Madras High Court
Tvl.Prasad Properties And Investment vs The State Of Tamil Nadu on 21 March, 2014
Author: Chitra Venkataraman
Bench: Chitra Venkataraman, T.S.Sivagnanam
IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 21.03.2014 Coram The Honourable Mrs.Justice CHITRA VENKATARAMAN and The Honourable Mr.Justice T.S.SIVAGNANAM Tax Case (Revision) Nos.119, 120 and 121 of 2009 Tvl.Prasad Properties and Investment (P) Ltd., No.2, Sarangapani Street T.Nagar, Chennai-17. ... Petitioner in all the Tax Case (Revisions) -vs- 1. The State of Tamil Nadu Represented by the Deputy Commissioner (CT) Chennai (Central) Division Chennai-6. 2. Deputy Commercial Tax Officer T.Nagar (North) Assessment Circle, Chennai. ... Respondent in all the Tax Case (Revisions) Tax Case (Revisions) filed under Section 38 of the Tamil Nadu General Sales Tax Act, 1959 r/w Rule 30 of the Tamil Nadu General Sales Tax Rules, 1959 to revise the common order of the Tamil Nadu Sales Tax Appellate Tribunal, (Additional Bench), Chennai in STA Nos.840, 841 and 842 of 2001 dated 26.08.2008 for the assessment year 1993-94, 1992-93 and 1991-92 respectively. For Petitioner : Mrs.Pushya Sitaraman in all TC(Rs). Senior Counsel for Mrs.R.Maheswari For Respondents : Mr.Manokar Sundaram in all TC(Rs). Additional Government Pleader (Taxes) COMMON ORDER
(The Order of the Court was made by CHITRA VENKATARAMAN, J.) The assessee is on revision as against the common order dated 26.08.2008 passed by the Sales Tax Appellate Tribunal relating to the assessment years 1991-92, 1992-93 and 1993-94.
2. The Tax Case (Revisions) are admitted on the following substantial questions of law:
"(i) Whether the Appellate Tribunal as a final fact finding authority is justified in ignoring the evidences produced by the petitioner to show that there was no sale effected by them as shown in the invoices and hence there was no sales suppression?
(ii) Whether the Tribunal was correct in coming to the conclusion that there was sale when there was no "goods" bought or sold in the transaction and whether the Tribunal was correct in levying sales tax in the absence of a sale?
(iii) Whether the Appellate Tribunal is correct in conforming the levy of tax on the petitioner assuming that the transaction per se (bill discounting) is a sale, as then the liability to sales tax would be on the first seller and not the petitioner?
(iv) Whether the Appellate Tribunal is correct in conforming the penalty imposed by the second respondent when the finding of factual aspect was not considered while conforming the assessment?"
2. Since the issues are common, we deem it fit to pass a common order in all these cases.
3. The assessee is a dealer in cine raw films. The assessee originally reported a nil taxable turnover for the above said assessment years under the provisions of the Tamil Nadu General Sales Tax Act, 1959. On 07.01.1994, the Enforcement Wing Officials inspected the business premises of the assessee and recovered 23 files from there. The verification of the records revealed suppression of taxable transaction. This lead to the re-opening of the assessment for the above said years. The contention of the assessee was that the turnover in dispute did not represent any sale as defined under the Tamil Nadu General Sales Tax Act, 1959. The bills referred to in the various files represents bills, which were being raised purely for the purpose of bill discounting and there was no sale transaction between the parties. The entire transactions were accommodation bill transaction for obtaining money through discounting of bills. Thus the assessee contended that there was no sale transaction and there was no consideration moving from one party to another. Hence, the assessee contended that in the absence of movement of goods or sale of goods, there was no basis for assuming that a sale had taken place. In this connection, the assessee placed reliance on the letter dated 18.03.1997 from the Special Recovery Monitoring Cell, Central Office, Indian Bank and supporting affidavits from the companies involved in this transaction. The assessee pointed out that the bills were discounted with Standard Chartered Bank, NSC Bose Road, and the amounts received from the bank was accounted as loan in assessee's books of accounts. Consequently, the question of taxing the transaction did not arise. The Revenue however, contended that the assessee had purchased raw films from Tvl.Sarada Enterprises, Chennai-17, Tvl.Photomec Enterprises, Chennai-6, Tvl.Asian Photo Film, Chennai-4 and Tvl.Manoharamma Agencies, Chennai-6.
4. In the background of the documents thus recovered, the Revenue reiterated their contention before the First Appellate Authority that these suppressed sale transaction. The First Appellate Authority pointed out that neither the Enforcement Wing Officers nor the Assessing Authority established through any evidence that there was an actual movement of goods evidencing the sale. The invoices recovered were not supported by any sales bills or other records to substantiate the contention of the Revenue. Consequently, the First Appellate Authority held that the invoices had no commercial value. On the following defects pointed out by the Assessing Authority at the time of inspection by the Enforcement Wing Officials, viz., Cash book for 1993-94 was not completed for 06.01.1994 and also cash balance as on 06.01.1994 was not struck, that purchase account was not maintained in respect of purchase of 20 cases of films under Bill No.922/4.1.94 for Rs.62,100/- from Tvl.Cine Film Distributors, Madras and the same was not entered in the books of accounts at the time of inspection, and no stock of goods were available at the business premises of the assessee, the First Appellate Authority held that those defects were only technical in nature. Thus in the background of the materials available, the First Appellate Authority held that the Department had failed to prove that the transactions were based on element of sale. Referring various decisions of this Court, the First Appellate Authority held that even an estimate should closely follow the material and in the absence of any material to link those documents to be a concluded sale, the question of re-opening of assessment did not arise. The First Appellate Authority pointed out that the Assessing Officer had proceeded merely on guess work, surmises and conjectures in making best judgment assessment. Consequently the assessments have to be set aside.
5. When the Revenue went on appeal as against this assessment, the Sales Tax Appellate Tribunal pointed out that the burden of proving that there was no sale rested only on the assessee and it was for the assessee to establish that the bills raised were for raising of loan from the bank and the discounted bills did not in fact represent any sale transaction. The Sales Tax Appellate Tribunal pointed out that the records to that effect were not made available by the dealer. There were intrinsic evidences to show that the transactions carried out by the assessee were sale, which were liable to be taxed as sales under the provisions of the Act. Thus, the Tribunal rejected the assessee's claim and sustained the assessment.
6. With reference to the transactions with the bank and the charge sheet filed by the CBI authorities, the Tribunal viewed that it would be unsound to place any reliance on the charge sheet filed by the authorities to decide whether the transactions were in fact carried on or not for the purpose of the asessment order. Thus the Tribunal allowed the Revenue's appeal. Hence the present revisions before this Court by the assessee.
7. Learned Senior Counsel appearing for the assessee submitted that during the hearing of the appeal, the assessee submitted letters from the alleged sellers confirming that the invoices recovered from the place of business did not relate to sale of goods and that the invoices were issued only for bill discounting purposes. The assessee also filed letter from Bank's Special Monetary Cell confirming that the invoices recovered have no commercial value. The assessee further pointed out that the assessee never purchased anything outside the accounts or sold the same to the purchasers off the record. Considering the fact that at the time of inspection, there were no stock of goods, the contention of the assessee merited acceptance that the invoices were only accommodation invoices and nothing beyond. The assessee further pointed out to the proceedings taken against the Indian Bank and the assessee herein, before the Criminal Court and the charge sheet filed by the Deputy Superintendent of Police, Central Bureau of Investigation, Bank Securities and Fraud Cell, Bangalore which would categorically establish that the transaction between the bank and the assessee was only a sham transaction and there was no sale of goods effected through the invoices discounted.
8. Considering the above said circumstances narrated by learned Senior Counsel, this Court thought fit to call for the records pertaining to the Criminal Court proceedings and the Enforcement Wing Officials records from the Government Pleader, so that the nature of transaction as contended by the assessee could be seen from verification of the same. Sufficient opportunity was given to the Revenue to find out whether in respect of the criminal proceedings any records were available with the Revenue and also to find out whether any statement at all were recorded from the assessee too at the time of inspection, since according to the assessee no statements were recorded and no documents pertaining to the alleged purchase of raw films were effected. However the learned Additional Government Pleader appearing for the Revenue expressed his inability to produce the same on the ground that none of the documents pertaining to inspection were available with the Revenue. However, considering the fact that criminal proceedings are already pending before the Criminal Court, this Court again asked the Additional Government Pleader to find out whether anything was available with the police official or in the learned Magistrate Court as regards the seizure of records during the inspection. Learned Government Pleader placed before this Court the letter written by the Assistant Commissioner (CT) T.Nagar (North) Assessment Circle to the Special Government Pleader dated 10.03.2014 enclosing the copy of the letter received from the Superintendent of Police, Central Bureau of Investigation, Economic Offences Wing dated 10.03.2014. The said letter reads as under:
"Kind attention is invited to the subject and reference cited above.
In this connection, it is intimated that the proceedings/statement given by the assessee before the Enforcement Officers of the Commercial Tax Officer is not cited as Exhibit in RC 2/E/98-CBI/BS & FC/BLR (CC 82/2001) pertaining to M/s.Prasad Properties and Investments (P) Ltd., Chennai."
Thus, we regretfully note that there is practically no assistance in this matter from the Revenue to place the inspection records or for that matter search records to find out the statement recorded from the assessee, the details of the records recovered and the findings thereon.
9. Thus with the available materials, when we looked at the facts of the case, it is evident, particularly from the confirmation letters of the Indian Bank, as regards the granting of credit in favour of the suppliers and the bills discounted for the purchase of raw films by the assessee. The assessee had noted this transaction as loan in the books of accounts. Read in the context of the factual absence of any block of raw films at the time of inspection and the affidavit filed from the various suppliers as well as the Indian Bank on the proceedings taken against Indian Bank on the bogus transactions, we can only draw an inference that the contentions of the assessee merited acceptance by this Court. We may point out that the Sales Tax Appellate Tribunal had not adverted to the facts as stated above on the other hand, it had relied on the decision of this Court reported in 1993(4) MTCR 4 and held that the case is not substantiated by the assessee.
10. The Revenue does not dispute the fact that there is a charge sheet filed by the CBI authorities as against the Indian Bank in granting loans or offering discounting on sham documents, yet the Sales Tax Appellate Tribunal rejected the assessee's case on the ground that no reliance could be placed on the charge sheet to decide whether there was sale transaction or not. Thus with the proceedings still pending before the Criminal Court on the allegation of fictitious loan transaction dealt with by the Bank and one of the parties being the assessee herein, we have no hesitation in setting aside the order passed by the Sales Tax Appellate Tribunal insofar as the appeals filed by the assessee are concerned.
11. We may also note that in the decision rendered by the Sales Tax Appellate Tribunal in STA No.58/99 in the case of one Tvl.Ravishankar Films (P) Ltd., one of the group concern relating to a similar transaction, the Sales Tax Appellate Tribunal noted that in the proceedings initiated by the Central Bureau of Investigation against Indian Bank Authority, in the charge sheet filed it was stated that there was no genuine transaction in all these cases and no goods as per LC documents were actually procured/supplied/transported. Based on the proceedings thus taken, the Tribunal held that there was no real business transaction and the entire transaction was false and forged. Thus, the asessement in that case was set aside.
12. A reading of the order in the said case, however shows on verification of the records recovered with the books of accounts of Tvl.Prasad Properties and Investments (P) Ltd., it was found that Tvl.Prasad Properties and Investments (P) Ltd., had repurchased the films from Tvl.Ravishankar Films (P) Ltd.,Chennai-17 in the name of Tvl.Kalyani Audio Enterprises and others and the letter of credits issued to Tvl.Prasad Properties and Investments also were noted in the order relating to M/s.Ravishankar Films (P) Ltd. Thus as rightly contended by learned Senior Counsel for the assessee the Sales Tax Appellate Tribunal had dismissed the Revenue's appeal under similar circumstances and nature of transactions.
12. In view of the above, we do not find any justification to draw a different conclusion as far as the present case is concerned. Accordingly, all the Tax Case (Revisions) stand allowed and the order of the Sales Tax Appellate Tribunal is set aside. No costs.
Index :No (C.V.,J) (T.S.S.,J)
Internet:Yes 21.03.2014
vj2
To
1. The Sales Tax Appellate Tribunal
(Additional Bench), Chennai 600 104.
2. The Appellate Assistant
Commissioner(CT-III) Chennai 600 108.
3. The Deputy Commercial Tax Officer
T.Nagar (North) Assessment Circle.
CHITRA VENKATARAMAN, J.
and
T.S.SIVAGNANAM, J.
vj2
Tax Case (Revision).Nos.119 to 121 of 2009
21.03.2014