Delhi High Court Upholds Sales Tax Demand Against Berger Paints On Stock Variations

The Delhi High Court has upheld the sales tax demand against Berger Paints on stock variations.

The bench of Justice Yashwant Varma and Justice Dharmesh Sharma has observed that the discrepancies in the sales figures as well as the physical stock were not explained by the appellant. The assessing authority took a fair, just, and reasonable view of the matter in proceeding to carry out a best judgment assessment by enhancing sales by 10% of the net Goods Transport Operator (GTO) after deducting the stock transfer figure of GTO, and accordingly, the levy of tax with interest cannot be unpalatable or an unconscionable exercise of powers.

The appellant/assessee is in the business of manufacturing and marketing paints and allied products.

A team of enforcement officials conducted a survey at the premises of the appellant in Delhi. Certain documents, including diaries of salespersons and certain gate passes, were seized. The Sales Tax Officer, Enforcement, eventually passed an assessment order directing the assessee to pay a sum of Rs. 59,49,503, comprising a tax component, interest, and penalty. Based on variations in physical stock in comparison to the stock on record, The demand for DST was computed by increasing the sales value of the goods.

The appellant challenged the assessment orders before the Additional Commissioner, Sales Tax, New Delhi. The assessee contested that the photocopies of the seized documents were not provided to the appellant and that the case of the department with regard to interstate sales was not sustainable. However, the Special Commissioner, Sales Tax, dismissed the appeal and confirmed the demand on both counts.

On an appeal to the Delhi Value Added Tax Appellate Tribunal (DVATT), it was observed that the appellant had failed to produce any gate pass books on the pretext that old records were not available and thus found justification in the decision of the Assessing Authority.

The assessee contended that DVATT failed to appreciate that the photocopies of the seized documents were never supplied to it, despite specific objections taken before the Assessing Authority.

The court held that, as per Section 6 of the DST Act, the burden of proving that the sale was not effected and that no tax was liable to be paid was upon the appellant. There was no flaw in the decision that the appellant did not make any request to the Assessing Authority to produce the party, namely M/s. Mahabir Prasad and Company, as regards the transaction of sale shown in the loose paper, coupled with the fact that no explanation was submitted by the appellant with regard to the case of suppression of the sale of Rs. 11,63,867. No documents in the nature of stock reconciliation, certified by the auditors of the company or by the accountants concerned, were furnished either.

Counsel For Petitioner: Karan Sachdev

Counsel For Respondent: Rajeev Aggarwal

Case Title: Berger Paints India Ltd Versus Commissioner Of Trade And Taxes

Citation: 2023 LiveLaw (Del) 983

Case No.: VAT APPEAL 26/2022 and CM APPL. 35985/2022

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