TMI Tax Updates - e-Newsletter
March 4, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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Income Tax:
Re-opening of assessment - AO could not even have taken the prima facie view that there were reasons to believe that income had escaped assessment - notices u/s 148 was not warranted - HC
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Income Tax:
Revision u/s 264 in favor of assessee - period of limitation of one year is mandatory or directory - the provisions are directory only - CIT directed to decided the application even after lapse of one year - HC
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Income Tax:
Deduction of Interest liability - merely because assessee has disputed its liability it can can not be held as un-ascertained liability - interest liability of earlier year not allowed - HC
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Income Tax:
Reopening of assessment - expenditure has wrongly been allowed - reopening of the assessment completed under section 143(1) by issue of a notice under section 148 was valid - HC
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Income Tax:
Protective assessment - in the case of doubt or ambiguity about real entity in whose hands a particular income is to be assessed the AO is entitled to have recourse to make a protective assessment - HC
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Customs:
Warehoused goods - Issuance of duty remission certificate - goods destroyed during cyclone - notice for recovery of the customs duty is hopelessly belated. - HC
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Customs:
Pending the order of the adjudicating officer, goods can be released to the owner, on taking a bond from him in the proper form with such security and conditions if the adjudicating officer may require. - HC
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Indian Laws:
An Amnesty Scheme in Service Tax – A Big loophole - Article
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Service Tax:
Business of printing & fabrication of readymade advertisement material - imposition of service tax on the goods - stay order of the tribunal modified partially - HC
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Service Tax:
Placement services - campus recruitment of its students - Prima facie, this transaction squarely fell within the ambit of the definition of “Manpower Recruitment or Supply Agency’ - AT
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Central Excise:
Non discharge of Excise duty on installation of Digital Local Telephone Exchange Equipment (DLTEE) system - the extended period of limitation is rightly invoked and imposition of penalty justified - AT
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Central Excise:
Refund claim on excess duty paid rejected as time bar - even though there is a clause in the agreement stipulating downward revision of prices, the same cannot be taken to be an assessment to duty on provisional basis - AT
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VAT:
Genuinety of forms issued by the registered purchasing dealers in ST-1 - for the acts of the purchasing dealer, the selling dealer cannot be held responsible. - HC
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VAT:
Non production of C-Forms before AO but produced before appellate authority during PH - appellate authority directed to examine whether the C-Forms before making an order of pre-deposit - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2013 (3) TMI 36
Re-opening of assessment - As per AO assessee was not entitled to deduction u/s 801C as the petitioner’s product namely PET bottles fall within the negative list stipulated in serial No. 20 of the 13th schedule of the said Act - AY 2005-06 - assessee contested against invoking extended period - Held that:- As noted the arguments the petitioner that the product manufactured by them falls under 3923.30.90 of the Central Excise Classification which is not within the range of products specified in serial No.20 of the 13th schedule of the said Act, that is, within headings 39.09 to 39.15. Therefore clearly the submission of the petitioner is correct. The petitioner’s product does not fall within the negative list stipulated in the 13th schedule of the said Act. If that be the case, then, the answer given by the petitioner in serial No. 14(ii)(e) of form 10 CCB filed along with the return is not wrong, false or inaccurate. Therefore, the petitioner cannot be held to have failed to fully and truly disclose all material facts necessary for its assessment. Insofar as the other assessment years are concerned where the issue of limitation of four years does not arise, the position would not be any different because on a reasonable interpretation of the provisions of section 80-IC(2) read with serial No. 20 of the 13th schedule of the said Act read with the first schedule to the Central Excise Tariff Act, 1985, it would be clear that the petitioner’s product does not fall within the negative list and therefore the petitioner had rightly claimed deduction under section 80-IC of the said Act which the assessing officer in the years in which the assessment had been completed under section 143(3) had allowed after examining the necessary evidence. Even in respect of the year in which there was no assessment order under section 143(3), that is, the assessment year 2007-08, the same cannot be re-opened because no reasonable person can be attributed with any reason to believe that income had escaped assessment when the petitioner’s product clearly does not fall within the negative list. Thus AO could not even have taken the prima facie view that there were reasons to believe that income had escaped assessment - the issuance of notices under section 148 was not warranted - in favour of assessee.
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2013 (3) TMI 35
Reopening of assessment - addition of Rs 77 lakhs receive from other companies on account of amount having allegedly escaped assessment - Held that:- On going through the purported reasons there is no mention of the respondent-assessee not having made a full and true disclosure of the material facts necessary for assessment. On the contrary the purported reasons indicate that the amounts mentioned therein had been shown in the books of accounts as receipts from the companies mentioned therein. Also to note that at serial No.5 of the list of companies from which amounts have been allegedly received, the name of the assessee has been shown. This means that the assessee received the received money from itself, which can hardly be an allegation in this case. Thus the Tribunal has approached the matter in the correct perspective and has held the issuance of the notice under Section 148 to be bad in law and need to be set aside - in favour of assessee.
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2013 (3) TMI 34
Revision u/s 264 in favor of assessee - period of limitation of one year is mandatory or directory - held that:- The Finance Act (No. 2) Act, 1988, has made it obligatory on the Commissioner to pass an order under section 264 within a period of one year from the end of the financial year in which the application is made for revision. However, in computing the period of limitation, the time taken in giving an opportunity to the assessee to be reheard and any period during which any proceedings under this section are stayed by an order or injunction of any court shall be excluded. - Further, the above time shall also not apply in cases of revisionary orders to be passed in; con sequence of or to give effect to any finding or direction in an order of the Appellate Tribunal, the High Court or the Supreme Court. If a revision has not been decided by the Commissioner within the stipulated period, it does not mean that the revision stands allowed. If the provisions of section 264(6) is held to be mandatory then the failure to decide the revision within the stipulated period would cause prejudice not only to the person who has filed the revision but also to the department. It would also defeat or frustrate the leglislative intent. The legislative intent is that the revision should be decided expeditiously, if possible within the time bound period. Failure to do so would not defeat the right of the aggrieved person. Thus, the provisions are directory only. CIT directed to decide the expeditiously - in favor of assessee.
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2013 (3) TMI 33
Deduction of Interest liability - accrual of interest - ascertained liability - held that:- Applying the principles laid down in the Swadeshi Cotton and Flour Mills Pvt. Ltd.(1964 (4) TMI 8 - SUPREME COURT) and Kedarnath Jute Mfg. Co.Ltd.(1971 (8) TMI 10 - SUPREME COURT), to the facts of the present case, we find that admittedly in the present case the applicant was under an obligation to pay an interest at the rate of 8% per annum on the amount of loan advanced by the State Government and merely because it has disputed its liability by contending that it should not be charged, the liability to pay interest was always there and this plea is of no consequence. The liability was ascertained and, therefore, the Tribunal had rightly held that the claim of interest relating to the previous assessment years is not admissible for deduction during the assessment year in question. - Decided in favor of revenue.
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2013 (3) TMI 32
Reopening of assessment completed under section 143(1) - as per AO deduction on account of guest house maintenance expenses to be disallowed - Held that:- It is not in dispute that the assessment was completed under section 143(1) on 6th January, 1987 & subsequently AO noticed that the guest house maintenance expenses had been claimed which was not allowable, therefore, he had reason to believe that the income had escaped assessment. It is note worthy to mention that the assessment order framed u/s 143(1) did not require any application of mind as the same is subject to certain adjustment. The return was accepted and the order was passed. Thus, it cannot be said that there was any application of mind while passing the assessment order and if subsequently it comes to the notice on the basis of the material already on record that an item of expenditure has wrongly been allowed which is against the specific statutory provision then certainly it is not a case of change of opinion but there was reason to believe that the income had escaped assessment. Thus reopening of the assessment completed under section 143(1) by issue of a notice under section 148 was valid. Claim of expenses on the maintenance of guest house - Held that:- As decided in Britannia Industries Ltd.(2005 (10) TMI 30 - SUPREME COURT) in view of specific provision of section 37(4) expenses incurred on the maintenance of guest house is not to be allowed - appeal decided against the assessee.
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2013 (3) TMI 31
Protective v/s substantive assessment - AO was not aware as to who was the real owner of the income and in whose hands the substantive assessment has to be made - Held that:- A protective assessment can be made against a person who has voluntarily filed a return. If AO has doubt about the genuineness and veracity of the claim made by the person, who has filed the return in that event he will be well within his rights to make a protective assessment. Thus in the case of doubt or ambiguity about real entity in whose hands a particular income is to be assessed the Assessing Authority is entitled to have recourse to make a protective assessment, thus the Tribunal was not justified in holding that in the absence of the real owner and as AO was not aware as to who is the real owner of the income a protective assessment should not have been made and instead a substantive assessment has to be made - against the assessee.
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2013 (3) TMI 30
Unexplained investment made in the purchase of bank drafts - addition u/s 69 - ITAT deleted the addition - Held that:- It is common practice in the trade to procure goods on credit which is dependant on creditworthiness of the purchaser . No hard and fast rule can be laid that a seller cannot sell goods to a purchaser on credit. The CIT(Appeals) and also the Tribunal accepted that the goods were purchased on credit and after it was sold the bank drafts were got prepared and there is no investment made by the assessee so as to warrant invoking the provisions of Section 69 - in favour of assessee.
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Customs
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2013 (3) TMI 29
Warehoused goods - Issuance of duty remission certificate - goods destroyed during cyclone - held that:- Section 23 provides for cases where and under circumstances in which duty remission would be available. - Section 72, as noted, pertains to goods improperly removed from warehouse etc. - Upon happening of the events envisaged under clause (b) of sub-section (1) of Section 72 of the Act, the liability of the petitioners to pay duty on the goods arose, any subsequent event such as loss or destruction of the goods thereafter would not alter the situation. Extended period of limitation - held that:- notice for recovery of the customs duty is hopelessly belated. Nothing has been brought on record to suggest that due to pendency of the petition and out of due deference to the court in view of pending disputes, the Department did not issue the show-cause notice. - initial inaction on part of the customs authorities for four years before the petition was filed by itself must be seen as unreasonable delay on their part. Further, the notice is rather vague and general. No specific details have been given as to why such duty is payable in terms of Section 72(1)(b) and (d) of the Act. We may recall that clause (d) of sub-section (1) of Section 72 pertains to a case where bond has been executed and the goods are not accounted for to the satisfaction of the proper officer. Show cause notice quashed - Decided in favor of assessee.
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2013 (3) TMI 28
Provisional release of goods - held that:- it is clear that pending the order of the adjudicating officer, goods can be released to the owner, on taking a bond from him in the proper form with such security and conditions if the adjudicating officer may require. Further, it is also brought to our notice the recent Notification No. 81/2011, dated 25-11-2011, issued by the Government of India, wherein it is stated that if the importer or exporter, as the case may be, execute a bond in an amount equal to the difference between the duty that may be finally assessed or re-assessed and the provisional duty and deposits with the proper officer such sum not exceeding twenty percent of the provisional duty as the proper officer may direct, the proper officer may assess the duty on the goods provisionally at an amount equal to the provisional duty. Respondents directed that the goods of the respondents shall be cleared by the appellants herein on the respondents’ furnishing a bank guarantee of 30% of the differential duty to the satisfaction of the Commissioner of Customs.
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Service Tax
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2013 (3) TMI 39
Business of printing & fabrication of readymade advertisement material - imposition of service tax on the goods - Tribunal directed to deposit Rs.7 Lakhs as pre-deposit within a period of eight weeks and further directed to waive off the balance of dues subject to pre-deposit of balance - applicant submits that the Tribunal decided the matter without considering the financial stringency shown in the affidavit in support of the application for interim relief - Held that:- While entertaining the appeal, the Tribunal is required to look into the prima facie merit of the case as well as financial condition of the appellant.Further, the Tribunal is required to consider the relevant factor like financial hardship and other relevant facts because the condition of deposit will make the purpose of filing of appeal itself nugatory. Appeal is partly allowed - The order passed by the Tribunal is modified to the extent that in case the appellant deposits 10% of the assess amount as pre-deposit for entertaining the appeal within a period of three months from today, the Tribunal shall consider the appeal on merit and decide it, expeditiously, in accordance with law.
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2013 (3) TMI 38
Cenvat credit - input services - outdoor catering services - running a cab service for transportation of employees - held that:- Credit allowed in view of CCE, Bangalore v. Bell Ceramics Ltd. - (011 (9) TMI 792 - KARNATAKA HIGH COURT) and CCE, Bangalore-III v. Stanzen Toyotetsu India (P) Ltd. - (2011 (4) TMI 201 - KARNATAKA HIGH COURT) - Decided in favor of assessee. This order has been rectified entirely by the CESTAT [ 2012 (10) TMI 1139 - CESTAT NEW DELHI ]
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2013 (3) TMI 37
Placement services - Manpower Recruitment and Supply Agency Services - period from 1-5-2006 to 30-9-2009 - held that:- Prima facie, the institute was facilitating campus recruitment of its students by various companies from year to year and collecting charges/fees from such companies as a consideration for the same. Prima facie, this transaction squarely fell within the ambit of the definition of “Manpower Recruitment or Supply Agency’ as amended w.e.f. 1-5-2006. - stay granted partly. Decision in the matter of COMMISSIONER OF SERVICE TAX, BANGALORE Versus M/s INDIAN INSTITUTE OF MANAGEMENT, BANGALORE [2011 (3) TMI 410 - CESTAT, BANGALORE] distinguished.
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Central Excise
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2013 (3) TMI 27
Non discharge of Excise duty on installation of Digital Local Telephone Exchange Equipment (DLTEE) system at Panihati Telephone Exchange put to use in July, 2002 - confirmation of duty demand and equivalent penalty on the Appellant u/s 11AC of the CEA, 1944 - Appellant is a Government of India Undertaking and provider of telephone services assessee contested against invoking of extended period of limitation - Held that:- Department has adduced evidence establishing the fact that even though the Advance Purchase Order(APO) and Purchase Order (PO) were placed on M/s. Alcatel Network Systems India Ltd., but on the basis of a sub-contract clause in the said APO/PO, the entire equipment was sub-contracted to M/s. ITI Ltd. Further, the Department, on investigation, found that not only the equipments supplied by M/s. ITI Ltd., various other parts were also procured by the Appellant and by employing their own engineers, all these equipments were assembled at their site at Panihati. Besides the equipments manufactured by M/s. ITI Ltd. at Bangalore, various other equipments were procured from other units. She has observed that the equipments could not have been entirely manufactured by M/s. Alcatel Network Systems India Ltd. and supplied to the Appellant after payment of appropriate excise duty. The said finding of the adjudicating authority has not been challenged in the present Appeal nor any contrary evidence has been produced thus, it is crystal clear that the Appellant had procured various parts of DLTEE System from different sources including M/s. ITI Ltd., Bangalore, on whom M/s. Alcatel Network Systems India Ltd. had sub-contracted for supply of the said System and the same were assembled at their site by their own engineers. Also, the evidences in the form of statements of the Divisional Engineer and AGM are relevant, as both these employees of the Appellant had clearly agreed/accepted that all these parts were assembled by the engineers of the Appellant at their site resulting into emergence of the said DLTEE. Therefore, the claim of the Appellant that in view of the stipulation in the APO and PO, the DLTEE could not be assembled without necessary training and expertise, being contrary to the evidence, hence, cannot be accepted. As decided in Solid & Correct Engineering Works (2010 (4) TMI 15 - SUPREME COURT) if the attachment to earth is with an intention of affixing the property permanently, then it becomes immovable. On the contrary, if the goods are attached or affixed to earth by way of nuts and bolts to provide a wobble free operation to the machine, such attachment cannot be considered as a permanent attachment, and be called as an immovable property. Applying the said ratio to the facts of the present case, it is find that the Divisional Engineer in his statement dated 01.02.2006 had categorically stated that the DLTEE was screwed by nuts and bolts on the floor to avoid vibration and displacement and the same could be movable after unscrewing. It is commonsense that the DLTEE can easily be shifted to any place from the premises where it is installed, and many a time, these Exchanges are installed in different floors of a multistoried building. Therefore, by affixing the said DLTEE to the floor by nuts and blots would not make it an immovable property and cease to be goods as the intention of affixing it to the floor is not to make it a permanent structure, but to make it functional. Digital Telephone Exchange (DLTEE), as a commodity, is known in the market as the supply of the said product has been tendered and necessary Purchase Orders were also placed on M/s. Alcatel Network Systems India Ltd. for supply of the said System. This indicates that the said Digital Switching System is being bought and sold and therefore, the test of marketability is satisfied in the present case. Since the twin test of movability and marketability, as laid down in Medley Pharmaceuticals Ltd. case [2011 (1) TMI 13 - SUPREME COURT OF INDIA] had been satisfied, no hesitation to observe that the product emerged after assembly of various parts at Panihati known as DLTEE, is an excisable goods and leviable to excise duty under Chapter Heading 85.17 of the CETA. As decided in CCE Vs. Fiat India Ltd. [2012 (8) TMI 791 - SUPREME COURT] that even if manufactured goods are put to use at the place of its manufacture, in theory as well as in practice the same is leviable to excise duty. This situation of use of goods without its removal from the place of manufacture, is covered through a specific provision prescribed at Explanation-II to Rule 4 of the Central Excise Rules, 2002, as was in force at the material time. Thus as in the instant case, it is not in dispute that after assembly of the said DLTEE by the engineers of the Appellant, the same was tested and handed over for its use on 30.07.2002 also admitted in the statement of Shri Nikhil Kumar Das dated 01.06.2006, an evidence not been contradicted and hence the said DLTEE System could be considered as manufactured and removed on 30.07.2002 and therefore, liable to excise duty on the assessable value determined as per the principles laid down under Sec.4 of CEA,1944. In the present case, there is no doubt that the Exchange had been put to use by the Appellant for rendering telephone lines to the respective customers for their use. Hence, the assessable value is correctly determined under Rule 8 of the Central Excise (Determination of Price of Excisable Goods) Rules, 2000. The Appellant have not disputed the cost price adopted for the determination of the value under the said Rule 8 of Valuation Rules,2000. The claim of the Appellant has been found to be incorrect leading to an irresistible inference that the facts were suppressed from the knowledge of the Department, as no excise duty was intended to be paid on the said DLTEE nor any Central Excise registration was taken for manufacture/assembly of the DLTEE System, thus the extended period of limitation is rightly invoked and imposition of penalty justified - in favour of revenue.
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2013 (3) TMI 26
Non-compliance of provisions of section 35F of Central Excise Act, 1944 - Held that:- On going through the records it is find that assessee have enclosed a copy of GR-7 Challan wherein entire directed amount has been deposited by them Commr. (Appeal) has dismissed the appeal for non-compliance with the Provisions of Section 35F as applicable to Finance Act, 1994 by virtue of Section 83 of the Finance Act, 1994 and without affording an effective hearing to the appellant the order passed is set aside and the matter is remanded back for deciding the issue afresh without insisting for any pre deposit from the appellant
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2013 (3) TMI 25
Refund claim on excess duty paid rejected as time bar - reduction of rates of sets of high tensile centre buffer coupler for B. G. wagon and high capacity draft gear, falling under Chapter Sub-heading 8607.00 of CETA, 1985 to Indian Railways - Held that:- On a plain reading of the meaning of relevant date prescribed under Section 11B of the Central Excise Act, 1944, it is clear that where excise duty was paid provisionally under the Act or the rules, the date of adjustment of duty after final assessment, should be the date for calculation of the period of one year for claiming refund of the excise duty paid. In any other case, the date of payment of duty, is prescribed to be relevant date for claiming the refund. In the present case, the duty was paid in July, 2005 on the basis of a provisional price, but not on the basis of provisional assessment under the Central Excise Act & Rules and the circumstances and procedure for resorting to provisional assessment has been prescribed under the Central Excise Rules which had not been followed by the Appellant in the present case and hence, finalization of price on 13.9.06, cannot be construed as finalization of provisional assessment. As decided in Maharashtra Cylinders Pvt. Ltd., (2010 (8) TMI 235 - BOMBAY HIGH COURT) that even though there is a clause in the agreement stipulating downward revision of prices, the same cannot be taken to be an assessment to duty on provisional basis - in favour of revenue.
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CST, VAT & Sales Tax
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2013 (3) TMI 41
Genuinety of forms issued by the registered purchasing dealers in ST-1 - Whether the Tribunal was right in placing the burden upon the dealer to prove it - Held that:- As decided in The State of Madras Versus Radio and Electricals Ltd. and Another [1966 (4) TMI 59 - SUPREME COURT OF INDIA] it is not the burden of the selling dealer to show that the declaration in form No.ST-1 submitted by the purchasing dealer were not spurious or were genuine or that the conditions subject to which the forms were issued to the purchasing dealer by the sales tax department were complied with. The burden will shift to the selling dealer only if it is shown that the selling dealer and the purchasing dealer had acted in collusion and connived with each other in order to evade tax by obtaining spurious forms of declaration. The assessment order dated 28.03.1988 makes no such allegation. It refers only to certain discrepancies between forms ST-1 and the ST-2 accounts given by the purchasing dealers. That is not for the selling dealer to explain. The “on-the-spot” verification supposedly carried out by the sales tax authorities does not appear to have unearthed any material or evidence to show that there was any collusion or connivance between the appellant and the purchasing dealers. The fact that the colour of the form gave rise to the suspicion that the forms are not genuine could be a starting point for further enquiry but by itself does not establish any guilt on the part of the selling dealer. There appears to have been no further enquiry conducted by the sales tax authorities to prove that the forms are spurious, neither is there any evidence to show that the appellant was in any way connected with the alleged fraud committed by the purchasing dealer. Thus wrongly placed the burden upon the selling dealer, which is contrary to the law laid down in the above decisions - in favour of the appellant and against the revenue. Refusal to allow deduction of the sales made by the appellant to dealers under section 4(2)(a)(v) of the Delhi Sales Tax Act, 1975 - penalty of ₹ 5,00,000/- had also been imposed on the dealer for furnishing non-genuine ST-1 forms in relation to the aforesaid sales - Whether the Tribunal was right in law in sustaining the penalty to the extent of ₹ 25,73,072/- imposed under section 50(1)(a) of the DST Act? - Held that:- Reading section 50(1)(a) together with section 56(2), it is seen that they provide for penalty on the dealer who holds, gives, produces or accepts a declaration under the second proviso to section 4(2)(a)(v) which he knows or has reason to believe to be false. It is the burden of the assessing authority to show that the appellant knew or had reason to believe that the ST-1 forms were false. Nothing has been brought on record to discharge this burden. According to the Tribunal, the mere fact that the forms were found in the premises of the appellant during the survey conducted on 13.07.1983 was sufficient to show that the appellant knew that the forms were false is unable to be accepted as in several judgments it has been held that it was for the Sales Tax authorities to establish that the certificates were false to the knowledge of the selling dealer or that there was collusion between the selling and purchasing dealers. This indicates that for the acts of the purchasing dealer, the selling dealer cannot be held responsible. The ST-1 forms are issued by the sales tax authorities to registered dealers. The selling dealer is accordingly entitled to rely upon the certificates as having been genuinely issued. The inaction, neglect or even a fraud of a registered purchasing dealer cannot result in penalising the innocent selling dealer in the absence of his having been a party to the fraud, deception or misrepresentation. There is no evidence to show that the appellant was in any way involved in the procurement of the allegedly fake or false ST-1 forms, so that any culpable knowledge can be imputed to it - The Tribunal failed to note that the main ingredient of section 50(1)(a) that the dealer should know that the forms are false or had reason to be believe that they are false has not been proved by the Sales-Tax authorities, thus Tribunal committed an error in sustaining the penalty to the extent of ₹ 25,73,072/- - in favour of the appellant dealer and against the Commissioner of Sales Tax.
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2013 (3) TMI 40
Liability fastened on account of the absence of C-Forms - stay on condition that the petitioner will remit 10% of the disputed tax and interest - Held that:- Petitioner having produced copies of the C- Forms before the Appellate Authority when the stay petition was heard the appellate authority should have at least prima facie verified that contention. Set aside orders of conditional stay and direct the appellate authority to examine whether the C-Forms produced by the petitioner before it are sufficient to wipe off the liability - in favour of assessee by way of remand.
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