Parliament
under entry 45 in List I in the Seventh Schedule whereas BST Act, 1959 and
KGST Act, 1963 have been enacted by the concerned State Legislatures under
Entry 54 in List II in the Seventh Schedule. The two sets of legislations have
been enacted with reference to entries in different Lists in the Seventh
Schedule. Hence, Article 254 of the Constitution could not be invoked to
strike down the State legislations on the ground that they were in conflict
with the Central legislation. The 1993 and 2002 Acts were enacted by
Parliament after the concerned State Acts and yet, the Parliament did not
incorporate a specific provision like sec. 529A of the Companies Act, 1956 for
creating priority in favour of Banks and Financial Institutions over the
State’s statutory first charge.
Central Bank of India vs.
State of Kerala (2009) 21 VST 505 (SC)
9. Remand by Tribunal –
Obligations
While dealing with the
contentious issue of whether the impugned transactions were inter-state sales
or transfers to branch, the CSTAA has opined that in a case of remand by the
Appellate Tribunal to the assessing authority, the Tribunal had two options:
a. Lay down the legal
principles to the extent necessary and then direct the assessing authority
to examine the facts in the light of such legal principles or
b. The assessing authority
should be left free to decide the factual issues after objective
consideration of the material on record including the party’s explanation.
Further, the
observations/comments made by the Tribunal should be based on concrete reasons
and ought not to be too sweeping or vague. As the period in question was very
old and remanding to the Assessing authority would have been unjust and
improper, the CSTAA accordingly remanded the matter to the Appellate Tribunal
for fresh disposal after recording definite findings on consideration of the
material on record including the explanation filed by the assessee.
Kumaragiri Textiles Ltd. vs.
State of T.N. (2009) 21 VST 162 (CSTAA)
10. Stock declaration – Time
Limit
Upon changeover to VAT
regime, registered dealers were required to file Stock declaration within 30
days of the appointed day i.e. April 1, 2005. The assessee had filed the
declaration on June 18, 2005. The time was extended on April 24, 2006 by Act
11 of 2006 to 45 days. However, it was submitted that Punjab VAT Rules, 2005
were published on June 21, 2005. Since compliance within 45 days (May 15,
2005) was impossible as the Rules were published on June 21, 2005, the Court
held that 45 days should be counted from the date of publication of the said
Rules applying the rule of purposive construction to a statute to make the
Rules workable. Such an interpretation would be consistent with the intention
of the Legislature and Rule framing authorities and would advance the object
of the statute.
State of Punjab & Anr. vs.
City Petro (2009) 21 VST 353 ( P & H)
11. Transfers to Consignment
Agents or Inter- State Sales – Scope of enquiry
While deciding whether
transfers to Agents were to be allowed or treated as Inter state sales, the
Assessing authority has to enquire whether the assessee sent stock to real and
identifiable consignees (agents) who were dealers in that commodity at the
relevant time. The fact that the consignee-agents had filed returns in their
States disclosing the sales effected on behalf of the assessee and had paid
taxes thereon was not very material. Enquiry reports could be obtained by the
assessing officer from other States to the extent that they were relevant and
could be acted upon in the course of the assessment proceedings, subject to
the observance of the principles of natural justice. The filing of the F form
was mandatory during 2000-01 and even in the absence of a valid Form F, the
assessee could discharge the burden of proof of establishing that there was no
inter-State sale by adducing other evidence. The Court dealt with 64 items by
applying these principles and granted relief wherever admissible. The Court
retained the penalty at three times of the tax sought to be evaded without
considering the plea of the assessee to exercise its discretion for levying
penalty at lesser quantum than that prescribed by section 7A(2)(i) of the
APGST Act.
Sheetal Refineries P. Ltd.
vs. State of A.P. 21 VST 212 (CSTAA)
12. Unauthorized collection
of tax by unit granted Exemption Certificate
The assessee had been issued
an Exemption certificate in respect of sales of cement manufactured at a
backward area unit at Cherthala, Kerala. The assessee was granted the
Exemption Certificate with effect from August 7, 2003 on August 9, 2004. It
had collected tax during the intervening period as well as for 21 days after
receipt of Exemption Certificate. It did not deposit tax that was collected
from August 9, 2004 to August 31, 2004 despite receiving Notice for depositing
the same. In response to Notice of Demand, it stated that it had issued Credit
Notes to the concerned customers. When this found to be untrue, the assessee
stated that they had subsequently issued Debit Notes and were adjusting the
excess collection of tax towards increased sales price. The Court held that a
colourable device had been adopted by the dealer and the Tribunal was wholly
unjustified in merely relying on the so-called credit notes and debit notes to
grant relief to the dealer.
State of Kerala vs. Malabar
Cements Ltd. (2009) 21 VST 291 (Ker.)
13. Withdrawal of a
beneficial Circular can be prospective
In response to a query, the
Commissioner had clarified on February 2, 2006 that the rate of tax on
Aluminium composite panel sheets was 4%. After giving the assessee an
opportunity of being heard, vide a fresh Clarification dt. December 11, 2007,
the Commissioner withdrew the old Circular. Before the Court, the Revenue
contended that the old Circular was obtained by misrepresentation of facts.
However, the Court ruled that
the new Circular would be with prospective effect and the benefits conferred
by the earlier Circular could not be denied.
R.K. Corporation vs. Govt. of
Karnataka (2009) 21 VST 386 (Kar.)
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