18. Vol. 9 VST 220

Whether, amendment in Sec. 6A of CST Act, section on us on person effecting transfer of goods is more rigorous, therefore violation of constitutional provision?

Held –No

The petitioner came in writ before the High Court, against the amended Sec. 6A under CST Act.

Sec. 6A prior to amendment, enabled the person like petitioner to substantiate their claim that a transfer that had been effected from a place in one state by way of stock transfer and not one of sale was by producing supporting material in the form of a declaration by recipient. Now amended provision shifts on us on the petitioner, which is more rigorous. Amended provision makes the task of proving that the movement of the goods is only one of stock transfer and not one of sale was by producing supporting material in the form of a declaration by recipient. Now amended provision shifts onus on the petitioner, which is more rigorous. Amended provision makes the task of proving that the movement of the goods is only one of stock transfer more difficult on the part of persons like the petitioner and that it can also lead to practical difficulties in effecting stock transfer which is otherwise deemed to be sale while in reality, it is not a sale; that the value cannot be determined as there is no sale; that what is sought to be taxed being transfer of stock is not sale in reality and therefore is also in violation of the constitutional provisions.

Section 6A of the Act, if at all, is a provision which is an enabling provision for persons like the petitioner to claim that it is really a stock transfer and not a sale. It enables persons like the petitioner to make good their case that the transaction is one of simple transfer and not one of sale by producing supporting material as provided. The manner in which such proof is to be produced should be in accordance with the prescribed manner as per the amended provision. The mere fact that it may make the task of persons like the petitioner a little more difficult or cumbersome, by itself cannot render the provision unconstitutional. The mere fact that it becomes little more rigorous does not change the nature of the provision as It stood earlier before the amendment and as it stands now after the amendment. The provision was one which only enabled the assessee to place commensurate material to substantiate their claim that it was not sale but a transfer. In the absence of the proof to show that it was only a stock transfer, the deeming provision operates that it is only a sale in which event the tax liability arises.

Such fictions are created under the taxing statute for the purpose of preventing pilferage of revenue. When the provision creating the fiction provides for an opportunity to an assessee or a dealer to make good his case that it is only stock transfer and it is only on his failure to prove the same that the transaction is to be taken as transaction of sale, I do not find anything obnoxious in the provision which can make it unconstitutional’.

It is only on the assessee failing to make good that the transfer is a stock

Transfer, it is taken to be a sale and the object of the Act being to levy tax on inter-State sales & if a dealer fails to make good his version that it is only a stock transfer, creating a fiction to treat the transaction as a sale is a provisions in consonance with the object of the Act and challenge to the validity of the provisions is rejected.

The petitioner then urged for interpretation of sec. 6A, this prayer is rejected, because the petitioner, urges that the petition should be examined at least for interpreting the provisions of section 6A of the Act, it is not necessary for this court to look into the matter unless the matter comes up for this court to look into the matter unless the matter comes up for examination in a proper manner and then brought to this court.

A question of interpretation does not arise at this stage as this court does not examine the assessment order for the purpose of interpreting the provision when the matter can go through various statutory authorities.

New Kiran Cashews vs. Union of India & Others 9VST 220 Kar

19. Vol. 9 VST 433

Can the registration certificate be cancelled on failure to apply for fresh registration in the absence of enabling provision?

Held-No.

The petitioner is a registered dealer under the Tamil Nadu General Sales Tax Act, 1959. The Government of Tamil Nadu introduced the value added tax under the Tamil Nadu Value Added Tax Act, 2006 with effect from January 1, 2007 in the State of Tamil Nadu.

Under the Act, all the registered dealers are obliged to submit an application for obtaining fresh certificate of registration on or before January 31, 2007 and a grace time up to February 15, 2007 was allowed.

The petitioner failed to apply even before the expiry of the grace time.

The Commercial Tax Officer issued a order cancelling the TIN allotted under the Act.

Challenging this order, the petitioner came in writ.

The petitioner claims to have sent an application on January 18, 2007 by ordinary post. But it is disputed by the respondents. The respondents claim that they never received any such application from the petitioner.

As a consequence of the respondents’ claim that they did not receive any application from the petitioner, the impugned order has been passed. Therefore, the question that has to be considered in the writ petition is as to what are the consequences of failure of a person to submit an application in time.

Allowing the writ court found that

A reading of section 88(2) together with rule 4(8) shows that a time-limit for submitting an application was fixed not under the statute, but under the subordinate legislation. Neither the Act nor the subordinate legislation prescribed the consequences of the failure of a registered dealer to apply within the time-limit prescribed.

In this situation cancellation of TIN by Commercial Tax Officer was not correct. Setting aside the order passed by C T O, court directed the petitioner to submit application for fresh registration.

9 VST 433 Majri Steel vs. CTO Tiruchy

20. 9 VST 445

Rate of tax under CST

Tax rate is reduced by u/s. 8(5), and declaration is rejected being defective tax will be levied at the rate reduced rate u/s. 8(2) (b) read with notification issued u/s. 8(5).

The petitioner is a manufacturer of gunny bags and it sells its produce also to buyers outside the State. In course of inter-State trade and commerce one of its bulk purchasers for the period in question was the Directorate General of Supplies and Disposal (in short, DGS & D,). The assessment orders under the Bihar Finance Act and the Central Sales Tax Act, 1956, for the period in question were initially passed on July 5, 2003, while assessing the dealer for the period 2000-01, the claim of petitioner was allowed on the sale is supported with declaration in Form D.

Later some audit objections were raised and on that basis the case of the petitioner was subjected to reassessment. In the reassessment proceeding the Commercial Taxes Officer discarded the declarations in Form “D” issued by the DGS & D. for the defects pointed out in them by the audit and consequently subjected the sale figure to tax at the rate of 10 per cent as provided under section 8(2) of the CST Act.

The petitioner submission was

In view of the State Government’s notification, dated October 13, 1986, any inter State sale of gunny bags could only be subjected to tax at the rate of three per cent regardless of production or non-production of the declaration in Form “D”

Though the declarations in Form “D” produced by the petitioner were not accepted.

The State Government Notification, dated October 13, 1986 fixed the rate of tax on sale of jute bags in course of inter-State trade or commerce at the rate of three per cent both for the purposes of sub-sections (1) and (2) of section 8 of the CST Act and hence, even in case the sales were not covered by sub section (1) of section 8 and fell under sub-section (2) of that section, tax could not be levied at a rate higher than three per cent.

Submission of petition was accepted by the court, because gunny bags or jute bags are not declared goods and, therefore, the sale of gunny bags or jute bags would be covered by clause (b) of sub-section (2) of section 8 of the Act and, hence, in case the sale are not covered by sub-section (1) of section 8(2)(b) of the CST Act.

Court observed that one of the conditions for application of sub-section (1) of sec. 8 is provided in sub-section (4) as the provisions of sub-section (1) shall not apply to any sale in the course of inter-State trade or commerce unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner –

1. a declaration duly filled and signed by the registered dealer the goods are sold containing the prescribed particulars in a prescribed form obtained from the prescribed authority" or

2. If the goods are sold to the Government, not being a registered dealer, a certificate in the prescribed form duly filled and signed by a duly authorised officer of the Government:

Provided that the declaration referred to in clause (a) is furnished within the prescribed time or within such further time as that authority may, for sufficient cause, permit." (emphasis1 supplied)

In the present case as the sales were made to DGS & D, the certificate/ declarations in Form D produced by the petitioner were defective and for that reason held that the turnover in question would fall under sub-section (1) and consequently subjected the turnover to tax at the rate of 10 per cent as provided in clause (b) of sub-section (2) of section 8 of the CST Act.

Court also noted that, sec. 8(5) begins with non obstante clause and it empowers the State Government to fix rate of tax applicable both to causes falling u/s. 8(1) & (2).

Tax rate on jute bags was reduced by notification u/s 8(5) and that was effective from 15-10-1986.

In view of this position court concluded that even if it is held that the sales turnover relating to jute bags to DGS & D, fell outside the purview of sub-section (1) of section 8 of the CST Act for failure to produce proper and valid certificate/declaration in Form “D” it would fall under sub-section (2) of section 8 of the CST Act. But by virtue of the notification the rate of tax under that sub-section too would only be three per cent and not 10 per cent as applied by the Commercial Taxes Officer in the impugned order.

Revenue placed its reliance on the decision of Supreme Court in Sarvottam Vegetables Products 101 STC 547 differences between the reported decision and the case in hand was that in the case before the Supreme Court, the notification issued by the State of Rajasthan fixed a lower rate of tax (1.5 per cent) only for cases falling under sub-section (1) of section 8 of the CST Act. The Rajasthan Government notification did not fix any separate or lower rate of tax under section 8(2) of the CST Act. Hence, once the case fell out of section 8(1) of the CST Act for failure to produce proper and valid declaration in Form ”D”, it naturally attracted the higher rate of 10 per cent as provided under sub-section (2) of section 8 of the Act.

Rameshwara Jute Mills vs. State of Bihar (9 VST 444)

The petitioner is a manufacturer of gunny bags and it sells its produce also to buyers outside the State. In course of inter-State trade and commerce one of its bulk purchasers for the period in question was the Directorate General of Supplies and Disposal (in short, DGS & D). The assessment orders under the Bihar Finance Act and the Central Sales Tax Act, 1956, for the period in question were initially passed on July 5, 2003.

21. 9 VST 450

Limitation – Inordinate delay in service of order – Presumption in favour of assessee

Reassessment order passed one day before the expiry of limitation period, and served on the dealer after three years. Delay in service of order not explained.

Presumption that order passed after limitation period is valid.

The facts leading to this was that petitioner was assessed for the period 1980-81 by the C.T.O. A appeal was filed against this order, while deciding this appeal direction were given to hold fresh assessment. The C.T.O., passed order, but ex parte in 1991, but copy of order and demand notice were not served upon the petitioner till
21-10-1994.

On September 13, 1994 the petitioner received the first letter from the Commercial Tax Officer asking it to clear the dues. The petitioner, thereafter, made a request for serving a demand notice and the order of assessment, if any, which were received by him on October 21, 1994.

Appeal against this order failed therefore petitioner can before the HC in revision petition. Petitioner submits that there was inordinate delay in serving the copy of the ex parte reassessment order and the demand notice. No explanation for such delay was given. Therefore, the ex parte order of reassessment may be presumed to be barred by limitation. The demand notice and copy of the order should have been served by the respondents within reasonable time otherwise the presumption would be that the order was back dated to save the limitation.

Petitioner relied on the decision in the case of State of A.P. vs. M. Ramakishtaiah 93 STC 406, wherein court has observed that “There is no explanation from the Deputy Commissioner why it was so delayed. If there had been a proper explanation, it would have been a different matter. But, in the absence of any explanation whatsoever, we must presume that the order was not made on the date it purports to have been made. It could have been made after the expiry of the prescribed four year period”. The appeal preferred by the State, therefore, was dismissed.

In the present case, we also find that direction to make fresh assessment was given on August 20, 1987 which should have been completed within four years and it was done on August 19, 1991 just one day before the period of limitation. But neither a copy of assessment order nor demand notice could be served even after three years and that too at the request of the petitioner. The delay in service of notice of demand and copy of order without explanation obviously would give rise to the Presumption that the ex parte order of reassessment alleged to have been passed on August 19,1991 was actually not in existence. No order of the Assistant Commissioner of Commercial Taxes, as submitted, was found. Following the principles laid down by the Hon'ble SC Umedbhai & Co. vs. CCT West Bengal 9 VST 450