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2003 (3) TMI 690 - HC - VAT and Sales Tax
Issues Involved:
1. Legitimacy of the transport documents under Section 29(2) of the Kerala General Sales Tax Act, 1963. 2. Nature of the transaction between the petitioner and English India Clays Ltd. 3. Applicability of inter-State sale provisions. 4. Imposition of penalty for alleged tax evasion. 5. Determination of tax liability and penalty under the Act. Issue-Wise Detailed Analysis: 1. Legitimacy of the Transport Documents: The Sales Tax Inspector at Walayar inspected a lorry carrying machinery and found that the consignment was transported without proper documents required under Section 29(2) of the Kerala General Sales Tax Act, 1963. The defect noted was the absence of a sales tax registration number for the consignee, raising suspicion of tax evasion. The petitioner secured the goods' release by furnishing a security deposit of Rs. 5,31,912. 2. Nature of the Transaction: The petitioner, a private limited company based in New Delhi, argued that the transport of machinery was supported by all statutory documents and that there was no attempt to evade tax. The machinery was purchased by the petitioner and licensed to English India Clays Ltd. for use in their factory on a monthly fee basis. The petitioner claimed the transaction was an inter-State purchase, and since the agreement was executed outside Kerala, the state had no right to levy sales tax on the transaction. 3. Applicability of Inter-State Sale Provisions: The department contended that there were two transactions: the inter-State purchase of machinery by the petitioner from Presswell Industries and the subsequent local sale to English India Clays Ltd. The Tribunal upheld this view, stating that the transaction between the petitioner and English India Clays Ltd. was a local sale exigible to tax under Section 5(1)(iii) of the Act. 4. Imposition of Penalty for Alleged Tax Evasion: The authorities imposed a penalty of Rs. 5,31,912 on the petitioner, which was upheld by the Appellate Assistant Commissioner and the Tribunal. The Tribunal found that the petitioner attempted to evade tax by not obtaining the required registration under the Act and by transporting goods without proper documentation. 5. Determination of Tax Liability and Penalty: The Tribunal noted that the agreement between the petitioner and English India Clays Ltd. was executed in Kerala, and there was no privity of contract between the outside seller and English India Clays Ltd. The Tribunal concluded that the transaction attracted tax under the Act. The court observed that if the goods had not been intercepted, the transaction would have escaped tax assessment since the petitioner was not a registered dealer. Conclusion: The court found that the transaction between the petitioner and English India Clays Ltd. was taxable under the Act. However, it held that the imposition of the maximum penalty was not justified. The Sales Tax Officer (Enquiry) was directed to modify the penalty order, limiting it to the tax sought to be evaded or one and a half times the tax if the transaction had not been subjected to tax. The petitioner was allowed to adduce evidence regarding whether the transaction was assessed to tax. The tax revision case was disposed of accordingly.
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