Gujarat High Court
Happy Oil Industries vs State Of Gujarat on 18 February, 1993
Author: M.B. Shah
Bench: M.B. Shah
JUDGMENT M.B. Shah, J.
1. In both the references, similar questions arise out of the similar facts, that is, transactions by the applicants for the purchases of oil-cakes from one M/s. Ratilal Bhogilal of Kapadwanj are held to be bogus and only for billing purpose. Hence, at the request of the learned advocate for the parties, both the references are disposed of by the common judgment.
2. Sales Tax Reference No. 3 of 1989 :
The Gujarat Sales Tax Tribunal has referred the following questions for our decision under section 69 of the Gujarat Sales Tax Act, 1969 (hereinafter referred to as "the Sales Tax Act").
1. Whether, in the facts and circumstances of the case, the findings of the Tribunal that the applicant has not purchased oil-cakes from M/s. Ratilal Bhogilal, and that delivery of such oil-cakes to the applicant is not proved are vitiated being perverse, contrary to the evidence produced in the case, and based on no evidence ?
2. If the answer to the above question is in the negative and against the assessee whether in the facts and circumstances of the case, the finding of the Tribunal that the oil-cakes shown as purchased from M/s. Ratilal Bhogilal are really the by-product of manufacture of oil by the applicant sold outside is books, by making unaccounted purchases of groundnuts and tins is vitiated being perverse and contrary to the evidence produced, and based on no evidence, as well as surmises and conjectures ?
3. Whether, in the facts and circumstances of the case the Tribunals, implied finding, that payment of price by the applicant to M/s. Ratilal Bhogilal is not proved is vitiated being perverse, contrary to the evidence and based on no evidence ?
4. Whether, in the facts and circumstances of the case, the Tribunal was justified in laying burden of proof upon the applicant to prove that its vendor M/s. Ratilal Bhogilal has purchased oil-cakes from his Rajasthan vendor, and has paid price to his vendor ?
5. Whether, in the facts and circumstances of the case, the findings of the Tribunal that the only normal and convenient route for the oil-cakes to come from Vanswada to Himmatnagar is via, Ratanpur check-post and it is the only motorable road, while road from Vanswada to Himmatnagar via Mandli and Sarthus check-posts, is not motorable, are vitiated being perverse and based on no evidence ?
6. Whether, in the facts and circumstances of the case, the finding of the Tribunal that electricity consumption of the applicant is more in the months in which, it has shown purchases from Ratilal Bhogilal, is vitiated being perverse and contrary to the evidence ?
7. If the answers to the above questions are in the negative, whether the Tribunal was justified in recording the said findings in spite of the facts that in identical circumstances, the Tribunal had recorded the findings on the very subject-matter in favour of the order assesses, viz., M/s. Saraswati Oil Mills and M/s. Mahalaxmi Oil Mills ?
8. Whether, in the facts and circumstances of the case, the Tribunal was justified in law in relying upon the ratio of electricity consumption with the production of oil by the applicant in arriving at the above findings ?
9. Whether, in the facts and circumstances of the case, the Tribunal has applied correct principles of law in sustaining the levy of penalties under sections 45(2)(c) and 45(6) of the Gujarat Sales Tax Act, 1969 ?
3. The aforesaid questions arise in the background of the following facts :
The applicant, M/s. Happy Oil Industries, is a partnership firm carrying on the business of edible oils and of reselling oil-cakes at Himmatnagar. It is a registered dealer under the Sales Tax Act. It is the case of the applicant that during Samvat Year 2029 (November 6, 1972 to October 26, 1973) the applicant purchased oil-cakes from six dealers including M/s. Ratilal Bhogilal of Kapadwanj. The dispute in this reference pertains to the alleged purchases of oil-cakes made by the applicant from M/s. Ratilal Bhogilal. It is the say of the applicant that in Samvat Year 2029 it had purchased oil-cakes weighing 2,54,744 kgs. for a sum of Rs. 3,19,488 and during Samvat Year 2030 it purchased oil-cakes weighing 35,250 kgs. for a sum of Rs. 45,075 from M/s. Ratilal Bhogilal. These purchases were made by the applicant against issuance of declaration in "form 17". On December 20, 1973, the business premises of the applicant were visited by the Sales Tax Officer, Enforcement Branch, and some account books were seized. On December 24, 1973, the business premises of M/s. Ratilal Bhogilal were also visited by the sales tax authorities wherefrom some account papers were seized. After scrutiny of the materials, the Sales Tax Officer issued a notice dated May 9/12, 1975 to the applicant to show cause as to why the purchases of oil-cakes made by the applicant from M/s. Ratilal Bhogilal should not be held to be non-genuine and why it should not be held that oil-cakes were produced by it out of the suppressed purchases of groundnuts and the suppressed manufacture of oil therefrom, which was sold without accounting in the books of account. The sales tax authority for this purpose gave the following reasons :
(1) In Samvat Year 2029, 42, 163 units of electricity had been consumed against which 12,484 tins of oil had been shown to have been produced. The said production of oil was less in proportion to the aforesaid electricity consumption.
(2) On enquiry, it was found that there was no firm in the name of Harishchandra Nagavat & Co. at village Dhanmandi, Vansvada in the State of Rajasthan from whom it is alleged that M/s. Ratilal Bhogilal had purchased oil-cakes.
(3) There was no motor truck number disclosed by the applicant or by M/s. Ratilal Bhogilal to prove that oil-cakes purchased were brought by the said vehicle.
(4) The register maintained by the Ratanpur check-post from November 17, 1972 to March 1973 was verified and no entry was found indicating that the truck containing oil-cakes had passed through the said check-post. Some other discrepancies were also mentioned.
4. After hearing the applicant, the Sales Tax Officer passed the assessment orders for Samvat Year 2029 and Samvat Year 2030 on December 31, 1975. The Sales Tax Officer did not believe the purchases of oil-cakes made by the applicant from M/s. Ratilal Bhogilal as genuine purchase and held that the oil-cakes were manufactured by the applicant in its own mill during the course of manufacture of groundnut oil after purchasing groundnuts from the market. He accordingly determined the sale of such additional unaccounted manufacture of oil on the basis of purchases of groundnuts and empty tins and levied sales tax on the sale of oil during those years. The Sales Tax Officer also imposed penalties under section 45(2)(c), 45(6) and 45(8) of the Sales Tax Act.
5. Against the said assessment orders, the applicant preferred two first appeals before the Assistant Commissioner of Sales Tax. The Assistant Commissioner confirmed the decision of the Sales Tax Officer by holding that the alleged purchases from M/s. Ratilal Bhogilal were only by way of bogus billing. However, so far as the estimation was concerned, he gave partial relief and consequential relief in penalties imposed under section 45(2)(c) and section 45(6) of the Sales Tax Act. He totally remitted the penalties under section 45(8) of the Sales Tax Act.
6. Against the judgment of the Assistant Commissioner of Sales Tax, the applicant preferred two Second Appeals Nos. 197 and 198 of 1978 before the Tribunal. After discussing various contentions raised by the applicant elaborately, by its judgment and order dated February 27, 1984, the Tribunal dismissed the second appeals filed by the applicant and sustained the imposition of penalties under sections 45(2)(c) and 45(6) of the Sales Tax Act. Being aggrieved by the judgment of the Tribunal, the applicant sought a reference on the questions stated hereinabove. The Tribunal by its order dated July 4, 1986, has referred the aforesaid questions for our decision.
7. Re : Questions Nos. 1, 3, 4 and 5 :
At the time of hearing of the matter, Mr. Pathak, learned advocate appearing on behalf of the applicant, contended that the finding given by the Tribunal that the applicant has not purchased oil-cakes from M/s. Ratilal Bhogilal and the delivery of the said oil-cakes to the applicant is not proved, is on the face of it illegal and perverse. He contended that the Tribunal was not justified in laying the burden of proof upon the applicant to prove that its vendor, M/s. Ratilal Bhogilal, had purchased oil-cakes from M/s. Harishchandra Nagavat & Co. of Vansvada, Rajasthan. It is his contention that the applicant had paid the amount for purchases of the said oil-cakes by "bearer cheque" or by "crossed cheque" to M/s. Ratilal Bhogilal & Co. and, therefore, there is no reason for holding that the purchases of oil-cakes made by the applicant from M/s. Ratilal Bhogilal were only by way of bogus billing.
8. In our view, it is apparent that the questions referred to us for decision depend only on appreciation of evidence. It would be difficult to hold that the finding given by the Tribunal that purchases of oil-cakes shown to have been made by the applicant from M/s. Ratilal Bhogilal were merely billing transactions and not genuine transactions of purchases of oil-cakes, is in any manner perverse or unreasonable or without any evidence on record.
9. The Tribunal has discussed the contentions raised by the applicant and evidence in details. The findings of the Tribunal are based on reasonable appreciation of material which is on record. This would be clear from the following main aspects considered by the Tribunal :
(a) The Tribunal has considered the instances which indicate that the accounts in respect of the alleged transactions of oil-cakes were not free from suspicion and that the accounts of the applicant and M/s. Ratilal Bhogilal were not substantially tallying with each other. The Tribunal has drawn the said inference on the basis of various transactions noted by it. In our view, it would be difficult to hold that the said inference is without any foundation or is based on no evidence.
(b) The Tribunal has arrived at the conclusion that the applicant has failed to prove that it had received delivery of oil-cakes from M/s. Ratilal Bhogilal. For this purpose, the Tribunal has considered the say of M/s. Ratilal Bhogilal that it has not delivered the goods directly to the applicant but has directed M/s. Harishchandra Nagavat & Co. of Vansvada to deliver the said goods to the applicant at Himmatnagar.
(c) The applicant of M/s. Ratilal Bhogilal has produced no evidence to point out that oil-cakes were delivered to the applicant by M/s. Harishchandra Nagavat & Co. of Vansvada. No attempt was made by the applicant to establish the delivery of the goods by the said firm to the applicant at Himmatnagar. The applicant has not maintained any register to show that it had received oil-cakes from M/s. Harishchandra & Co. through a particular vehicle bearing a particular registration number. A copy of the certificate showing that oil-cakes in question were brought to the State of Gujarat from the State of Rajasthan via Mandali-Sarthoo check-post was sought to be relied upon. It indicated that M/s. Harishchandra Nagavat & Co. sent five trucks of oil-cakes from Rajasthan in Samvat Year 2029 and three trucks of oil-cakes from Rajasthan in Samvat Year 2030. At the time of hearing, in spite of being called upon to produce the original certificate repeatedly, neither Ratilal Bhogilal nor Champaklal, partner of the applicant-firm, had produced the original certificate before the Tribunal. The Tribunal found that, on the basis of the alleged copy of the certificate, the Assistant Commissioner had made an enquiry at the said check-post and it was found that no record for the concerned period was available.
(d) The Tribunal also noted that, at the time of hearing of the appeals, the Assistant Commissioner of Sales Tax had made an enquiry at Vansvada to find out whether a firm, namely, M/s. Harishchandra Nagavat & Co. was in existence. For that purpose, the Sales Tax officer had received a letter dated May 3, 1974, from the Assistant Commercial Tax Officer, Vansvada, stating that no firm, namely, M/s. Harishchandra Nagavat & Co. was in existence in Vansvada. That officer has further reiterated that he made an enquiry in the local market and found that there was no firm dealing in the name and style of M/s. Harishchandra Nagavat & Co., Dhanmandi-Vansvada and that in the office records also he did not find any firm in the said name. He opined that it may be an assumed name employed by M/s. Ratilal Bhogilal of Gujarat.
(e) The Tribunal also considered the finding of the Sales Tax Officer that the convenient road for transportation from Vansvada in Rajasthan to Himmatnagar was via Ratanpur check-post and there was no entry whatsoever in the records of the Ratanpur check-post and there was no entry whatsoever in the records of the Ratanpur check-post showing entry of oil-cakes from Rajasthan to Himmatnagar during the relevant period. The Tribunal held that the said circumstances relief upon by the Sales Tax Officer cannot be said to be in any way irrelevant. The Tribunal also rejected the contention that the goods might have been sent to Himmatnagar via Mandali-Sarthoo check-post. The Tribunal held that the sales tax authorities rightly arrived at the conclusion that the said road was not motorable and it is most inconvenient and uneconomic to bring the goods via that check-post from Vansvada to Himmatnagar. If it was a genuine transaction, the businessman would bring the goods to Himmatnagar from Vansvada via Ratanpur check-post.
(f) On the question of alleged payment made by the applicant to Ratilal Bhogilal, the Tribunal held that the version of M/s. Ratilal Bhogilal was inconsistent. In his first statement dated December 24, 1973, he stated that the payment made to him by the oil millers including the applicant was by crossed cheques and he used to sign on the reverse of the cheques and the Vansvada dealer used to encash those cheques whenever he thought fit and took away the money. It is his further say that whenever it was necessary, he used to write chit and settle the difference on account of variation in rates subsequently with Vansvada dealer. In his subsequent statement on January 25, 1974, he stated that he had received payment from the applicant and he used to make payment to M/s. Harishchandra Nagavat & Company after encashing cheques received by him. He has further stated that he used to encash the crossed cheques or bearer cheques given by the applicant and paid-up the amount to Rajasthan party. For encashing bearer cheques, he used to go to Himmatnagar, Salal, Dehgam, etc. Apart from the fact that he has not produced nay evidence on record to show that he has paid any amount to M/s. Harishchandra Nagavat & Co., it is apparent that his first say that the cheques were encahsed by him is contradictory to his second statement that the cheques were encashed by M/s. Harishchandra Nagavat & Co. If really there was a genuine transaction between M/s. Ratilal Bhogilal and M/s. Harishchandra Nagavat & Co., M/s. Ratilal Bhogilal would have paid the amount of the goods purchased by it to M/s. Harishchandra Nagavat & Co. by cheque or in any case after obtaining receipt. Further, if there was a genuine transaction, M/s. Ratilal Bhogilal would not have straightway handed over the cheques received by it to M/s. Harishchandra Nagavat & Co. There would normally be some difference of amount between the purchase price which is required to be paid to M/s. Harishchandra Nagavat & Co., and the sale price which he is entitled to receive from the applicant.
(g) Neither the applicant nor M/s. Ratilal Bhogilal has produced any correspondence between them or between M/s. Harishchandra Nagavat & Co. and M/s. Ratilal Bhogilal to establish that there were sale transactions between the applicant and M/s. Ratilal Bhogilal on the one hand, and between M/s. Ratilal Bhogilal and M/s. Harishchandra Nagavat & Co. on the other. The Tribunal has observed that the oil-cakes worth lakhs of rupees were purchased and there was no satisfactory evidence about payment having been paid by M/s. Ratilal Bhogilal to the vendor.
10. Considering the aforesaid main aspects dealt with by the Tribunal, it cannot be held that the Tribunal has erred in confirming the findings of the sales tax authorities that the applicant had not purchased oil-cakes from M/s. Ratilal Bhogilal; that there was no delivery of goods to the applicant and that there were bogus billing transactions. Further, it cannot be said that the judgment and order passed by the Tribunal with regard to these findings is in any way perverse or illegal or unreasonable or contrary to the evidence produced on record.
11. Answers to questions Nos. 1, 3, 4 and 5 depend upon the said findings. Hence, questions Nos. 1, 3, 4 and 5 are required to be answered in the negative.
12. Re : Questions Nos. 2, 6 and 8 :
These questions are interconnected. The learned advocate for the applicant submitted that, merely from the conclusion that there were no genuine purchases of oil-cakes from M/s. Ratilal Bhogilal of Kapadwanj, it was not open to the sales tax authorities to draw an inference that the applicant must have produced oil-cakes in its oil mill. He submitted that the applicant was required to maintain a regular register as prescribed by the Civil Supplies Department and the said register is authenticated by the civil supplies authorities, and, therefore, there was no scope for the applicant to suppress the production of oil or purchase of groundnuts.
13. In our view, once the sales tax authorities have arrived at the conclusion that the bills obtained by the applicant from M/s. Ratilal Bhogilal are bogus, the inference drawn by the authorities that the applicant had adjusted is unaccounted production by obtaining bogus bills cannot be said to be in any way unreasonable. It is not the say of the applicant that the applicant had not sold the said oil-cakes. That means, it is undisputed that the applicant was in possession of the said oil-cakes. It is not the say of the applicant that it had obtained the said oil-cakes from anyone else. The alleged purchases from M/s. Ratilal Bhogilal are disbelieved. Therefore, it was reasonable to hold that the applicant must have produced the said oil-cakes in its oil mill. Hence, it was open for the authorities to infer that, for producing oil-cakes weighing 2,54,754 kgs. in Samvat Year 2039 and 32,250 kgs. in Samvat Year 2030, the applicant was required to purchase groundnuts from which oil and oil-cakes would be produced. It is true that power to levy assessment on the basis of best judgment is not an arbitrary power. But, in the present case, it is apparent that the assessment is based on the relevant materials, i.e., oil-cakes, which were found in possession of the applicant. The Sales Tax Officer held that the applicant obtained bogus bills for purchases of oil-cakes and adjusted its production of oil and oil-cakes. He arrived at the conclusion that the applicant had not maintained accounts regularly and assessments cannot be made properly on the basis of the accounts maintained by the assessee and, therefore, assessed to the best of his judgment the amount of tax due from the assessee. For this purpose, he took into consideration the alleged purchases of oil-cakes made from M/s. Ratilal Bhogilal weighing 2,54,754 kgs. in Samvat Year 2029 and oil-cakes weighing 32,250 kgs. in Samvat Year 2030. Hence it cannot be held that guess-work made by the authorities is in any way unreasonable or dishonest. With regard to correctness of estimation and determination of proportion of groundnuts, oil and oil-cakes, the learned advocate for the applicant has not disputed it before the Tribunal and before this Court.
14. It is established law that, when the books of accounts submitted by the assessee are rejected, the assessing officer under the Sales Tax Act or under the Income-tax Act is empowered to make estimate and to that extent he has to make a guess-work after taking into consideration some evidence and material available. In the present case, the basis of estimate is weight of oil-cakes. For the assessment on the best judgment basis, Mr. Mehta, learned Assistant Government Pleader, rightly relied upon the following observations of the Supreme Court in the case of Brij Bhushan Lal Parduman Kumar v. Commissioner of Income-tax [1978] 115 ITR 524; AIR 1979 SC 209 :
"6. At the outset it may be stated that in the case of both the assessees their returns and book results were rejected on the ground that proper and reliable books of account had not been maintained and the Income-tax Officer was required to make the assessments on 'best judgment' basis. However, the principles to be followed by the Income-tax Officer while making a best judgment assessment have been clearly laid down by the Privy Council as also by this Court in a number of decisions. In Commissioner of Income-tax v. Laxminarain Badridas [1937] 5 ITR 170; AIR 1937 PC 133, their Lordships of the Privy Council observed as follows :
'The officer is to make an assessment to the best of his judgment against a person who is in default as regards supplying information. He must not act dishonestly or vindictively or capriciously because he must exercise judgment in the matter. He must make what he honestly believes to be a fair estimate of the proper figure of assessment, and for this purpose he must, their Lordships think, be able to take into consideration local knowledge and repute in regard to the assessee's circumstances, and his own knowledge of previous returns by and assessments of the assessee, and all other matters which he thinks will assist him in arriving at a fair and proper estimate; and though there must necessarily be guess-work in the matter, it must be honest guess-work. In that sense, too, the assessment must be, to some extent, arbitrary.'
15. Since the law relating to 'best judgment assessment' is the same both in the case of income-tax assessment and sales tax assessment, the following observations of this Court in Raghubar Mandal Harihar Mandal v. State of Bihar [1957] 8 STC 770 at page 778; AIR 1957 SC 810 at page 614 a case under the Bihar Sales Tax Act, would be material :
'No doubt it is true that when the returns and the books of account are rejected, the assessing officer must make an estimate, and to that extent he must make a guess; but the estimate must be related to some evidence or material and it must be something more than mere suspicion.'
16. Again in State of Kerala v. C. Velukutty [1966] 17 STC 465 (SC); [1966] 60 ITR 239 (SC) which was a case under the Travancore-Cochin General Sales Tax Act, Subba Rao, J. (as he then was), speaking for this Court observed at page 244 of the Report (at page 470 of STC) thus :
'The limits of the power are implicit in the expression "best of his judgment". Judgment is a faculty to decide matters with wisdom truly and legally. Judgment does not depend upon the arbitrary caprice of a judge, but on settled and invariable principles of justice. Though there is an element of guess-work in a "best judgment assessment", it shall not be a wild one, but shall have a reasonable nexus to the available material and the circumstances of each case.'
7. It will appear clear from what has been said above that the authority making a best judgment assessment must an honest and fair estimate of the income of the assessee and though arbitrariness cannot be avoided in such estimate the same must not be capricious but should have a reasonable nexus to the available material and the circumstances of the case ........."
17. From the aforesaid observation, it can be stated that the assessing authority is entitled to have honest guess-work in the estimate of proper figure of assessment when the information or the books of account maintained by the assessee are found not to be reliable.
18. In the present case, the Tribunal has taken into consideration the weight of oil-cakes alleged to have been purchased from M/s. Ratilal Bhogilal along with the consumption of electricity. It was found by the Tribunal that in the months, during which entries for purchases of oil-cakes from M/s. Ratilal Bhogilal were made, consumption of electricity was 5.50 units for production per oil tin and 5.33 units per tin in the months of January and February respectively, indicating that during that period the applicant had crushed groundnuts and produced oil without making proper entries in the books of accounts for purchases of groundnuts and sale of oil tins. The Tribunal has disbelieved the contention of the applicant that because of irregular supply of electricity and other factors, there was variation of electricity consumption by considering that the average consumption for production of one tin of oil was 2 units only during the remaining period while during the period when the entries for purchases of oil-cakes from M/s. Ratilal Bhogilal were made, the consumption of electricity for production of per oil tin was around 5.50 units. The Tribunal, therefore, observed that it has no hesitation in saying that the consumption of electricity is also a factor which goes to support the conclusion that purchases of oil-cakes from M/s. Ratilal Bhogilal were bogus.
19. In this view of the matter, the find of the Tribunal that oil-cakes shown as purchased from M/s. Ratilal Bhogilal are really the by-product of manufacture of oil by the applicant sold outside its books by making unaccounted purchases of groundnuts and tins, cannot be said to be contrary to evidence on record. Hence, question No. 2 is answered in the negative.
20. Similarly, the finding of the Tribunal that electricity consumption of the applicant is more in the months in which it has shown purchases from M/s. Ratilal Bhogilal, is not in any way vitiated as being perverse and contrary to evidence. Hence, question No. 6 is answered in the negative.
21. With regard to question No. 8 also, we hold that the Tribunal was justified in relying upon ratio of the electricity consumption with the production of oil by the application in arriving at the aforesaid findings. Hence, question No. 8 is answered in the affirmative.
22. Re : Question No. 7 :
It is vehemently contended by learned advocate Mr. Pathak that the Tribunal was not justified in recording the findings against the applicant in spite of the fact that in identical circumstances the Tribunal had recorded the finding with regard to the similar purchases made by other assessees, namely, M/s. Saraswati Oil Mills and M/s. Mahalaxmi Oil Mills, from M/s. Ratilal Bhogilal of Kapadwanj in their favour. In our view, the principles of res judicata would have no bearing on the findings based on question of facts. The Tribunal is entitled to appreciate the evidence in each case and to arrive at its own conclusion. If that finding is an erroneous one, it would not mean that the said finding is required to be followed in other cases. Hence, we hold that the Tribunal was justified in recording the findings on facts after appreciating the evidence on record without being influenced by the previous findings recorded by it in the cases of other assessees, namely, M/s. Saraswati Oil Mills and M/s. Mahalaxmi Oil Mills, as the Tribunal is required to appreciate evidence in each cash independently. Hence, question No. 7 is answered in the affirmative.
23. Re : Question No. 9 :
The question is : whether in the facts and circumstances of the case, the Tribunal has applied correct principles of law in sustaining the levy of penalties under section 45(2)(c) and 45(6) of the Sales Tax Act. Learned advocate Mr. Pathak submitted that, even though he has raised a contention that, before imposing penalties, the department has failed to establish concealment of any sale or purchase and, therefore, the penalties under section 45(2)(c) and 45(6) should be fully remitted, yet the Tribunal has not considered the said contention. As against this, Mr. Mehta, learned Assistant Government Pleader, submitted that, as the authorities arrived at the conclusion that there were concealment of transactions of sales and purchases by the applicant and that the entire case rested upon the bogus billing and bogus entries in the books of account, the sales tax authorities were fully justified in levying the penalties under section 45(2)(c) and 45(6) of the Sales Tax Act. For this purpose, he relied upon the decision of the Supreme Court in the case of Anantharam Veerasighaiah & Co. v. Commissioner of Income-tax [1980] 123 ITR 457; AIR 1980 SC 1146. However, considering the fact that the Tribunal has not recorded any finding, we are not required to discuss this question. It would be open to the Tribunal to deal with this question in accordance with law.
24. Sales Tax Reference No. 14 of 1989 :
In this reference, the applicant, M/s. Gandhi Oil Mills of Himmatnagar, is a partnership firm carrying on business of manufacturing oil and reselling of oil-cakes. It is a registered dealer under the provisions of the Sales Tax Act. It is the contention of the applicant that it purchased oil-cakes for reselling from various persons including M/s. Ratilal Bhogilal of Kapadwanj during Samvat Years 2029 and 2030. During Samvat Year 2029 it purchased oil-cakes weighing 1,79,179 kgs. for a sum of Rs. 2,08,121 against declarations in form 17. During Samvat Year 2030 up to the month of Posh the applicant had purchased oil-cakes weighing 39,375 kgs. valued at Rs. 44,277. The aforesaid purchases of oil-cakes were made from M/s. Ratilal Bhogilal. The business premises of the applicant were visited by the Sales Tax Officer, Enforcement Branch, on December 19, 1973. Some accounts papers were seized from the applicant. Thereafter, the notice dated January 8, 1975, was issued by the Sales Tax Officer to the applicant asking him to show cause why purchases of groundnut oil-cakes made from M/s. Ratilal Bhogilal should not be held to be non-genuine and why it should not be held that oil-cakes were produced out of the suppressed purchases of groundnuts. The applicant was also asked to show cause why the suppressed manufacture of oil should not be treated as sold outside account books and also to show cause why those sales should not be held to be of goods packed in empty tins purchased by it. The Sales Tax Officer relied upon the following grounds for issuing the aforesaid show cause notice :
1. No proof in respect of delivery of the goods except bills was produced by the applicant. No proof was available as to who gave and took delivery of the goods purchased; the expenditure of transporting the goods, truck number, etc., were not produced.
2. No firm in the name and style of M/s. Harishchandra Nagavat & Co. of Dhanmandi, Vansvada in the State of Rajasthan from whom M/s. Ratilal Bhogilal aforesaid could have received the goods was in existence. M/s. Ratilal Bhogilal had not produced any proof in support of his purchases except payments. According to the record of Ratanpur check-post those goods did not appear to have passed through that check-post for effecting delivery to the applicant at Himmatnagar.
3. It was not proved that on account of a transaction of purchase from M/s. Ratilal Bhogilal the latter had received the price thereof.
4. In the account books of the applicant the purchases from dealers other than M/s. Ratilal Bhogilal were shown to be of groundnut oil-cakes but really they were of cotton seeds oil-cakes and against them the sales of oil-cakes were shown.
5. The presumption regarding suppressed manufacture of oil was supported by the consumption of electricity : the average consumption of 3.27 units of electricity per one oil tin tallied, if the production of suppressed oil tins to the tune of 8,861 is added.
25. After hearing the applicant and considering the reply submitted by it, the Sales Tax Officer passed an assessment order on May 16, 1975 for Samvat Year 2029 and an assessment order for Samvat Year 2030 up to pash Vad 30 on February 27, 1975. The Sales Tax Officer did not believe that oil-cakes in dispute were purchased by the applicant from M/s. Ratilal Bhogilal and he held that the purchases were non-genuine and that oil-cakes were manufactured by the applicant in its own mill during the course of manufacturing groundnut oil. Since oil can be produced only only from groundnuts, the Sales Tax Officer took a view that the applicant must have purchased groundnuts and that he must have purchased empty tins for packing oil. He held that the applicant sold groundnut oil produced by it from the suppressed purchase of groundnuts and suppressed crushing of groundnuts. He calculated the purchase tax on 2,71,483 kgs. of suppressed purchases of groundnuts. He also held that the applicant must have purchased 4,072 empty tins and levied purchase tax thereon. He also levied penalty under section 45(6) of the Sales Tax Act. For Samvat Year 2030, the Sales tax Officer held that 55,133 kgs. of groundnuts were suppressed purchases. He also held that 937 empty tins must have been purchased for packing oil produced from the aforesaid suppressed purchase of groundnuts. Some additional evidence in the form of chits which were found from the possession of the applicant was also taken into consideration and the Sales Tax Officer took a view that groundnuts worth Rs. 41,183 were also suppressed purchases. On that basis, he calculated that groundnut oil worth Rs. 37,264 was sold. He also calculated resultant oil-cakes to be of Rs. 16,306 and purchase of empty tins to be of Rs. 1,690. He levied purchase tax and sales tax at the appropriate rates on the suppression. He also imposed penalty under section 45(2)(c) , 45(6) and 45(8) of the Act.
26. The applicant preferred first appeals against the aforesaid two assessment orders before the Assistant Commissioner of Sales Tax. The Assistant Commissioner of Sales Tax upheld the decision of the Sales Tax Officer in respect of purchase of oil-cakes made by the applicant from M/s. Ratilal Bhogilal as being bogus. He gave partial relief in respect of the remaining assessment made by the Sales Tax Officer and consequential relief in penalties under sections 45(2)(c) and 45(6) of the Sales Tax act. So far as Samvat Year 2030 is concerned, he held suppressed purchases of groundnuts to be worth Rs. 7,590 and levied purchase tax thereon. He totally remitted the penalty under section 45(6) of the Sales Tax Act.
27. Against these orders, the applicant preferred two Second Appeals Nos. 229/78 and 100/79. After considering the contentions raised by the parties and the documentary evidence in detail, the Tribunal Confirmed the order passed by the Assistant Commissioner of Sales Tax. The Tribunal observed that the applicant has resorted to bogus billing system with the help of M/s. Ratilal Bhogilal in order to dispose of oil-cakes manufactured by it. It further observed that, in the facts and circumstances of the case, it cannot be said that penalty imposed under section 45(6) of the Sales Tax Act was uncalled for.
28. Being aggrieved by the judgment of the Tribunal, the applicant sought reference. The Tribunal referred the following questions for our decision by its order dated November 27, 1986 :
1. Whether, in the facts and circumstances of the case, the finding of the Tribunal that the applicant has not purchased any groundnut oil-cakes from Ratilal Bhogilal is vitiated being perverse and contrary to the evidence produced in the case ?
2. If the answer to the question set out above in the negative and against the assessee, whether in the facts and circumstances of the case, the finding of the Tribunal that the oil-cakes shown as purchased from Ratilal Bhogilal are really the by-product of manufacture of oil by the applicant sold outside its books, by making unaccounted purchases of groundnuts and tins, is vitiated being perverse and contrary to the evidence as well as on surmise and conjectures ?
3. Whether, in the facts and circumstances of the case, the findings of the Tribunal that the only normal and convenient route for the oil-cakes to come from Vansvada to Himmatnagar is via Ratanpur check-post and it is the only motorable road, while road from Vanswada to Himmatnagar via Mandali and Sarthu check-post, is not motorable, are vitiated being perverse and based on no evidence ?
4. Whether, in the facts and circumstances of the case, the finding of the Tribunal that the applicant has not paid the price to Ratilal Bhogilal is vitiated being perverse and contrary to the evidence produced in the case ?
5. If the answers to the above questions are in the negative, whether the Tribunal was justified in recording the said findings in spite of the fact that in identical circumstances, the Tribunal had recorded the findings on the very subject-matter in favour of the other assessees, viz., Saraswati Oil Mills and Mahalaxmi Oil Mill ?
6. Whether, in the facts and circumstances of the case, the Tribunal was justified in law in relying upon the ratio of electricity consumption with the production of oil by the applicant in arriving at the above findings ?
7. Whether, in the facts and circumstances of the case, the Tribunal has applied correct principle of law in sustaining the levy of penalties under sections 45(2)(c) and 45(6) of the Gujarat Sales Tax Act, 1969 ?
29. In this reference also, learned advocate Mr. Pathak submitted that the the finding given by the Tribunal that the applicant has not purchased oil-cakes from M/s. Ratilal Bhogilal and the delivery of the said oil-cakes to the applicant is not proved, is on the face of it illegal and perverse. He contended that the Tribunal was not justified in laying the burden of proof upon the applicant to prove that its vendor, M/s. Ratilal Bhogilal, had purchased oil-cakes from M/s. Harishchandra Nagavat & Co. of Vansvada, Rajasthan. It is his submission that the applicant had paid for the purchases of oil-cakes by "crossed cheques" to M/s. Ratilal Bhogilal and, therefore, there is no reason for holding that purchases of oil-cakes made by the applicant from M/s. Ratilal Bhogilal were only for bogus billing.
30. In our view, it is apparent that the questions referred to us for decision depend only on appreciation of evidence. It would be difficult to hold that the finding given by the Tribunal that purchases of oil-cakes shown to have been made by the applicant from M/s. Ratilal Bhogilal were merely billing transactions and not genuine transactions of purchases of oil-cakes, is in any manner perverse or unreasonable or without any evidence on record.
31. In this case also, the Tribunal has discussed the contentions raised by the applicant and evidence in detail. The finding of the Tribunal is based on reasonable appreciation of material which is on record. This would be clear from the following main aspects considered by the Tribunal :
(i) The Tribunal confirmed the view taken by the sales tax authorities that M/s. Ratilal Bhogilal has not delivered oil-cakes to the applicant nor has M/s. Ratilal Bhogilal received the amount for the said goods. The say of Ratilal Bhogilal that he has purchased the goods from M/s. Harishchandra Nagavat & Co. of Vansvada is not believed on the ground that there was no such firm in existence at Vansvada.
(ii) Further, the Tribunal has observed that it is very easy to say that the applicant was not supposed to enquire about the address and particulars of M/s. Harishchandra Nagavat & Co., but, ultimately, when the oil-cakes were being sold, analysis report regarding percentage of contents was obtained, on the basis of which purchase price was fixed. The Tribunal rightly observed that in the instant case no such report is obtained nor produced on record to justify the claim that M/s. Ratilal Bhogilal Sold oil-cakes to the applicant.
(iii) The Tribunal has also considered that, during the pendency of the appeals, a copy of the certificate purported to have been issued by the Assistant Commercial Tax Officer, in respect of Mandali-Sarthoo check-post was produced. The copy of that certificate certainly indicates that some goods were despatched by M/s. Harishchandra Nagavat & Co. of Vansvada to Modasa and Kapadwanj and the consignee therein was M/s. Ratilal Bhogilal. The appellate officer, i.e., the Assistant Commissioner of Sales Tax made an enquiry about the correctness of the certificate. On enquiry, the Assistant Commercial Tax Officer has written a letter dated October 20, 1977, stating that no such certificate or letter can be traced out at his end. Further, the applicant was asked to produce the original certificate but the applicant has failed to produce before the appellate authority. The Tribunal considered the aforesaid letter and observed that copy of the certificate dated June 16, 1975, appears to be bogus.
(iv) The Tribunal also considered the finding of the Sales Tax Officer that the convenient road for transportation from Vansvada in Rajasthan to Himmatnagar was via Ratanpur check-post and there was no entry whatsoever in the records of the Ratanpur check-post showing entry of oil-cakes from Rajasthan to Himmatnagar during the relevant period. The Tribunal held that the said circumstances relied upon by the Sales Tax Officer cannot be said to be in any way irrelevant. The Tribunal also rejected the contention that the goods might have been sent to Himmatnagar, via Mandali-Sarthu check-post. The Tribunal held that the sales tax authorities rightly arrived at the conclusion that the said road was not motorable and it is most inconvenient and uneconomic to bring the goods via that check-post from Vansvada to Himmatnagar. If it was a genuine transaction, the businessman would bring the goods to Himmatnagar from Vansvada via Ratanpur check-post.
(v) The applicant or M/s. Ratilal Bhogilal has produced on evidence to point out that oil-cakes were delivered to the applicant by M/s. Harishchandra Nagavat & Co. of Vansvada. No. Attempt was made by the applicant to establish the delivery of the goods by the said firm to the applicant at Himmatnagar. The applicant has no maintained any register to show that it has received oil-cakes from M/s. Harishchandra & Co. through a particular vehicle bearing a particular registration number.
(vi) Even with regard to the alleged payments made by the applicant to M/s. Ratilal Bhogilal, the Tribunal has confirmed the view taken by the sales tax authorities that the applicant has failed to prove that the amounts for purchases of oil-cakes were paid to M/s. Ratilal Bhogilal. This finding is based on various circumstances, namely :
(a) During the course of hearing on February 7, 1975, it was pointed out that the amounts of two or three cheques from the bank were received by Mehtaji Kodarlal Nahalchand of applicant-firm. Explanation given by the applicant that Mehtaji Kodarlal Nahalchand attested the said cheques for the security of the bank's cashier was not accepted by the Tribunal. For this purpose, the Tribunal has relied upon the statement supplied by the bank showing that cheques Nos. 352 and 353 issued by the appellant on February 15, 1973, were originally deposited in the account of Ashokkumar Ratilal on the same day. Ashokkumar Ratilal in turn issued cheque No. 103 on the same day which was encashed and the amount of the cheque was received by Mehtaji Kodarlal Nahalchand, the accountant of the applicant-firm. The Tribunal observed that large amounts were received by the employees, namely, Sevantilal Somchand and Kodarlal Nahalchand, of the applicant-firm. The modus operandi is issue of cheques by the applicant, delivery of cheques to the dealers of Salal on the same day who in turn issued the cheques of similar amounts and the said cheques of the dealers were being encashed and the cash was received by the employees of the applicant. This aspect is discussed by the Tribunal in detail.
(b) Apart from the fact that M/s. Ratilal Bhogilal has not proved any payment to M/s. Harishchandra Nagavat & Co., it is apparent that his first say that the cheques were encashed by him is contradictory to his second statement, that the cheques were encashed by M/s. Harishchandra Nagavat & Co. If really there was a genuine transaction between M/s. Ratilal Bhogilal and M/s. Harishchandra Nagavat & Co., M/s. Ratilal Bhogilal would have paid the amount of the goods purchased by it to M/s. Harishchandra Nagavat & Co. by cheque or, in any case, after obtaining receipt. Further, if there was a genuine transaction, M/s. Ratilal Bhogilal would not have straightway handed over the cheques received by it to M/s. Harishchandra Nagavat & Co. There would normally be some difference of amount between the purchase price which is required to be paid to M/s. Harishchandra Nagavat & Co. and the sale price which he is entitled to receive from the applicant.
(c) Neither the applicant nor M/s. Ratilal Bhogilal has produced any correspondence between them or between M/s. Harishchandra Nagavat & Co. and M/s. Ratilal Bhogilal to establish that there were sale transactions between the applicant and M/s. Ratilal Bhogilal on the one hand, and between M/s. Ratilal Bhogilal and M/s. Harishchandra Nagavat & Co. on the other. The Tribunal has observed that the oil-cakes worth lakhs of rupees were purchased and there was no satisfactory evidence about payment having been made by M/s. Ratilal Bhogilal to the vendor.
32. Re : Questions Nos. 1, 3 and 4 :
Considering the aforesaid main aspects dealt with by the Tribunal, it cannot be said that :
(i) finding of the Tribunal that the applicant has not purchased any groundnut oil-cakes from M/s. Ratilal Bhogilal is contrary to evidence on record;
(ii) finding of the Tribunal that the only normal and convenient route for the trucks carrying oil-cakes to come from Vanswada to Himmatnagar is via Ratanpur check-post and it is the only motorable road, while road from Vanswada to Himmatnagar via Mandali and Sarthu check-post, is not motorable, is perverse or based on no evidence; and
(iii) finding of the Tribunal that the applicant has not paid price to M/s. Ratilal Bhogilal is perverse or contrary to evidence produced on record.
33. Hence, questions Nos. 1, 3 and 4 are answered in the negative against the assessee and in favour of the Revenue.
34. Re : Questions Nos. 2 and 6 :
35. These questions are interconnected, with regard to similar questions Nos. 2, 6 and 8 in Sales Tax Reference No. 3 of 1989, we have discussed this aspect in detail, and, for the same reasons recorded hereinabove,
(i) it cannot be held that the finding of the Tribunal that the oil-cakes shown as purchased from M/s. Ratilal Bhogilal are really the by-product of manufacture of oil by the applicant sold without recording in its books of account by making unaccounted purchases of groundnuts and empty tins, is perverse or contrary to evidence on record; and
(ii) the Tribunal was justified in law in relying upon the ratio of electricity consumption with the production of oil.
36. Hence, question No. 2 is answered in the negative and question No. 6 is answered in the affirmative, in favour of the Revenue and against the assessee.
37. Re : Question No. 5 :
In Sales Tax Reference No. 3 of 1989, with regard to similar question No. 7, we have arrived at the conclusion that the Tribunal was justified in recording the finding against the applicant in spite of the fact that in identical circumstances, the Tribunal has recorded the finding with regard to the similar purchases made by other assessees, namely, M/s. Saraswati Oil Mills and M/s. Mahalaxmi Oil Mills from M/s. Ratilal Bhogilal of Kapadwanj, in their favour. We have held so mainly on the ground that the principles of res judicata would have no bearing on the finding based on questions of facts. The Tribunal is required to appreciate the evidence in each case and to arrive at its own conclusion. If appreciation of evidence in one case is erroneous, it would not mean that the said finding is required to be followed in other cases. For the same reasons, questions No. 5 is answered in the affirmative in favour of the Revenue and against the assessee.
38. Re : Question No. 7 :
The Tribunal has confirmed the penalties on the ground that the applicant attempted to conceal the production of oil and consequential concealment of purchase of groundnuts and empty tins and has resorted to bogus billing with the help of M/s. Ratilal Bhogilal in order to dispose of oil-cakes manufactured by the applicant in its oil-mill. The Tribunal has therefore rightly held that it cannot be said that the penalty under section 45(2)(c) of the Sales Tax Act was wrongly levied by the sales tax authorities. The Tribunal has further observed that under section 45(6) of the Sales Tax Act the penalty is in the nature of loss of interest on the amount of tax withheld by the assessee and it can be remitted only if reasonable cause is shown. In the present case, there was no such reasonable cause shown. In the view of the matter, it cannot be said that the order passed by the Tribunal confirming the levy of penalty under section 45(6) of the Sales Tax Act is in any way illegal or erroneous. Hence, it is held that the Tribunal has rightly applied correct principles of law in sustaining the levy of penalties under sections 45(2)(c) and 45(6) of the Sales Tax Act.
39. Hence, question No. 7 is answered in the affirmative in favour of the Revenue and against the assessee.
40. Sales Tax Reference No. 3 of 1989 :
41. In the result, we answer questions No. 1 to 6 in the negative in favour of the Revenue and against the assessee and question Nos. 7 and 8 in the affirmative in favour of the Revenue and against the assessee. As regards questions No. 9, the Tribunal has to decide it on merits in accordance with law.
42. Reference is disposed of accordingly with no order as to costs.
43. Sales Tax Reference No. 14 of 1989 :
In the result, we answer questions No. 1, 3 and in the negative in favour of the Revenue and against the assessee and questions Nos. 5, 6 and 7 in the affirmative in favour of the Revenue and against the assessee.
44. Reference is disposed of accordingly with no order as to costs.
45. Reference answered accordingly.