Madras High Court
The State Of Tamil Nadu vs Tvl. Solaimalai Granites on 14 March, 2018
Author: S.Manikumar
Bench: S.Manikumar, V.Bhavani Subbaroyan
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 14.03.2018 CORAM: THE HON'BLE MR.JUSTICE S.MANIKUMAR AND THE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN T.C.(R).No.41 of 2018 The State of Tamil Nadu, represented by the Deputy Commissioner (CT), Madurai Division, Madurai. .. Petitioner Vs. Tvl. Solaimalai Granites, Madurai. .. Respondent Prayer: Tax Case Revision is filed under Section 38 (1) of Tamil Nadu General Sales Tax Act, 1959, to revise the order of the Sales Tax Appellate Tribunal (AB) Madurai, dated 20.12.2002 in Madurai Tribunal Appeal No.1067/2001 and 720/2001 of Tvl. Solaimalai Granites, Madurai for the assessment years 1997-98 and 1995-96. For Petitioner : Mr.V.Haribabu Additional Govt. Pleader (Taxes) ORDER
(Order of this Court was made by S.MANIKUMAR, J.) Tax Case Revision is filed to revise the order of the Sales Tax Appellate Tribunal (AB), Madurai, dated 20.12.2002 in Madurai Tribunal Appeal No.1067/2001 and 720/2001 of Tvl. Solaimalai Granites, Madurai for the assessment years 1997-98 and 1995-96.
2. Short facts leading to the Tax Case Revision are that the respondent is exporter and dealer in granite blocks. The dispute in the appeal in MTA.Nos.720 and 1067/01 was in respect of the turnover of Rs.8,20,654/- and Rs.18,10,200/-. The Commercial Tax Officer, Madurai Rural (South) Circle, Madurai, in his original assessment made for the year 1997-98, under TNGST Act, 1959, at the time of check of accounts, rejected the exemption claimed and assessed a turnover of Rs.2,91,150/- at 11%, for the reasons that the sales of exporter within the State have not supported by proper documents. He also estimated the sales turnover for non-production of 13 taxes of Form XX obtained from the Commercial Tax Officer, Mahal Circular, Madurai at Rs.14,30,000/-.Thus, he determined the total and taxable turnover at Rs.18,10,200/-, as against the reported total and taxable turnover at Rs.20,63,814/- and Rs.Nil respectively. He also levied penalty of Rs.2,98,683/-, under Section 12(3)(b) of the TNGST Act, 1959, for the shortfall established in tax payment on final assessment.
3. For the year 1995-96, the Assessing Officer, in his original assessment, found at the time of check of accounts that the receipt of granite raising contractor fee, amounting to Rs.13,25,119/- and commission received amounting to Rs.4,56,128/-, were not supported by proper documents, viz., agreement, labour charges, bills, cash receipt, etc., and assessed the same to tax at 8%. He further estimated the transactions effected through 100 form XX declarations, out of 105 obtained from the department, amounting to Rs.82,49,100/-, at 8% to the value of the granite amount, worked out from 5 Form XX declarations received from the checkposts for non production of Form XX Declaration, at the time of check of accounts. Thus, he determined the total and taxable turnover at Rs.1,02,60,127/-, as against Nil total and taxable turnover reported. He also levied a penalty of Rs.17,23,703/- under Section 12(3)(b) of the TNGST Act, 1959, for the shortfall established in tax payment on final assessment.
4. Aggrieved by the abovesaid penalty levied, the respondent filed A.P.No.176/2000 and CST.No.46/2000, before the Appellate Assistant Commissioner (CT), Madurai (South). The Appellate Assistant Commissioner, vide common order, dated 11.07.2001, dismissed both the appeals. Being aggrieved by the said order, the respondent filed Appeal Nos.1067/01, 720/01 and 721/01 before the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Madurai. After considering the facts and circumstances of the case, the Tribunal, vide order, dated 20.12.2002, held as follows:-
Now we have examined the estimation on 2 form XX declarations production of form XX arrived to the tune of Rs.14,30,000/- for the year 1997-98 under TNGST Act, 1959 and Rs.82,49,100/- for the year 1995-96 under the TNGST Act, 1959 and Rs.2,20,000/- for the year 1996-97 under CST Act, 1956. The learned lower authorities have arrived this estimation by adopting Rs.1,10,000/- per form the years 1997-98 and 1996-97 under TNGST Act, 1959 and CST Act, 1956 respectively, Rs.82,491/- per form XX for the year 1995-96 under TNGST Act, 1959 which were not produced before the Assessing Officer during the check of accounts and for the reason that two form xx delivery notes bearing serial no.333236 and 333237 received from checkposts, were not entry in the daybook. The learned Assessing Officer had treated this as sales omission and made estimation holding that the respective form xx would have been used during the respective assessment years 1997-98 and 1995-96 but the two forms have been omitted to be accounted for in their accounts for the year 1996-97. The above view of the learned Assessing Officer has also been accepted by the first appellate authority. The learned Authorised representative appearing for the appellants strongly contended that the observation of the learned lower authorities that they have not accounted for the transactions as per the form xx received from the checkposts are not correct. In fact in the reply given to the pre-assessment notice also they have mentioned that the transactions mentioned in the two form xx delivery notes were relating to the transport of goods effected to Tvl.Shenoy Granites(p) Ltd., Bangalore and these have been accounted for in their books of accounts vide invoice no.16 dated 6.8.96. So we first verified whether the above arguments advanced by the learned Authorised Representative is correct or not? It is found in reply given to the Assessing Officer against the proposal the appellants have taken the same stand. However, it is found from the accounting procedure of the appellants that they are mentioning invoice numbers only in the sales omission. Regarding the further estimation for non-production of form xx, the learned Authorised representative contended that the form xx received from the Assessing Officer was maintained in the remote quarry site and since they have to transport the goods from quarry site the form xx delivery notes were utilised or the goods intended for sale, goods intended for export and also for transporting granites obtained in respect of the raising contract entered intoby them with Tvl.South India Corporation Ltd., Madras. While taking form xx and form XXIV register after the close of every day from the factory site to the accountant's residence, they have lost the form XX and XXIV register against which they have lodged a police complaint and the police officers after enquiry closed the investigation as not detectable. He produced the corresponding documents and was found that there is proof for loss of form XXIV register. Moreover the learned Authorised representative at the time of hearing also pleaded that apart from the non-maintenance of form XXIV register they have maintained movement register for recording the movement of goods from quarry site. He also produced the register and he pointed out that in the register the Authorities under Mining Act had perused and affixed their signature. We have examined and found that in the movement register they have recorded the details of goods sent to various customers on various dates as per the form XX. In fact in their register were found that the said form XX received from the checkposts by the Assessing Officer is also available and they have been utilised for transport of goods to Tvl. Shenoy Granites (P) Ltd., Bangalore, in which the corresponding invoice has also been mentioned and the invoices had been accounted for in the books. There is evidence for utilising the said missing form as per the movement register. Regarding the goods sent to Tvl., South India Corporation Ltd., Chennai, the learned Authorised Representative has produced the agreement entered into with them and as per the agreement they have to excavate granites from the site of Tvl. South India Corporation Ltd., at Keelaveerasigamani Village. Thus, it is proved that the appellants have utilised form XX said to be missing for the not doing transaction outside the account. The learned lower authorities had also not proved that the appellants have utilised the form XX for transporting the goods outside the account. In the above circumstances, we are of the view that the estimation made in respect of 13 forms for the year 1997-98, 100 forms for the year 1995-96 and tow forms for the year 1996-97 amounting to Rs.14,30,000/- at 11% Rs.82,49,100/- at 8% for the year 1995-96 and Rs.2,20,000/- at 10.7% under TNGST Act 1959 (1997-98) and (1995-96) and CST Act, 1956 for the year 1996-97 respectively, under the respective appeals are not sustainable and accordingly, we order for the deletion of the above turnovers from assessment.
9. Point (ii): Rs.17,23,703/- MTA No.720/01 Rs.2,35,960/- MTA No.1067/01 Rs.6,48,708/- MTA No.721/01 The next dispute arises for consideration is the penalty levied by the Assessing Officer and sustained by the learned Appellate Assistant Commissioner. In all these cases, the pre-export sales and eport sales figures are available in the books of accounts but rejected by the lower authorities as not covered by relevant documents and the appellants have suppressed the turnover said to be effected from the non-production of form XX and treating the commission received as sales suppression. As there are no proved suppression or concealment of turnover established by the department, the penalty sustained by the Appellate Assistant Commissioner is quite illegal. Following the judgment of Supreme Court reported in 28 STC 700 in the case of Tvl.S.G.Jayaraj Nadar and Sons, we order for the deletion of penalty sustained by the Appellate Assistant Commissioner.
In the result, all the three appeals stand partly remanded and partly allowed.
5. Being aggrieved by the abovesaid order, the instant tax case revision is filed by the State.
6. Mr.V.Haribabu, learned Additional Government Pleader (Taxes) submitted that the Tribunal, being the final fact finding authority, has failed to note that Form XX declarations, which were used by the dealers, relating to the transactions effected by them and which were collected from the checkpost, were not brought into accounts. Verification of Form XXIV register revealed that large number of Form XX declarations issued to the dealers were not accounted for in their books and that a police compliant has been lodged for the same. The dealers during the time of final assessment contended that they have accounted for the transactions in another dealer 's accounts viz., Shenoy Granites (P) Ltd., Bangalore. In view of the contradictory statements given by the dealers, the Assessing Officer had no other alternative except to estimate the transactions for the missing Form XX declarations. The estimation so made is widely accepted in judicial forums.
7. He further contended that the Tribunal erred in allowing the appeal filed by the dealers by not following the decision of the STAT(MB), Chennai in T.A.247/89, dated 15.6.90, wherein, similar estimation has been upheld. In a decision reported in 96 STC 597, this Court upheld estimations made under similar circumstances for unaccounted delivery notes.
8. Learned Additional Government Pleader (Taxes) for the petitioner also contended that the Tribunal ought to have seen that but for receipt of copy of Form XX delivery notes from the checkpost the transactions involved would not have come to light and suppression would have gone unnoticed. The Tribunal failed to follow the decisions reported in 96 STC 597 and 104 STC 535 which would squarely apply to the case on hand. Inasmuch as the assessment made is justified, the consequent levy of penalty is warranted in this case.
9. He further submitted that the Tribunal ought to have seen that the Assessing Officer had levied penalty, in as much as the dealers have not reported the above taxable turnover and paid tax as prescribed under the Act which amounts to filing of incorrect or incomplete return and hence, the assessment made falls under Section 12(2). Consequently, the levy of penalty under Section 12(3)(b) is automatic.
10. He has further submitted that the Tribunal erred in deleting the penalty as levy of penalty under Section 12(3)(b) is not called for in this case. As per the amended provisions of Section 12(3)(b) of the TNGST Act, levy of penalty is automatic and it should be levied when there is balance of tax payable to the government. The Tribunal erred in following the decision reported in 28 STC 200 which has no relevance to the case on hand. The Tribunal has failed to note that the first Appellate Authority had rightly and thoroughly discussed the issue in his order and confirmed the assessment made in this case.
Heard the learned counsel for the parties and perused the materials available on record.
11. On the facts and circumstances, the Tribunal has framed the following points for consideration:-
"(i) Whether the turnovers of Rs.18,10,200/- in MTA.No.1067/01, Rs.1,02,58,177/- in MTA.No.720/01 and Rs.40,48,942/- in MTA.No.721/01 sustained by the Appellate Assistant Commissioner are justifiable or not?
(ii) Whether penalty of Rs.2,35,950/-, Rs.17,23,703/- and Rs.6,48,708/- under Section 12(3)(b) of the Act in MTA Nos.1067/01, 720/01 and 721/01 respectively, sustained by the Appellate Assistant Commissioner is reasonable or not?"
12. Tribunal has discussed the facts, analysed evidence, following judgments of the Hon'ble Supreme Court in 28 STC 700 in the case of Tvl.S.G.Jayaraj Nadar and Sons, deleted the penalty.
13. Section 12(3)(b) of the Act deals with, submission of incorrect or incomplete return and for the purpose of levy of penalty, under Clause (b), the tax assessed on the following kinds of turnover shall be deducted from the tax assessed on final assessment, (i) twenty-five per cent of the difference of the tax assessed and the tax paid as per return, if the tax paid as per the return falls short of the tax assessed on final assessment by not more than five per cent;
(i-a) fifty per cent of the difference of the tax assessed and the tax paid as per return, if the tax paid as per the return falls short of the tax assessed on final assessment by more than five per cent but not more than fifteen per cent;
(ii) seventy-five per cent of the difference of the tax assessed and the tax paid as per return, if the tax paid as per the return falls short of the tax assessed on final assessment by more than fifteen per cent but not more than twenty-five per cent;
14. In Appollo Saline Pharmaceuticals (P) Ltd., Vs. Commercial Tax Officer (FAC) and Others, reported in {(2002) 125 STC 505}, considering a decision of the Hon'ble Supreme Court in State of Madras Vs. Jayaraj Nadar & Sons {(1971) 28 STC 700, at paras 5 to 7, held as follows:-
5. The Supreme Court in the case of State of Madras Vs. Jayaraj Nadar & Sons {(1971) 28 STC 700, at page 701, after extracting Section 12 (2) of the Tamil Nadu General Sales Tax Act, 1959, which remains in the same form even now, observed thus:-
The question is whether penalty can be levied while making the assessment under sub-Section (2) of the above Section merely because an incorrect return has been filed. The High Court was of the view that it is only if the assessment has to be made to the best of the judgment of the assessing authority that penalty can be levied. It seems to us that the High Court came to the correct conclusion because sub-sections (2) and (3) have to be read together. Sub-Section (2) empowers the assessing authority to assess the dealer to the best of its judgment in two events: (i). if no return has been submitted by the dealer under sub-section (1) within the prescribed period, and (ii). If the return submitted by him appears to be incomplete or incorrect. Sub-Section (3) empowers the assessing authority to levy the penalty only when it makes an assessment under sub-Section (2). In other words, when the assessing authority has made the assessment to the best of its judgment, it can levy a penalty. It is well known that the best judgment assessment has to be on an estimate which the assessing authority has to make not capriciously but on settled and recognised principles of justice. An element of guess-work is bound to be present in best judgment assessment but it must have a reasonable nexus to the available material and the circumstances of each case: [see State of Kerala Vs. C.Velukutty {(1966) 17 STC 465 (sc)}. Where account books are accepted along with other records, there can be no ground for making a best judgment assessment.
6. The law so declared that the best judgment assessment is based on an estimate and is not one based solely on the account books was reiterated by the Supreme Court in the case of Commissioner of Sales Tax, Madhya Pradesh Vs. H.M.Esufali H.M.ABDULALI {(1973) 32 stc 77}.
7. Though other sub-Sections of Section 12 were amended by the State Legislature subsequent to the date of the judgment in the case of Jayaraj Nadar & Sons {(1971) 28 STC 700 (SC), Sections 12 (1) and 12 (2) have remained in the same form. The legislative intention therefore, except during the period December 3, 1979 to May 27, 1993 and on and after April 1, 1996 must be taken to be to, permit the levy of penalty only in case where the assessment is a best judgment assessment made on an estimate and not by relying solely on the accounts furnished by the assessee in the prescribed return. On and after April 1, 1996 an explanation has been added below Section 12 (3) which requires the turnover relating to the tax assessed on the basis of the accounts of the assessee, to be disregarded, while determining the turnover on which the penalty is to be levied under Section 12 (3).
15. In Indira Industries Vs. State of Tamil Nadu, reported in {2014 (69) VST 139 (Mad.), this Court considered a question, as to whether, levy of penalty under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959, was justifiable, particularly, when there was no suppression pointed out by the Revenue that the Claim of the assessee related only to concessional rate of tax. This Court held as follows:
8. .......Thus when the turnover assessed under the assessment order is drawn from the books of accounts itself, and there being no reference to any specific concealment of the turnover in the accounts, the question of invoking section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959 would not arise. The Explanation to section 12(3)(b) of the Act specifies the turnover which merited to be excluded for the purpose of levy of penalty, one such being the turnover representing addition related to book turnover itself. Thus, even while calculating the turnover for the purpose of levy of penalty, the turnover, which are already available in the books of accounts are to be excluded and only those turnover which are estimated having reference to a specific concealment alone, the purpose of addition, invite the penal provisions under the Tamil Nadu General Sales Tax Act, 1959. In the decision reported in [2002] 125 STC 505 (Mad) (Appollo Saline Pharmaceuticals (P) Limited v. Commercial Tax Officer (FAC)) this court pointed out that when the assessment is based on the accounts turnover, the question of levy of penalty does not arise.
9. In the circumstances, applying the said decision reported in [2002] 125 STC 505 (Mad) (Appollo Saline Pharmaceuticals (P) Limited v. Commercial Tax Officer (FAC)) and the Explanation to section12(3)(b) of the Tamil Nadu General Sales Tax Act, the order of the Sales Tax Appellate Tribunal in levying penalty under section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959 is set aside and the tax case (revision) is allowed. No costs.
16. In Tax Case Revision No.186 of 2009, dated 28/7/2016, between Tvl. Shyam Air Fridge, Vellore and The State of Tamil Nadu, rep. By The Deputy Commissioner (CT), Vellore, on the facts and circumstances of the case, at para No.18, a Hon'ble Dsivision Bench of this Court held as follows:-
Levy of penalty would not be justifiable, if at the time of assessment, turnover has been recorded as per the books of accounts, verified by the department and in such circumstances, suppression cannot be attributed. Transaction giving rise to taxable turnover, has been categorically declared by the assessee as composite works contract and at the concessional rate of 4%, tax has been paid. In such circumstances, it cannot be contended that it is a deliberate and wilful non-disclosure of turnover, in the return and thus rightly proceeded, under Section 12 (3) (b) of the Act, which deals with submission of incorrect or incomplete return. Though penalty is leviable under the provisions of the Act, while exercising discretion, the assessing officer is required to take note of the bona fides of the assessee. Contention of the respondent that levy of penalty under Section 12 (3) is automatic, cannot be accepted, in the light of the explanations to Section 12 (3) of the Act.
17. In the light of the above discussion and decisions, Tax Case Revision Petition is dismissed. No costs.
[S.M.K., J.] [V.B.S., J.]
14.03.2018
Index : Yes\No
Internet : Yes\No
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S.MANIKUMAR, J.
AND
V.BHAVANI SUBBAROYAN, J.
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T.C.(R).No.41 of 2018
14.03.2018