2022 (3) TMI 1387 - HC - VAT and Sales Tax

Enhancement of turnover in the absence of any material to establish that goods found short have been sold is lawful and valid - Applicability of decision of MAHABIR RICE MILL VERSUS STATE OF ORISSA 1980 (9) TMI 268 - ORISSA HIGH COURT where it was held that the dealer was liable to tax on sale of gunny bags as estimated by the assessing officer. HELD THAT - On perusal of the order of the ACST the Court finds that the order is an elaborate one discussing in detail the fraud reports on the basis of which the enhancement was sought to be made. In particular the ACST appears to have carefully analyzed the materials placed on record and found that explanation was available for at least 50% of the so called sale suppression. It is on that basis that the enhancement as ordered by the STO was reduced by almost 50%. The order of the ACST when read carefully does not give impression that it was done in a flippant manner or without discussing the evidence. On the contrary the discussion is elaborate and involves very minute analysis of the entire evidence. The Court is therefore not able to concur with the Tribunal for reversing the order of the ACST and restoring the order of the STO as far as the enhancement of taxable turnover is concerned. The Court is unable to sustain the reasoning of the Tribunal for restoring the order of the STO and reversing the order of the ACST. The question framed by this Court is answered in the negative by holding that the enhancement of turnover in the absence of any material to establish that the goods found short have been sold is neither lawful nor valid and is contrary to the law explained by the Court in Mahabir Rice Mills. The question is accordingly answered in favour of the Assessee and against the Department - the revision petition is disposed off.

Summary

Issues:
1. Revision petition against order of Orissa Sales Tax Tribunal
2. Reduction of taxable turnover by first appellate authority
3. Legality of turnover enhancement without evidence of goods sold
4. Comparison of ACST and STO orders
5. Charge of unexplained shortage of stocks

Analysis:
1. The revision petition was filed against the order of the Orissa Sales Tax Tribunal arising from an appeal before the Tribunal based on the order of the Assistant Commissioner of Sales Tax (ACST). The Tribunal had restored the Sales Tax Officer's (STO) order, which the first appellate authority had reduced.

2. The first appellate authority had reduced the taxable turnover for the year from Rs.30,79,000/- to Rs.15,39,000/-, thereby reducing the demand. However, the Tribunal reinstated the STO's order, considering the reduction by the ACST as unwarranted.

3. The High Court framed a question of law regarding the legality of enhancing turnover without evidence of goods sold. The Court analyzed the ACST's order, noting the detailed examination of fraud reports and evidence. The Court found that the ACST's order was elaborate and involved a minute analysis, contrary to the Tribunal's view.

4. The Court compared the ACST and STO orders, emphasizing that the ACST had provided explanations for a significant portion of the alleged sale suppression, leading to a reduction in the enhancement ordered by the STO. The Court disagreed with the Tribunal's decision to restore the STO's order and held that the enhancement without proof of goods sold was not valid.

5. The main charge against the Assessee was unexplained shortage of stocks. The Court referenced previous judgments to highlight that unless the Department could prove the suppressed stocks were sold, automatic enhancement of taxable turnover was not justified. Consequently, the Court set aside the Tribunal's order and restored the ACST's order, ruling in favor of the Assessee.