Law: Sales Tax Act, 1990

Section: 2(35),3,11,33,34,46

Sales Tax Act (VII of 1990)- -Ss. 2(35), 3, 11, 33, 34 & 46-Demand of sales tax on basis of consumption of electricity units-Examination of sales tax returns of assessee, certain discrepancies were pointed out-Department issued show-cause notice, to assessee demanding sales tax of Rs.2,402,4301 under S. 11(3) of the Sales Tax Act, 1990 along with default surcharges and penalty under Ss.33 & 34 of the Act-Adjudicating Authority partially vacated demand of sales tax and upheld recovery of Rs. 2,337,682-Commissioner (appeal) rejected the appeal-Validity- Suppression of sales had been alleged by the department merely on the basis of consumption of electricity units and not on the basis of actual supply of goods-Consumption of electricity units might have any nexus with that of production of goods and any correlation in between could have been made, but no direct relationship could be established in electricity with that of sales and supplies of taxable goods-Both the variables being completely independent to each other, no functional relationship could be established-Impugned demand of sales tax created on the basis of electricity units, was illegal and without lawful authority-Neither the Sales Tax Act, 1990 nor Rules made thereunder prescribed any procedure or formulage to calculate liability of sales tax merely on consumption of electricity units-Under S.3(l)(a) of the Sales Tax Act, 1990, sales tax was on sale and supply of goods which necessarily entailed 'delivery of goods' or 'receipt of money consideration'-No corroborating evidence for any clandestine removal of goods or for receipts of money consideration had been provided by the Department under S.2(35) of the Sales Tax Act, 1990 the yardstick to charge and levy sales tax, was the sale constituting a taxable activity for a taxable supply-Assessment of sales tax on the basis of consumption of electricity units was not a safe rule and yardstick to assess the production-Unless the department was in a position to prove that the assessee did more production and same had been transferred to another party, sales tax could not be charged-Impugned show-cause notice as well as consequent order of both the…

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