Madras High Court
The State Of Tamil Nadu vs Tvl.West Asia Trading & Shipping on 28 January, 2014
Bench: R.Sudhakar, V.M.Velumani
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED: 28.01.2014 CORAM THE HONOURABLE MR.JUSTICE R.SUDHAKAR AND THE HONOURABLE MS. JUSTICE V.M.VELUMANI Tax Case (MD)No.3 of 2009 (Revision No.2 of 2009) The State of Tamil Nadu represented by the Deputy Commissioner (CT), Tirunelveli Division, Tirunelveli - 627 002. ... Petitioner Vs. Tvl.West Asia Trading & Shipping, Tuticorin. ... Respondent Prayer Revision Petition filed Section 38 of the TNGST Act, to revise the order of the Tamil Nadu Sales Tax Appellate Tribunal (AB), Madurai, dated 08.06.2004 passed in M.T.A.No.69 of 2000. !For Petitioner ... Mr.M.Alagadevan, Special Govt. Pleader ^For Respondent ... Mr.N.Inbarajan * * * * :ORDER
(Order of the Court was made by R.SUDHAKAR, J.) The Revenue has filed the present Tax Case Revision.
2.1. The respondent entered into an agreement with Tvl.TANFED, Chennai, for the supply of 23,000 Metric Tonne of bagged Di-Ammonium Phosphate(DAP). The sale bill 001 dated 30.12.1992 was raised by the respondent and issued to Tvl.TANFED and the goods were supplied under the Act. The Assessing Officer verified the transaction and he summarised the issue as follows:
In Bill No.001, dated 30.12.1992, 24,148.500 Metric Tonnes of DAP was supplied at the cost of 6,078.85 per Metric Tonne. Sales Tax, Surcharge, cost of empty bags, stevedoring, clearing, forwarding charges and standardisation, bagging, loading and unloading charges, transport costs were added separately and 100% total value was shown as 7,170.00 per Metric Tonne. The said invoice was cancelled and thereafter, the respondent issued revised invoices in the following manner:
Bill No.2/2-1-93 24148.500 MT DAP Rs.17,31,44,745.00 Bill No.3/8-3-93 24001.800 MT DAP Rs.17,20,92,248.55 Bill No.4/8-3-93 23947.315 MT DAP Rs.17,17,02,248.55 Bill No.5/8-3-93 23947.315 MT DAP Rs.14,55,72,135.78 2.2. In Bill No.5/8-3-93, the actual quantity that was supplied as 23,947.315 Metric Tonne was shown and the amount was noted as Rs.14,55,72,135.78. After verifying the A1 return filed, the Assessing Officer was of the view that the turn over of Rs.2,74,09,976/- was suppressed and he, therefore, assessed the turn over at Rs.17,31,44,745/- at 3% and for the turn over in excess of Rs.14,57,34,769/-, 3% tax was demanded together with penalty of 25,08,012/- under Section 12(3) of the Tamil Nadu General Sales Tax Act (hereinafter referred to as 'TNGST Act').
3. The Assessing Officer declined to accept the statement of the assessee that as per the revised agreement dated 18.12.1992 and the revised invoice No.5/8.3.93, the cost of the cargo was only Rs.6,078.85 per Metric Tonne and the total turn over is Rs.14,55,72,135.78. Insofar as the cost of empty bags, stevedoring, clearing, forwarding charges and standardisation, bagging, loading and unloading charges, transport costs, it is shown separately and therefore, the turn over amount of Rs.2,11,07,874.09 cannot be included in the turn over and it stood exempted under Section 2(p) of the TNGST Act read with Rule 6 of the TNGST Rules, which are extracted hereunder:
Section 2(p):
"Section 2(p). "Taxable turnover" means the turnover on which a dealer shall be liable to pay tax as determined after making such deductions from his total turnover and in such manner as may be prescribed;"
Rule 6:
Rule 6. The tax or taxes under (section 3 or 4) shall be levied on the taxable turnover of the dealer. In determining the taxable turnover, the amounts specified in the following clauses shall, subject to the conditions specified therein, be deducted from the total turnover of a dealer:-
* * * * * * Rule 6(c). all amounts falling under the following three heads when specified and charged for by the dealer separately, without including them in the price of the goods, sold:-
(i) freight;
(ii) .....
Rule 6(c)(iii). charges for delivery."
4.1. The said plea was rejected by the Assessing Officer and demand as above was made and the appeal was preferred to the Appellate Assistant Commissioner (C.T), Tirunelveli. He allowed the appeal in part, but concurred with the order of the Assessing Officer insofar as the levy on the price inclusive of the charges made separately without giving deduction to the cost towards cost of empty bags, stevedoring, clearing, forwarding charges and standardisation, bagging, loading and unloading charges, transport costs. In effect, the relief was only with regard to the error in calculation.
4.2. Aggrieved over the same, the appeal was preferred to the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Madurai, and the Tribunal came to the conclusion that the respondent - assessee had acted upon the subsequent agreement dated 18.12.1992 with regard to the contracted price which is not an all inclusive price, but price inclusive of cost of empty bags, stevedoring, clearing, forwarding charges and standardisation, bagging, loading and unloading charges, transport costs. The Appellate Tribunal came to the conclusion on the basis of the revised agreement price per Metric Tonne is Rs.6,078.85 and all other charges were shown separately and that it also held that the sale was effect only after subsequent agreement. Insofar as the Invoice No.001 to Invoice No.004, referred to in paragraph 2, there is a clear finding by the Tribunal that all Invoices came to be revised and the final Invoice was issued only on 08.03.1993 and earlier Invoices were made primarily for the purpose of benefits from the bank on the transactions and there is no dispute that Invoice No.5/8.3.93 is final invoice in respect of the transaction on price and quantity where the charges towards cost of empty bags, stevedoring, clearing, forwarding charges and standardisation, bagging, loading and unloading charges, transport costs, were shown separately. Therefore, the Appellate Tribunal, taking note of the subsequent agreement and the final revised Invoice and the clear indication of price with regard to cargo and other charges separately, came to the conclusion that the Assessing Officer was not correct in including the other charges towards price as of inclusive and therefore, set aside the order levying tax on Rs.2,63,32,368 at 3% and also penalty. The Tribunal also rejected the plea with regard to the excess levy of penalty collection under Section 22 of the TNGST Act on the premise that 4% sales tax as against 3% was collected. Taking into consideration the decision of this Court in State of Tamil Nadu v. K.Mohamed Ibrahim Sahib reported in 83 STC 402, the Tribunal held that when a buyer remitted the amount to the State, the element of penalty need not be mulcted on the assessee.
5. As against the order of the Appellate Tribunal, the present Tax Case Revision has been filed.
6. We find that the present Tax Case Revision was admitted on 21.10.2009, on the following substantial questions of law:
"1. Whether the Tribunal erred in deleting the turn over relating to packing and forwarding charges, transport charges, loading and unloading charges amounting to Rs.2,63,32,368/- which will form part of the cost price as pre-sale charges?
2. Whether the Tribunal had failed to note that the dealer had collected excess tax which was not refunded to the dealer and therefore the same was recovered by way of penalty under Section 22(2) of the TNGST Act as there is unjust enrichment on the part of the dealer which is against the principles laid down by the Apex Court in the case laws reported in 111 STC 467 and 112 STC 418?"
7. We are of the view that the Substantial Question of Law No.(1) has been wrongly framed and the correct substantial question of law reads as follows:
"(1) Whether the Tribunal erred in deleting the turn over relating to packing and forwarding charges, transport charges, loading and unloading charges amounting to Rs.2,63,32,368/- by including it as a part of Invoice price?"
Substantial Question of Law No.(1):
8. We find that the Tribunal has not committed any error as a reading of Section 2(p) of the TNGST Act makes it clear that "Taxable turnover" means the turnover on which a dealer shall be liable to pay tax as determined after making such deductions from his total turnover and in such manner as may be prescribed.
9. Rule 6 of the TNGST Rules, clearly provides that the tax or taxes under (section 3 or 4) shall be levied on the taxable turnover of the dealer. In determining the taxable turnover, the amounts specified in the following clauses shall, subject to the conditions specified therein, be deducted from the total turnover of a dealer.
10. Rule 6(c) and 6(c)(iii) provide that all amounts falling under the following three heads when specified and charged for by the dealer separately, be deducted without including them in the price of the goods, sold and this includes freight and charges for delivery.
11. In this case, it is not in dispute that Invoice No.5/8.3.93 shows the cost of the cargo DAP separately and other charges separately and that transaction has been effected based on the agreement dated 18.12.1992. This is also not disputed by the authority. Invoice Nos.1 to 4 are only made for other purposes and not for the purpose of filing the form A1 return. This is admitted by the Revenue.
12. Nevertheless, these invoices have not been suppressed and they have been shown to the authority as cancelled and therefore, the question of relying upon those invoices does not arise.
13. The Tribunal was, therefore, correct in allowing the appeal filed by the respondent holding that the tax on the turn over of Rs.2,63,32,368 at 3% is bad for the aforesaid reasons. As a consequence, penalty has also to be set aside.
14. Therefore, we find no error in the order of the Appellate Tribunal. The Substantial Question of Law No.(1) is answered in favour of the assessee.
Substantial Question of Law No.(2):
15. Section 22(2) of the TNGST Act, reads as follows:
"22. Collection of tax by dealer.-
* * * * * * * * * * (2) If any person or registered dealer collects any amount by way of tax or purporting to be by way of tax, in contravention of the provisions of sub-
section (1), whether or not any tax is due from such person or dealer under this Act in respect of the transaction in which he collects such amount, the assessing authority may, after giving such person or dealer a reasonable opportunity of being heard, by order, in writing impose upon him by way of penalty a sum, which shall be, -
(i) where the excess amount has been collected in the bona fide belief that it had to be collected, one hundred per cent of the amount collected;
(ii) where the excess amount has been collected wilfully and knowing that it was not due to be collected, one hundred and fifty per cent of the amount collected:
Provided that no proceedings under this sub-section shall be commenced after a period of five years from the date of order of the final assessment by the assessing authority:
Provided further that no prosecution for an offence under sub-section (1- A) of Section 45 shall be instituted in respect of the same facts on which a penalty has been imposed under this sub-section."
16. Insofar as the penalty under Section 22(2) of the TNGST Act is concerned, it is made applicable only if the amount is not remitted to the State by the dealer who collects the excess amount of tax. In this case, there is no dispute that the respondent-assessee has remitted the amount to the State and therefore, placing reliance on the decision of this Court in State of Tamil Nadu v. K.Mohamed Ibrahim Sahib reported in 83 STC 402, the Tribunal was justified in setting aside the levy of penalty.
17. Relying on the decisions of the Honourable Apex Court in Mafatlal Industries Ltd., v. Union of India and others reported in 111 STC 467 and Venkataramana Rice & General Merchants v. Government of A.P., and others reported in 112 STC 418, the substantial question of law No.(2) has been raised by the State, stating that the Tribunal erred in not upholding the levy of penalty under Section 22(2) of the TNGST Act. We find that the said issue was considered by the Honourable Apex Court in Mafatlal Industries Ltd., v. Union of India and others reported in 111 STC 467, which is a case of unjust enrichment. The principle of 'unjust enrichment' laid down by the Honourable Apex Court in Mafatlal case (cited supra) was held by the Madras High Court as not applicable under this Act in State of Tamil Nadu v. Sakthi Sugars reported in (2004) 137 STC 218, as there is no specific provision therefor in this Act.
18. The Tribunal was justified in setting aside the levy of penalty placing reliance on the decision in State of Tamil Nadu v. K.Mohamed Ibrahim Sahib reported in 83 STC 402. Accordingly, the substantial question of law No.(2) is answered in favour of the respondent assessee.
19. In the result, the Tax Case Revision is dismissed. No costs.
rsb