The court confirmed that sales tax liability requires clear evidence of collection, with the Tribunal correctly stating that merely inclusive pricing does not prove tax collection on exempt goods.

JUDGMENT :

BHARGAV D. KARIA, J.

1. Heard learned Assistant Government Pleader Mr. Utkarsh Sharma for the appellant and learned Advocates Mr. Kunal Nanavati and learned advocate Mr. Kaustubh Shrivastav for Nanavati Associates for the opponent.

2. This group of appeals is filed by the Revenue under section 78 of the Gujarat Value Added Tax Act, 2003 (for short ‘the VAT Act’] challenging the order of the Gujarat Value Added Tax Tribunal, Ahmedabad [for short ‘the Tribunal’] dated 28.06.2007 in Second Appeal Nos. 402 to 409 of 2006. The Tax Appeals are admitted by order dated 07.12.2012 for consideration of the following substantial questions of law:

(i) Whether the Gujarat Value Added Tax Tribunal was right in law and in facts in coming to the conclusion that respondent had not collected any amount by way of tax?

(ii) Whether the Gujarat Value Added Tax Tribunal was right in holding that the provisions of section 56 of the GUJARAT SALES TAX ACT are not attracted in the present case?

3. The respondent-M/s. Hindustan Coca Cola Beverages Pvt. Ltd. (hereinafter to be referred to as ‘the assessee’] is engaged in manufacture/trading of soft drink, packaged drinking water etc. and registered under the provisions of the GUJARAT SALES TAX ACT , 1969 [for short ‘the Sales Tax Act’] and under Central Sales Tax Act, 1956 [for short ‘the CST Act’].

3.1 The assessee had obtained sales tax exemption certificate under section 49(2) of the Sales Tax Act and availed sales tax exemption of Rs. 49,54,14,504/- till 24.11.2003 on the sale of manufactured products at its plant situated at Goblej, District-Kaira.

3.2 The assessee started payment of sales tax from 25.11.2003. The Sales Tax Officer issued a show-cause notice to the assessee to show cause as to why penalty under sub-section (1) of section 46 of the Sales Tax Act should not be imposed for violation of sub- section (1) of section 56 of the Sales Tax Act in view of the following findings:

(i) The assessee manufactures soft drinks in glass bottles, canisters and packaged drinking water in jar. The assessee is not having the facility of manufacturing soft drink in PET bottles in Gujarat. Most of the requirement/demand of soft drink in glass bottles, canisters and packaged drinking water was fulfilled at their Goblej plant. The assessee also receives soft drink in PET bottles/ can / tetra-pack and packaged drinking water from their plant which is situated outside Gujarat State and these products are also received from other suppliers.

(ii) The assessee paid sales tax in cash i.e. by depositing in Government Treasury on the sale of these products. It was a case of the department that though the assessee had common distributor area-wise for selling all the products, no declaration on glass bottles, PET bottles, Cans, tetra-pack etc. was made on the packing material so as to identify exempted products or non-exempted products.

3.3 According to the Sales Tax Officer in the true spirit of the Scheme of Incentive, the representation that the product is exempted from tax should be made known to the end consumer who bears the burden of tax and therefore, the end consumer must be informed regarding sales tax benefit for the product which was purchased. Accordingly, when incentive of sales tax exemptions is granted, the representation should be made known to the end consumer that the product is exempted from sales tax. However, in the facts of the case, and in the chain of transaction from the assessee to the distributors, distributors to the retailers and to the final consumers, end consumer was not at all made aware that the product purchased was exempted from sales tax.

3.4 The Sales Tax Officer has, after observing