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2022 (8) TMI 57 - HC - VAT and Sales TaxAssessment of sales shown in accounts at low prices - Benefit of exemption under Entry-30/Part B/Schedule-IV of the Tamil Nadu Value Added Taxes Act, 2006 - sale of footwear - Since the petitioner has priced the pairs at less than Rs.200/-, this has triggered a suspicion in the minds of the revenue that the prices have been tampered so as to bring them within the cover of the exemption - HELD THAT:- While Section 24 provides for a limitation of six years from the expiry of the year to which the tax relates, Section 27 provides for limitation of six years from the date of original assessment. Some of the assessments are seen to be barred by limitation whether one reckons limitation in terms of Section 24 or 27, as the case may be. There is no reference in the order as to what the specific materials are that lead to the conclusion that the price of the products are undervalued. Though reference is made to the visit of officials from Enforcement, there is no detail in regard to what those officials found to have led to a suspicion of undervaluation either - In the discussion, the authority states that the pricing arrived at by a manufacturer should take into account expenses on advertisement, promotion and transport, royalty and other expenses that would have an impact upon the cost of production. The petitioner has admittedly received royalty from the use of the brand 'VKC' and according to it, the royalty as well as the expenses enumerated by the officer have been taken into account by it, in arriving at the pricing. The petitioner is right in stating that apart from general observation on how proper is to be arrived at, there is nothing brought on record by the officer to support a conclusion that such factors have not been taken into account in arriving at the pricing. There is no scientific assessment of the pricing itself set out in support of the conclusion that relevant parameters to determine fix/pricing have been omitted, thus, leading to a conscious undervaluation. There is an apprehension in the minds of the authorities that the fixation of the prices is abnormal, perhaps for the reason that all the footwear have been priced at sums less than Rs.200/- per pair, and taking note of the variation of the prices at every stage of sale, manufacturer/wholesaler/retailer. Such differences however, may well arise on account of the costs incurred at each stage and the profit margin of each of the entities. Section 24 of the Act has been enacted in pari materia with Section 12A of the Tamil Nadu General Sales Tax Act to address transactions that are not bonafide and have been consciously and willfully undervalued and understated with a view to evade payment of tax. In the present case, the argument of the revenue is that the petitioner has undervalued the transactions merely to obtain the benefit of exemption under Entry-30/Part-B/Schedule-IV of the Act - Section 24 specifically requires undervaluation to be established qua other identically placed manufacturers / dealers. The language of the section is specific insofar as it states that the pricing should be 'abnormally low' when compared to the 'prevailing market price of such goods'. The prevailing market price must be taken into account which means that comparison must have been arrived at as between the prices of the manufacturer/petitioner and other identically placed manufacturers. This has admittedly not been done. In fact, nowhere in the Show Cause Notice nor the impugned order, does the officer enter into such a discussion at all. Thus, though the provision has been referred to in passing, the ingredients of Section 24 have not been referred to, much less satisfied in the impugned order. Petition allowed.
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