State of Gujarat Vs Hindustan Coca Cola Beverages Pvt. Ltd. (Gujarat High Court)
Conclusion: Penalty of Rs. 25.53 Cr. on Hindustan Coca-Cola was quashed as assessee had not collected any amount by way of sales tax during the exemption period, and the Revenue’s assumption of implicit tax collection was unsustainable.
Held: Assessee-company (“Respondent”) had obtained a sales tax exemption certificate under section 49(2) of the Sales Tax Act and availed sales tax exemption on the sale of manufactured products at its plant situated at Goblej, District Kaira. It was availing the exemption from payment of sales tax under Entry 69 of section 49(2) of the Sales Tax Act for a period of six years. Revenue had issued the show-cause notice by making an assumption that the sale price fixed by Hindustan Coca-Cola for its product was inclusive of the sales tax amount, though the sale of the goods was exempted from payment of sales tax. Sales Tax Officer imposed a penalty of Rs. 25.53 cr. on Hindustan Coca-Cola under section 46(1)(i) of the Gujarat Sales Tax Act, 1969. Assessee preferred First Appeals before the Deputy Commissioner of Commercial Tax, which were dismissed. Consequently, orders of penalty were also upheld in the First Appeals. Deputy Commissioner dismissed the appeals filed by assessee after considering the Books of Accounts maintained by assessee under two different account systems: one under the USGAAP [Generally Accepted Accounting Principles in the USA] and the other under IGAAP [Generally Accepted Accounting Principles in India]. Being aggrieved, assessee preferred Appeals before the Tribunal, which were allowed. Revenue argued that merely because in Books of Accounts, assessee had reversed the entries pertaining to the sales tax payable account, Deffered Sales Tax Asset account and sales tax expenses account which were created in USGAAP, assessee could not have been stated to have not collected sales tax from the end consumers though the exemption on payment of sales tax was available under section 49 (2) of the Sales Tax Act. It was held that there was no evidence on record to show that assessee had collected any amount by way of tax from its distributors, retailers or customers as the sales invoice showed the ‘Nil’ tax in the sales tax column along with the fact that there was endorsement on the sales invoice that the sales taxes were exempted from payment of tax. Tribunal had also found that respondent-assessee had not collected tax even after the expiry of period of exemption. With regard to two different accounting systems maintained by the respondent-assessee, Tribunal had rightly relied upon the accounts maintained in accordance with the IGAAP system which was relevant for the purpose of assessment under the provisions of the Sales Tax Act wherein, no amount was shown as collected as collection of tax by the respondent-assessee and in the returns filed under the provisions of the Sales Tax Act also there was no mention about collection and the Appellate Authority had committed an error in appreciation of the evidence on record resulting into wrong finding that assessee had collected some amount by way of tax from the distributors and retailers. Hindustan Coca-Cola/assessee had not collected any amount by way of tax and therefore, the provision of section 56 of the Sales Tax Act could not be attracted. Tribunal had therefore, rightly held that the amount of tax could not have been bifurcated by the Revenue simply because the sales had been inclusive of tax.
