1994 (10) TMI 284 - HC - VAT and Sales Tax

Summary

Issues:
- Assessment of tax on the appellant for alleged first purchase of groundnut kernel
- Exemption claimed by the appellant based on being a second seller
- Dispute regarding the status of Parameswari & Co. as a dealer or decorticator
- Authority to collect tax and levy penalty on Parameswari & Co.
- Jurisdiction of the Joint Commissioner to set aside the order granting exemption

Analysis:
The appellant, a dealer in groundnut oil, was assessed for the year 1977-78 on a total and taxable turnover. The dispute arose when exemption was allowed on the alleged second purchase of groundnut kernel from Parameswari & Co. The Joint Commissioner found that Parameswari & Co. acted as decorticators, not dealers, making the appellant the first purchaser liable for tax. The Joint Commissioner held that the exemption granted was incorrect, revoking the order of the Appellate Assistant Commissioner.

The appellant contended that they were entitled to exemption as a second seller, emphasizing that Parameswari & Co. was a registered dealer, not a decorticator. They argued that the tax collected by Parameswari & Co. was legal and not to be converted into penalty against them. The appellant challenged the Joint Commissioner's decision to reverse the exemption granted by the Appellate Assistant Commissioner.

On the other hand, the Additional Government Pleader argued that Parameswari & Co. was not a registered dealer, making the tax collected illegal. They asserted that the tax paid should be considered a penalty payable by Parameswari & Co. The Government Pleader supported the Joint Commissioner's decision to hold the appellant liable for tax on the first sale.

The Court referred to precedents emphasizing that the onus is on the revenue to tax the first sale, not on the subsequent seller to prove tax payment by the first seller. The Court found discrepancies in the Joint Commissioner's treatment of Parameswari & Co., noting that penalty cannot be levied without proper proceedings and opportunity to be heard. Ultimately, the Court held that the Joint Commissioner erred in setting aside the order granting exemption, restoring the decision of the Appellate Assistant Commissioner. The appeal by the appellant was allowed with costs.