Madras High Court
Vantage Leathers India (P) Limited vs The Secretary, Tamilnadu Sales Tax ... on 22 February, 2007
Equivalent citations: (2007)8VST412(MAD)
Author: K. Raviraja Pandian
Bench: K. Raviraja Pandian
ORDER K. Raviraja Pandian, J.
1. The petitioner is a manufacturer and seller of leather garments. For the assessment year 1992-93, the petitioner reported a total and taxable turnover of Rs. 4,74,80,849/- and Rs. 25,87,939/- respectively. The said turnover included the turnover relating to the sale proceeds of REP licenses. Though in the total turnover, the said proceeds has been shown, it was not reported as a taxable turnover and tax paid since at the time of filing of the monthly returns for the assessment year 1992-93 it was uncertain whether the turnover of sale of REP licenses is taxable. The issue has been decided by the Division Bench of this Court in the case of P.S. Apparels v. Deputy Commercial Tax Officer, T. Nagar East Assessment Circle, Madras reported in (1994) 94 STC 139 dated 4.4.1994 confirmed by the Supreme Court in the case of Vikas Sales Corporation and Anr. v. Commissioner of Commercial Taxes and Anr. reported in (1996) 102 STC 106 dated 1.5.1996. The second respondent before passing the original assessment issued notice proposing to impose tax on the said turnover and also proposed to levy penalty under Section 12(5)(iii) of the T.N.G.S.T.Act for the incorrect filing of the return since the petitioner failed to report the turnover of the REP licenses in the taxable turnover and pay tax. The petitioner explained the position that the turnover of REP licenses were reported in the total turnover, however not reported in the taxable turnover because the issue was pending in the High Court and stay was granted in favour of the petitioner. Consequently, there was no malafide intention and so, the penalty might be dropped. After considering the objections, the assessing officer by his proceedings dated 27.6.1994 completed the assessment by deleting the penalty proposed. The petitioner also paid the entire tax on the turnover of the sale of REP licenses on 8.10.1994. However, by notice dated 12.3.1998, once again the assessing officer proposed to impose penalty under Section 12(5)(iii) for non-inclusion of the turnover relating to the REP licenses. In spite of the explanation offered by the petitioner, the assessing officer confirmed the proposal by proceedings dated 30.3.1998. As against the said order, an appeal has been filed before the Appellate Assistant Commissioner, who by his order dated 30.3.1998 deleted the penalty and allowed the appeal on the ground of bona fide. The revenue filed an appeal before the Appellate Tribunal. The Appellate Tribunal set aside the order of the Appellate Assistant Commissioner and imposed the penalty by passing the impugned order. The correctness of the same was canvassed in the Original Petition filed by the petitioner before the Taxation Special Tribunal, Chennai in O.P.NO.1063 of 2003 and subsequently transferred to this Court on the abolition of the Tribunal and numbered as writ petition.
2. I heard the argument of the learned Counsel on either side and perused the materials on record.
3. From the facts, it is clear that in respect of the assessment year 1992-93, the petitioner has filed monthly returns in which the turnover in respect of the sale of REP licenses has been stated and claimed exemption as it is not a taxable turnover. It is also an admitted fact that the taxability of such turnover was a disputed issue and pending before the Court. The petitioner was also a party to the proceedings before this Court. This Court by its order dated 4.4.1994 reported in 94 STC 139 held that the sale turnover of the REP licenses was taxable turnover and as such tax was leviable on such tunrover. Immediately ,on 8.10.1994, the tax on the turnover has been paid by the petitioner. In this factual situation, whether the imposition of penalty under Section 12(5)(iii) is warranted is the question to be decided in this case.
4. The issue is no more res integra. It has been decided in more than one Division Bench judgment of this Court. In all those cases, the uniform opinion of the Court was that the question when a particular turnover is taxable or not was a disputed question and it was decided affirmatively in favour of the revenue and immediately on such decision being taken by the Court, the assessee paid the tax, that could be regarded as only a bona fide and cannot be regarded as a dereliction or infraction of the provision of Section 12(5)(iii) of the Tamil Nadu General sales Tax Act and on such of those occasions, the imposition of penalty was uncalled for and unwarranted. It is useful to refer two paragraphs of the judgment of this Court in the case of State of Tamil Nadu v. Papco Offset Printing Works reported in (2000) 118 STC 160, wherein such uniform opinion was taken, which reads thus:
11. We may now advert to the order of the Tribunal relatable to the setting aside of the penalty imposed upon the assessee-dealer. Section 12(5)(iii) of Tamil Nadu General Sales Tax Act empowers the assessing authority to levy a penalty in a sum not less than 50 per cent and not more than 150 per cent of the difference in tax payable on the turnover disclosed in the return and that determined by the assessing authority. In case the return submitted by the assessee-dealer is found to be incorrect and incomplete. It is not as if the assessee-dealer did not disclose the entirety of the transactions in his accounts. The admitted fact is that the assessee-dealer disclosed the entirety of the transaction in his turnover. But what was done was that a portion of the turnover was claimed to be exempted from tax, as if the said turnover represents sales of reading books falling under item No. 22 of the Schedule to the notification issued under Section 17 of the TamilNadu General Sales Tax Act.
12. In such state of affairs, it cannot at all be stated that the assessee-dealer had refracted or violated the salient provisions adumbrated under clause (iii) of Sub-section (4) of Section 12, attracting penalty impossible under clause (iii) of Sub-section (5) of Section 12 of the TNGST Act read with Section 9(2-A) of the CST Act. We are, therefore, of the view that the order of the Tribunal, setting aside the penalty imposed upon the assessee-dealer cannot at all be stated to be not sustainable in law.
The same view was taken by the Division Bench of this Court in The State of Madras v. Fairmacs Trading & Company reported in (1975) 35 STC 176 at page No. 179 and in The State of Tamil Nadu v. V.P.S. Narayana Nadar and Co. reported in (1984) 56 STC 267 at page 268. The same position was reiterated in the case of Appollo Saline Pharmaceuticals (P) Ltd. v. Commercial Tax Officer (FAC) and Ors. reported in (2002) 125 STC 505 at paragraph No. 9 and again in the case of Tan India Limited v. State of Tamil Nadu reported in (2003) 133 STC 311 at paragraph No. 15.
5. The Supreme Court has also in E.I.D. PARRY (I) Limited v. Assistant Commissioner of Commercial Taxes and Anr. reported in (2000) 117 STC 457 held as follows:
23. But so far as levy of penalty is concerned, we do not think that the Sales Tax Authorities were justified in levying it. Till the judgment of the Madras High Court, on 15-7-1991, in Perambalur Sugar Mills Ltd. v. State of T.N. (1992) 86 STC 17, the correct position of law within the State of Tamil Nadu was not free from doubt. Even thereafter, the Sales Tax Tribunal had in subsequent orders held that transport subsidy was not includible in the taxable turnover. Such a view was held by the Tribunal till March 19, 1993. It appears that on bona fide belief that planting and transport subsidies were not includible in the taxable turnover, the appellants had not included those amounts in their turnover and for that reason non-inclusion of these two items in the turnover do not seem to be intentional. Though we have now held that the appellants were not right in not including the amounts of planting subsidy and transport subsidy in the taxable turnover, considering the facts and circumstances of the case, it would not be correct to say that they had acted deliberately in defiance of law or that their conduct was dishonest or they had acted in conscious disregard of their obligation under the Sales Tax Act. The Sales Tax Authorities were, therefore, wrong in passing the orders of penalty and upholding the same. The High Court also, in our opinion, committed an error in upholding the orders of penalty. In the result, these appeals are partly allowed. The order of the High Court and the orders of the Sales Tax Authorities imposing and upholding levy of penalty are set aside. Only to that extent the appellants succeed and their appeals are allowed. The judgment of the High Court in respect to the planting subsidy and transport subsidy is upheld. In the facts and circumstances of the case, there shall be no order as to costs.
6. Therefore, in the light of the catena of decisions as stated above and with reference to the factual position of the case on hand, as narrated above, I am of the view that the levy of penalty in this case is uncalled for and unwarranted, as the turnover has been duly regarded and reported as a total turnover, but tax has not been paid along with the return in A-1. One more additional factor in this case in favour of the petitioner was the Supreme Court granted stay of collection of tax on the said turnover till it affirmed the decision of this Court in (1994) 94 STC 139 dated 4.4.1994 in (1996) 102 STC 106 on 1.5.1996. In this case, the tax relating to REP turnover was paid in December, 1994.
7. Hence the order of the Tribunal restoring the order of the Assessing Officer imposing penalty is hereby set aside by allowing the writ petition. However there is no order as to costs.