2009 (6) TMI 928 - AAAR - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of reassessment orders treating stock transfers as inter-State sales.
2. Condonation of delay in filing appeals.
3. Application of Section 6A(2) of the CST Act.
4. Determination of tax liability on stock transfers of machines and spare parts.
5. Refund of excess tax collected.

Issue-wise Detailed Analysis:

1. Validity of Reassessment Orders Treating Stock Transfers as Inter-State Sales:
The appellant argued that the reassessment orders treating stock transfers as inter-State sales and demanding Central sales tax were invalid. The appellant contended that it had discharged the burden of proof by filing F forms as required under Section 6A(1) of the CST Act, and these forms were accepted by the assessing authority. The Supreme Court's ruling in Ashok Leyland Ltd. v. State of Tamil Nadu was cited, which states that once F forms are accepted, the movement of goods "shall be deemed to have been occasioned otherwise than as a result of sale." The Tribunal and appellate authority's decisions to reopen assessments were challenged on the grounds that there was no fraud or misrepresentation by the appellant.

2. Condonation of Delay in Filing Appeals:
The respondent argued that the delay in filing appeals beyond 150 days could not be condoned due to the bar in the proviso to Section 20(3) of the CST Act. The appellant countered by invoking Section 29(2) read with Sections 14(2) and 5 of the Limitation Act, arguing that the time spent in pursuing the case in the High Court should be excluded. The authority noted that the objection regarding the delay was raised belatedly and that the appellant had taken prompt steps to challenge the Tribunal's order. It was held that the appellant should not be made remediless due to a procedural delay, and the earlier order condoning the delay was upheld.

3. Application of Section 6A(2) of the CST Act:
The authority examined Sections 3 and 6A of the CST Act and the interpretation placed on them by the Supreme Court. It was noted that the initial burden of proof is on the dealer to show that the movement of goods was occasioned by transfer and not by sale. Once an order under Section 6A(2) is passed, the transactions are deemed to be outside the purview of the CST Act. The appellant's case was found to fall within the propositions laid down in Ashok Leyland, and the reopening of assessments was deemed unjustified as there was no fraud or misrepresentation.

4. Determination of Tax Liability on Stock Transfers of Machines and Spare Parts:
The reassessment orders were scrutinized, and it was found that the stock transfers of machines were based on specific customer orders (OCNs) noted on the stock transfer challans, indicating inter-State sales. For spare parts, the reassessment was based on the finding that the appellant sent spare parts on "internal request" rather than in the regular course. The authority noted that the appellant failed to provide comprehensive records and details, leading to an inference that prior orders existed. However, the reassessment of spare parts was not conclusively addressed, and the matter required further examination.

5. Refund of Excess Tax Collected:
The authority directed the refund of excess tax collected, including the amount realized by encashing the bank guarantee. The respondent's undue haste in realizing the tax was noted, and it was ordered that the excess tax be refunded with interest at nine percent per annum from December 5, 2008, up to the date of payment.

Conclusion:
The appeals were partly allowed. The reassessment orders for the years 1998-99 and 1999-2000 were set aside except for the turnover not covered by F forms. For the year 2000-01, the reassessment was upheld due to the lack of an order accepting the F forms. The authority granted relief regarding the rate of tax on spare parts, directing that 25 percent of the turnover be taxed at two percent. Directions were also issued for the refund of excess tax collected.