Law: Sales Tax Act, 1990

Section: 2(41),11

SALES TAX ACT, 1990 (VII OF 1990) Section: 2(41), 11 - Taxable supplies - Input tax adjustments in respect of written off assets - Recovery of sales tax in respect of sale proceeds - Sale of plant and machinery - Failure to pay tax - Show Cause Notice - Creation of demand by the DCIR - Appellate Tribunal remanded the matter - Post-remand proceedings culminated in an order whereby applicant held liable to pay tax, default surcharge and penalty - Appeals filed before CIR(A), Appellate Tribunal, dismissed - Reference to High Court - FACTS Show cause notice by the Deputy Commissioner Inland Revenue, calling upon the applicant to show cause as to why sales tax should not be recovered from the applicant along with default surcharge and penalty. The proceedings culminated in creating a demand. The matter went up to the Income Tax Appellate Tribunal, which remanded the matter to the original forum. The post-remand proceedings culminated in the order whereby tax was held to be recoverable against the applicant along with default surcharge and penalty. The applicant’s appeal against the said order was dismissed by the Commissioner Inland Revenue (Appeals-I). The applicant’s appeal to the Income Tax Appellate Tribunal was also dismissed. ARGUMENTS The sole ground on which the learned counsel for the applicant challenged the order for recovery made concurrently against the applicant by three fora was that the equipment with respect to which the demand had been made had already been written off and therefore could not constitute ‘taxable supplies’. DECISION Passing of order by the DCIT for the recovery of tax, default surcharge and penalty - Validity- Even if it is assumed that the assets had been written off, they were nonetheless disposed of by the applicant and the proceeds from such disposal are clearly mentioned in the applicant’s own cash flow statements for years 2008 and 2009 to be Rs.214,535,000/- and Rs.165,946,000/-, respectively. The disposal of such written off property, plant and equipment for consideration does come within the ambit of a taxable activity or taxable supply as defined in section 2(41) of the Sales Tax Act, 1990. The said Act does not exempt the…

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