Validity of Reopening on the basis of plea that full CST was collected from customers

CA Bimal Jain

Where assessee was allowed partial exemption from CST in terms of Exemption Notification, reopening of assessments on plea that full CST was collected from customers is not justified

Facts:

J.K. Tyre & Industries Ltd. (the Petitioner) was carrying on trading and manufacturing activity in the State of Rajasthan. In order to increase inter-state sales and decrease the quantum of branch transfers, the State Government provided partial exemption from CST payable in respect of inter-state sales, vide the Notification dated May 6, 1986 (Exemption Notification).

The Petitioner was allowed partial exemption from tax payable in respect of inter-state sales for Assessment Years 1988-89 to 2003-04.However, the Anti Evasion, Bhilwara conducted survey at the business premises of the Petitioner and reopened CST assessment for the Assessment Years 1999-2000 to 2001-02, alleging that partial exemption in terms of the Exemption Notification was wrongly claimed by the Petitioner as full CST was collected from the customers.

Held:

The Hon’ble High Court of Rajasthan relying upon the following judgments:

• Amrit Banaspati Co. Ltd. State of Punjab 1992 taxmann.com 36 (SC)
• Kanthi Enterprises State of Karnataka 2002 taxmann.com 2389 (SC)

held that the partial exemption which was to be given could not be known at the beginning of assessment year, therefore, a dealer could not proceed for sale with less rate of tax with assumption to have partial exemption at end of year. It was further held that, although the Exemption Notification uses the term partial exemption, but, in fact it was a partial disbursement of State revenue which was given as an incentive to the dealers of the State in the form of exemption for enhancement of inter-state sales instead of branch transfer.

(Author can be reached at Email: bimaljain@hotmail.com)

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