Madras High Court
State Of Tamil Nadu vs English Electric Co. Of India Ltd. on 30 August, 1990
JUDGMENT Kanakaraj, J.
1. For the assessment year 1981-82, the respondents disputed the following amounts before the Tribunal which were sustained by the Appellate Assistant Commissioner in the appeal filed by the respondents :
"(i) Disallowance of import sales : Rs. 1,19,808.81 at 9 per cent Disallowance of credit notes issued in 1982-83 for invoices withdrawn relating to 1981-82 : 8,884.88 at 4 per cent Rs. 1,15,174.53 at 4 per cent Rs. 3,655.00 at 9 per cent Rs. 35,502.32 at 10 per cent
(ii) Rate of tax : Rs. 18,337.64 at 5 per cent
(iii) Turnover covered by form XVII : Rs. 1,15,275.64 at 5 per cent 7,272.72 at 6 per cent."
On the first of the three disputed amounts, namely the disallowance of the import sales, the argument before the Tribunal was that evidence was available with the respondents, but they could not be produced before the authorities. The evidence was to establish that the imports were made only after the Tamil Nadu Electricity Board placed orders on the respondents. The Tribunal held that there was no evidence before them to show that the entire goods imported were sold only to the Tamil Nadu Electricity Board and that therefore they were constrained to remand the matter to the assessing officer to give an opportunity to the respondents to adduce evidence on that aspect.
2. On the second question relating to the disallowance of credit notes issued in the year 1982-83 in respect of sales which related to the year 1981-82, the plea before the Tribunal was that fresh invoices for the goods returned had been issued and such invoices were placed before the Tribunal. The contention was that since the invoices had been withdrawn, there was no sale and therefore, the assessing officer and the Appellate Assistant Commissioner should have granted exemption. The lower authorities had treated the claim under sections 4C and 4D of the Tamil Nadu General Sales Tax Act (hereinafter called "the Act") and inasmuch as the claim was barred by limitation, the claim was disallowed. The Tribunal held that the fundamental taxation principle is that the turnover cannot be taxed unless the sale was completed or fructified. Inasmuch as the assessee had reasonable cause for failure to intimate the unfructified sales in time that issue was also remanded back to the assessing officer.
3. On the last issue relating to the turnover not covered by form XVII declaration, the plea of the respondents before the Tribunal was that the forms could not be filed along with A-1 return, in time, before the final assessment and that by virtue of the decision in State of Tamil Nadu v. Arulmurugan and Company [1982] 51 STC 381 (Mad.) [FB], the forms could be entertained even at the stage of the appeal before the Tribunal. The further plea was that they had sufficient cause for not filing the forms in time. The Tribunal accepted this plea and remanded this issue also to the assessing officer to verify the form XVII declarations.
4. The Revenue, aggrieved against the said order of remand by the Tribunal, has come up before this Court by way of revision. The argument is that solely for the purpose of enabling the assessee to adduce evidence, the matter cannot be remanded back to the assessing authority. On the second aspect of the case, it is the contention of the Revenue that the claim of the assessee under sections 4C and 4D of the Act was clearly barred by limitation and therefore the question of remand does not at all arise. Similarly on the third and last issue, the contention is that the decision in State of Tamil Nadu v. Arulmurugan and Company [1982] 51 STC 381 (Mad.) [FB] relating to the acceptance of C forms at later stages will not at all apply to the receipt of form XVII declarations. C forms, according to the Revenue, should be filed within the prescribed time or within such further time as the assessing authority, for sufficient cause may permit. On the other hand, section 3(3) of the Act says that form XVII declaration should be filed within the prescribed time and there is no provision for extending the same prescribed time.
5. When the tax case came up for admission on July 26, 1990, Mr. Inbarajan took notice for the respondents and accordingly we directed the case to be posted for final disposal. Mr. R. Karuppan, learned Additional Government Pleader, argues and presses before us the points which we have already noted above in support of the tax case. When the case was posted for further argument on August 16, 1990, the learned Additional Government Pleader referred us to page 15 of the typed set of papers where the Appellate Assistant Commissioner has considered the point. The argument is that the parties were only concerned with sections 4C and 4D of the Act. Similarly, before the Tribunal also, no argument was advanced on the basis that the said sections will not apply. Therefore, it will not be open to the respondents to put forward any new case in this Court. On the issue regarding form XVII declaration, the learned Government Pleader refers to T.C. No. 736 of 1989 (State of Tamil Nadu v. Electronics Trade and Technology Development Corporation Ltd., Madras) dated December 5, 1989 where this Court has applied the decision in State of Tamil Nadu v. Arulmurugan and Company [1982] 51 STC 381 (Mad.) [FB] even in respect of the delay in filing form XVII declaration.
6. Mr. C. Natarajan, learned counsel for the respondents, does not seriously dispute the fact that the assessee ought to have produced the evidence regarding import sales and they having failed to do so, cannot seriously seek for a remand at the stage of the Tribunal. Therefore, the learned counsel does not seriously dispute the contention of the Revenue on the first issue.
7. Learned counsel supports the order of remand made by the Tribunal in respect of the other two issues relating to the disallowance of credit notes and the belated submission of form XVII declaration. The learned counsel also produces before us the written arguments submitted on behalf of the Revenue before the Appellate Assistant Commissioner, which show that the Revenue also proceeded on the basis of section 4D of the Act and the claim not having been made within 30 days, the assessee is not entitled to any relief. Therefore, it is argued that the Revenue cannot now raise the ground in the revision petition on the basis of sections 4C and 4D of the Act. The contention of Mr. Natarajan is that sections 4C and 4D of the Act relate to the refund of tax paid by the dealer and for claiming such refund, a time-limit is prescribed under sections 4C and 4D and the proviso to section 4D. The relevant rule for claiming refund under section 4C is rule 23(2A) and for claiming refund under section 4D, the relevant rule is rule 23(2B). It is admitted by the learned counsel for the petitioner that no such claim was made within the prescribed time. But the learned counsel for the petitioner says that the credit notes issued in the year 1982-83 were for the withdrawal of invoices relating to the assessment year 1981-82. Therefore, at the time of fixing the turnover, these amounts should have been excluded. For the purpose of this argument, reference is made to section 2(r) of the Act. Explanation (2)(iii) of section 2(r) reads as follows :
"(iii) any cash or other discount on the price allowed in respect of any sale and any amount refunded in respect of articles returned by customers shall not be included in the turnover; and"
Rule 5-A of the Rules says that the following amounts mentioned in sub-clause (b) shall not, subject to the conditions specified therein, be included in the total turnover of a dealer. Sub-clause (b)(i) is as follows :
"(b)(i) all amounts refunded to purchasers in respect of goods returned by them to the dealer, when the goods are taxable on the amount for which they have been sold provided that the accounts show the date on which the goods were returned and the date on which and the amount for which refund was made or credit was allowed to the purchaser."
Learned counsel for the petitioner also refers to section 13 of the Act as amended by Act 15 of 1964. Section 13(5) reads as follows :
"(5) Where a dealer has refunded the price of articles returned by customers together with the tax collected from such customers in respect of the sale of such articles and where the amount representing the price refunded by the dealer is included in his turnover, the dealer shall be entitled to claim deduction of the tax levied in respect of such sales, within a period of six months from the date of sale by adjustment in the assessment and the final assessment shall be completed accordingly but such dealer shall not be entitled to claim any adjustment or refund of the tax in respect of the sale of such articles after the expiry of the said period of six months."
In the background of the said provisions of law, the Full Bench decision in Traders and Traders v. State of Tamil Nadu [1977] 40 STC 289 (Mad.) may be referred to with advantage. At page 297, the court observes with approval the observations in Devi Films (Private) Ltd. v. State of Madras [1961] 12 STC 274 (Mad.) which are as follows :
"The Court held on a construction of rule 5(1)(b) of the Turnover and Assessment Rules, which provided that in determining the net turnover, all amounts allowed to purchasers in respect of goods returned by them to the dealer shall be deducted, that if an allowance is made against the goods returned, the deduction can be claimed only in the year in which that allowance has been made and to the real extent of that allowance independent of the date of the sale. The court also held that the date of the sale decides the inclusion in the assessee's assessable turnover and the date of allowance determines the exclusion from the gross turnover under rule 5(1)(b)."
The Full Bench categorically held that there is no warrant for the conclusion that sales return may be claimed in any assessment year, provided the return is made in that year. It was also held by the Full Bench that rule 5-A does not mean that irrespective of the bar of limitation under section 13(5), a dealer would be entitled to tax return in respect of a sales return. The Full Bench rejected the plea of a dealer to obtain deduction from a later year's assessable turnover for a sales return pertaining to an earlier year's sale. Therefore, what follows from the Full Bench judgment is that the sales return should be taken note of in the year of assessment during which the sales were made. To the same effect is the judgment of the Supreme Court in Deputy Commissioner of Sales Tax (Law) v. Motor Industries Co. [1983] 53 STC 48. While dealing with similar rule, namely, rule 9(b)(i) of the Kerala General Sales Tax Rules, the Supreme Court observes as follows :
"Any deduction, that can be made under rule 9(b)(i) of the Rules can only be made from the total turnover of the assessment year in which the goods that are returned within three months of the date of delivery were actually sold. Such deduction cannot be claimed from the total turnover of the succeeding financial year."
The Supreme Court also makes the position clear by saying :
"We are, however, of the view that even in the absence of such an amendment, the deduction in respect of 'sales return' has to be allowed in the assessment relating to the financial year in which the sales of the returned goods had taken place and even where assessment for that year is completed, the department has to comply with the demand for adjustment or refund by making necessary rectification in the order of assessment, provided that other conditions are satisfied, as that is the inevitable consequence of rule 9(b)(i) which allows deduction of the value of the goods returned within three months from the date of their delivery from the total turnover of that assessment year."
The decision in Peico Electronics & Electricals Ltd. v. State of Tamil Nadu [1990] 78 STC 88 to which one of us was a party, lends support to the arguments of the learned counsel for the petitioner.
8. We may, however, point out that before the Appellate Assistant Commissioner, the respondent did not present the case in the manner in which it is projected before us. However, being a question of law, we are impressed by the arguments advanced before us by the learned counsel for the respondent and we are, therefore, sustaining the order of remand for reasons different from the reasons given by the Tribunal. There is room for raising this plea because, admittedly, the sales have taken place during the year 1981-82 and fresh invoices were raised cancelling the original invoices issued during the year 1981-82. Therefore, the argument is that while determining the turnover for the year 1981-82, the said sales in respect of which fresh invoices have been raised should not be considered as sales at all. The assessing officer will take note of the arguments advanced before us and see whether the deductions can be allowed in the assessment year 1981-82 to which the case relates.
8(a). The last question is whether the order of remand to enable the assessee to file form XVII declaration on the ground that it was prevented by sufficient cause from filing such declaration in time by applying the ratio in the decision in State of Tamil Nadu v. Arulmurugan and Company [1982] 51 STC 381 (Mad.) [FB] is correct or not. In Gordon Woodroffe and Company (Madras) Private Ltd. v. State of Madras [1968] 21 STC 120, a Division Bench of this Court held that section 3(3) does not indicate that the declarations should be filed within a prescribed time. Therefore, it was held that a time-limit could not be prescribed under the rule-making power of the Government. It is only thereafter that the proviso to section 3(3) was amended by the inclusion of the words "within the prescribed period". Rule 22 of the Rules says that the declaration referred to in sub-section (3) of section 3 shall be furnished in form XVII. Rule 22(5) prescribes the time-limit and it is as follows :
"(5) A dealer who claims that a sale is liable to tax under sub-section (3) of section 3 shall submit along with his return of turnover in which that sale is included or at any time before the final assessment of the accounts for that year the portion marked 'original' of the declaration received by him from the purchasing dealer and shall also produce for inspection the portion of it marked 'duplicate' if the assessing authority, in his discretion, directs him so to do.
Notwithstanding anything contained in the foregoing, a dealer paying tax under rule 18 may, instead of attaching the declaration in form XVII to his return of monthly turnover in form A-1 keep it in his custody subject to the condition that he submits all the forms of declaration relating to the year along with the last return in form A-1 due for that year or at any time before the final assessment of the accounts for that year."
The words which require to be considered in this case are "at any time before the final assessment of the accounts for that year". The question is whether the final assessment of the accounts for the year will mean only the assessment by the assessing authority or will also include the assessment made on appeal by an appellate authority. The learned counsel for the respondents relies on the judgment of the Supreme Court in Commissioner of Agricultural Income-tax v. V. N. Narayanan Bhattadiripad [1972] 83 ITR 453 where it is held that the Appellate Tribunal has all the powers of the assessing authority and the order of the Tribunal should be considered as an order under section 29 of the Kerala Agricultural Income-tax Act, 1950. The Bombay High Court in Commissioner of Sales Tax v. Minimax Ltd. [1975] 35 STC 388, held that it was permissible in law for the Assistant Commissioner to accept the declarations in form D in exercise of his appellate jurisdiction and subject the sales to the concessional rates of tax under section 8(1) of the Central Sales Tax Act. The judgment of the Patna High Court in Hewitt Robine Incorporation v. State of Bihar [1973] 32 STC 146 is also to the same effect in respect of a declaration under section 6A of the Bihar Sales Tax Act. The Orissa High Court in Sahu Trading Co. v. State of Orissa [1983] 54 STC 122 says that the Assistant Commissioner in exercise of his discretion given to him by a specific rule can accept the declarations, even though the same had not been filed before the assessment was over. It is interesting to see that rule 27(2)(i) of the Orissa Sales Tax Rules runs as follows :
"A dealer who wishes to deduct from his gross turnover the amount of a sale on the ground that he is entitled to make such deductions under item (ii) of sub-clause (a) of clause (A) of sub-section (2) of section 5 of the Act shall fumish a declaration in form XXXIV to the Sales Tax Officer before the completion of the assessment of the period to which the claim relates."
It was held that the Assistant Commissioner while exercising appellate powers was virtually in the same position as the assessing authority under Orissa Sales Tax Act. In Commissioner of Income-tax v. McMillan & Co. , it is observed as follows :
"While we agree that, in the first instance, the Income-tax Officer as the first assessing officer has to form an opinion about the applicability of the proviso to section 13, we do not agree that it is not open to any other authority, which is lawfully in seisin of the order of assessment of which the method of accounting under section 13 is only a part, to come to a different conclusion with regard to the applicability of the proviso."
Finally we come to the Full Bench judgment of this Court which has been relied on by the Tribunal in State of Tamil Nadu v. Arulmurugan and Company [1982] 51 STC 381. The following passage is apposite :
"The appellate authority can itself enter the arena of assessment, either by pursuing further investigation or causing further investigation to be done. It can do so on its own initiative, without being prodded by any of the parties. It can enhance the assessment, taking advantage of the opportunity afforded by the tax-payer's appeal, even though the appeal itself has been mooted only with a view to a reduction in the assessment. These are special and exceptional attributes of the jurisdiction of a tax appellate authority. These attributes underline the truth that the appellate authority is no different, functionally and substantially, from the assessing authority itself."
9. We are satisfied on the basis of the several judgments cited above that the words "any time before the final assessment of the accounts for that year" will mean any time before the final assessment of the accounts for the year either by the assessing authority or by the appellate authority. To make things easier for us a judgment of this Court in State of Tamil Nadu v. Electronics Trade and Technology Development Corporation Ltd. (T.C. No. 736 of 1989 dated December 5, 1989) is placed before us. In that case, this Court has dismissed at the stage of admission a tax revision case filed by the Revenue against the judgment of the Tribunal applying the ratio in the decision in State of Tamil Nadu v. Arulmurugan and Company [1982] 51 STC 381 (Mad.) [FB] in respect of belated filing of form XVII declaration. One of us was a party to the said judgment. We are, therefore, following the said judgment in State of Tamil Nadu v. Electronics Trade and Technology Development Corporation Ltd. (T.C. No. 736 of 1989), though it was a decision rendered at the time of dismissing a tax case without hearing the other side. Accordingly, the remand order of the Tribunal to enable the assessee to file form XVII declaration and the direction to the assessing authority to verify the same and give relief in accordance with law, has to be sustained.
10. For all the above reasons, the tax case is allowed in part setting aside the order of remand in respect of the import sales to the tune of Rs. 1,19,808.81 and sustaining the remand order of the Tribunal in respect of the disallowance of the credit notes and the belated filing of form XVII declarations. There will be no order as to costs.
11. Petition partly allowed.