Madras High Court
M/S.Eternit Everest Limited vs The State Of Tamil Nadu on 21 August, 2017
Author: T.S.Sivagnanam
Bench: T.S.Sivagnanam
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 21.08.2017
CORAM
THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM
W.P.No.4876 of 2005 &
W.M.P.No.5397 of 2005
M/s.Eternit Everest Limited,
Now known as Everest Industries Ltd.,
Office at The AAC Limited,
Research & Consultancy Directorate,
CRS Complex, LBS Marg, Thane (West) 400 604,
Maharastra. ... Petitioner
Vs.
1.The State of Tamil Nadu,
Rep. by its Commissioner,
Office of the Special Commissioner &
Commissioner of Commercial Taxes,
Chepauk, Chennai 600 005.
2.The Assistant Commissioner (CT)(FAC),
Fast Track Assessment Circle-II,
Coimbatore 18.
3.The Commercial Tax Officer,
No.II, 100 ft. Road, Ellapillai Chavadi,
Near Indira Gandhi Statue,
Pondicherry 1.
4.The Union of India, Through the Secretary,
Ministry of Finance, Department of Revenue
North Block, New Delhi 110 001. ... Respondents
Petition filed under Article 226 of the Constitution of India to issue a Writ of Certiorarified Mandamus to call for the records of the second respondent above named in TNGST.1800006/98-99 dated 29.10.2004 and served on the petitioner on 22.01.2005, quash the proceedings therein and further direct the second respondent to consider the Form F declarations with proof of despatch of the goods filed by the petitioner under Section 6A of the CST Act, 1956.
For Petitioner : Mr.N.Prasad for Mr.B.Raveendran
For Respondents : Mr.S.Kanmani Annamalai,
Additional Government Pleader
O R D E R
Heard Mr.N.Prasad, learned counsel representing Mr.B.Raveendran, learned counsel for the petitioner on record and Mr.S.Kanmani Annamalai, learned Additional Government Pleader appearing for the respondents 1 to 3.
2.The petitioner has filed this writ petition challenging an order of assessment dated 29.10.2004 under the provisions of Tamil Nadu General Sales Tax Act, 1959 (TNGST Act in short) for the assessment year 1998-1999 and for further direction upon the second respondent to consider the Form F declarations with proof of despatch of goods filed by the petitioner under Section 6A of the Central Sales Tax Act, 1956 (CST Act in short) and pass appropriate orders in the light of the law laid down by the Hon'ble Supreme Court in the case of Ashok Leyland Limited Vs. State of Tamil Nadu and another reported in [2004] 134 STC 473 (SC).
3.Though in the impugned assessment order there are two issues as against the issue pertaining to the levy of purchase tax on the purchase of fly ash by the petitioner from the Tamil Nadu Electricity Board, the petitioner had filed a separate writ petition in W.P.No.10262 of 2005, and the Division Bench by order dated 03.11.2010 has allowed the writ petition following the order passed in the case of State of Tamil Nadu v. Associated Cement Companies Limited reported in [2010] 29 VST 153 (Mad).
4.So far as the second issue is concerned, it is submitted that the present writ petition pertains to stock transfer to the petitioner's depot at Pondicherry. The petitioner was served with a notice dated 28.02.2001. On perusal of the annual reports filed by the petitioner for the year 1998-1999, it was pointed out that the place of business of the petitioner was inspected by the Enforcement Wing officials on 09.12.1998, and it was found that the petitioner had effected branch transfer to Pondicherry up to 30.11.1998. On verification of the accounts, the figures of such stock transfer were culled out and it was observed that at the time of inspection, the Inspecting Officers recovered 5 sale invoices pertaining to Pondicherry Depot and such invoices revealed sales to Tamil Nadu customers from Pondicherry Depot. Further commenting upon the nature of the transaction, it was observed that it is unbelievable because no consumer will visit the place far away from his place to purchase the product from Pondicherry Depot. On verification of certain Pondicherry invoices, wherein, the petitioner's Coimbatore head office-manufacture themselves had mentioned the name of either the authorized dealer or name of the canvassing agent on the right side edge of the invoices. These records were recovered from the petitioner.
5.After cataloging the records, the second respondent stated that even though they could not correlate each and every movement transported from manufacturing unit to Pondicherry Depot and Pondicherry branch to actual consumer in Tamil Nadu, the goods manufactured and sent to Pondicherry Depot are not sold to the actual consumers in Tamil Nadu, but again transported to Tamil Nadu to the destination contracted by the Coimbatore manufacturing Unit and terminates as a whole in the same State, but pass through Pondicherry State. Therefore, the first respondent proposed that this is only a camouflaged local sale as branch transfer for which process the State tax revenue is avoided.
6.The petitioner was granted time to submit their objections. The petitioner submitted their objections accordingly on 26.09.2003. Apart from other things, the petitioner gave explanation based on each individual invoice, which was referred to by the second respondent and seized during the course of inspection. By referring to those details, the petitioner pointed out that in all the cases, supplies were made to the parties against their specific orders placed by Pondicherry Depot and the goods were appropriated in Pondicherry Depot as per the requirement of the buyers mentioned in their purchase orders. Thereafter, despatches were invariably made from Pondicherry Depot to the buyers destination by road transport and number of the vehicle carrying the goods is also mentioned in the invoice.
7.After elaborately giving explanation based on the invoices referred to by the second respondent, the petitioner made a request that the documents, which were seized from them, marked as book D and E were not returned to them nor copies have been provided to them, in spite of oral and written request made on more than five occasions. Therefore, the petitioner stated that in the absence of relevant records, and fax messages, he is not in a position to give specific replies in respect of various challans/invoice numbers and the names noted in the fax copy and the Pondicherry invoice, which have been mentioned in the pre-assessment notice with regard to movement of goods. The petitioner's explanation was that in each and every case of stock transfer from manufacturing unit to Pondicherry Depot, the goods have been dispatched in bulk without any reference or linkage to any specific order or prior contract.
All such dispatches are by way of stock transfers where the consignor and the consignee is the Company.
The goods are dispatched by road transport for which proper proof of dispatch in the form of Lorry Receipt is available and is also supported with Form ST XX. These ST Forms are issued by the Commercial Tax Department and are subject to verification and scrutiny by the officials of the Commercial Tax Department.
The goods pass through sales tax check posts/barriers where the same are checked and then allowed to proceed further. On arrival at Pondicherry, the goods are off-loaded and kept in Company's Godown/Warehouse.
The Depot is maintaining huge stocks at all times and the orders placed on Pondicherry Depot for supplies to a particular customer in Tamil Nadu are executed from Pondicherry Depot only.
The appropriation of goods take place at Pondicherry Depot only and the goods as per orders are dispatched to the particular customer through road transport for which an invoice is prepared and applicable sales tax is charged therein.
8.Therefore, it was contended that after appropriation of goods, the actual movement of goods commenced from Pondicherry Depot to execute the purchase orders from the customer, which are placed on Pondicherry Depot and not from the manufacturing unit in Tamil Nadu, as alleged in the pre-assessment Notice. Further, the petitioner pointed out that the second respondent in the show cause notice has referred to Explanation 2 to Section 3 of the CST Act and the said Explanation covers only cases where movement of goods commences and terminates in the same State, but due to territorial locations, the vehicle carrying the goods pass through the territory of any other State before the movement of goods terminates.
9.Therefore, it was contended that the said Explanation does not in any manner affects their transactions. Further, by referring to the decision in the case of Commercial Tax Officer v. Hindustan Copper Limited reported in [1995] 96 STC 217 (Raj), among other things, it was contended that all transactions are supported with Form F and none of the contents of declaration in Form F is incorrect. Further, the petitioner stated that the Sale Tax Authorities in Pondicherry have already completed the assessment on the said basis and the company has paid taxes and if the same turnover is taxed again, it will amount to double taxation. The copy of the assessment order passed by the Pondicherry Sales Tax Authorities for the year 1998-99 is also enclosed. Therefore, it was submitted that there are no valid grounds for treating the stock transfer to Pondicherry as sales made within the State of Tamil Nadu.
10.With regard to proposal to levy penalty under Section 12(3)(b) of the TNGST Act, it was pointed out that the said provision cannot be invoked as there was no mala fide intention and best judgment assessment of the turnover is already reported in the CST returns and disclosed in the books of accounts also. On receipt of the objections, the second respondent issued a revised notice dated 18.08.2004.
11.Learned counsel for the petitioner pointed out that in the said revised notice, the second respondent has accepted the actual stock transfer value of goods to Pondicherry Depot from Podanur. For the revised notice, the petitioner submitted their objections dated 20.09.2004, much of which reiterating the earlier stand, apart from furnishing additional particulars on the figures mentioned in the revised notice. The second respondent has passed the assessment order rejecting the contention raised by the petitioner vide the impugned order confirming the proposal in the revised notice. The impugned assessment order runs to 35 pages.
12.It appears that the impugned order is a reasoned order. On a close scrutiny, it is seen that the second respondent has verbatim extracted the objections filed by the petitioner and the conclusion is only in the last paragraph of the order as mentioned earlier. In so far as the levy of purchase tax on the purchase of fly ash was concerned, separate order setting aside the assessment order was passed by this Court in W.P.No.10262 of 2005. Therefore, this Court has to look at the finding rendered by the second respondent on the issue relating to the stock transfer to the Pondicherry Depot, which has been treated as a local sale (i.e.) a sale within the State of Tamil Nadu. I find that the finding is very sketchy and that the second respondent has not dealt with the major issues, which the petitioner has pointed out.
13.Two of the major issues, which the second respondent should have decided is with regard to validity of Form F declarations produced by the petitioner. The second aspect on which the respondents should have rendered a finding is with regard to specific contention of the petitioner regarding appropriation of goods. The petitioner contended that after appropriation, the actual movement of goods were made/commenced from Pondicherry Depot. Unfortunately in the impugned order, the second respondent has not rendered a finding on these two issues and unless and until a finding is being rendered, the question of treating the transaction as local sale would not arise at this juncture.
14.It may be pointed out, as regards the scope of enquiry with regard to Form F declarations, the petitioner has stated in the affidavit filed in support of the writ petition that the Form F declarations have been furnished to the second respondent. Though no counter affidavit has been filed, in the impugned order, there is no allegation that the petitioner has not produced the required Form F declaration. The scope of enquiry on such Form F declarations has been circumscribed in the decision of the Hon'ble Supreme Court in the case of Ashok Leyland Limited Vs. State of Tamil Nadu and another reported in [2004] 134 STC 473 (SC), wherein it has been held that when the dealer furnishes the original of Form F to its assessing authority, an enquiry is required to be held. Such enquiry is held by the assessing authority himself. He may pass an order on such declaration before the assessment or along with the assessment. Once an order in terms of Sub-Section (2) of Section 6-A of the Central Act is passed, the transactions involved therein would go out of the purview of the Central Act. In other words, in relation to such transactions, a finding is arrived at that they are not subjected to the provisions of the Central Sales Tax Act. It is not in dispute thereunder no appeal is provided there against.
15.The particulars required to be furnished in Form F clearly manifest that the proof required is as to whether the goods were factually transferred to the assessee himself or his branch office or his agent and not to any third party. Any other enquiry is beyond the realm of the assessing authority.
16.The decision in Ashok Leyland Limited Vs. the State of Tamil Nadu and another reported in [2004] 134 STC 473 (SC) was followed by the Division Bench in the case of Ashoka Sweets v. State of Tamil Nadu reported in 2011 46 VST 275 (Mad) wherein it was held that after verifying the details contained in Form F and other records that the goods had moved through delivery notes in Form XX, the assessing authority granted the relief accepting the return and that the entire turnover was exempted under Section 6A of the CST Act. It was further held that in the reassessment order, there was hardly any reference to the Form F declaration, which was originally accepted by the officer as true and whose contents were checked with the other relevant records, nor had it, in any manner, disturbed the acceptance of Form F. Once a declaration had been accepted and acted upon by the Revenue, unless and until on further enquiry made thereto the particulars furnished were found to be incorrect or untrue, the assessment once made based on Form F, could not be reopened. Unless the details were found to be writ with fraud, collusion or misrepresentation or suppression of material facts, on a mere change of opinion, the findings could not be disturbed under Section 16 of the Act. When the original assessment rested on the findings of enquiry with reference to the details in Form F and the finding on Form F thus remained undisturbed even in the reassessment proceedings, the reassessment order revoking the exemption granted under Section 6A of the Central Sales Tax Act could not sustained.
17.The above decisions are referred to indicate as to what would be the scope of enquiry on such Form F declaration. With regard to appropriation aspect, the second respondent should take note of the decision of the Hon'ble Supreme Court in case of TATA Engineering and Locomotive Co. Limited v. Assistant Commissioner of Commercial Taxes reported in [1970] 26 STC (354), wherein the Hon'ble Supreme Court pointed out as follows:
.......The appropriation of the vehicles was done at the stock-yards through specification of the engine and the chassis number and it was open to the appellant till then to allot any vehicle to any purchaser and to transfer the vehicles from one stock-yard to another. Even the Assistant Commissioner found that on some occasion vehicles had been moved from a stock-yard in one State to a stock-yard in another State. It is not possible to comprehend how in the above situation it could be held that the movement of the vehicles from the works to the stock-yards was occasioned by any covenant or incident of the contract of sale. As regards the so-called firm orders it has already been pointed out that none have been shown to have existed in respect of the relevant periods of assessment. Even on the assumption that any such orders had been received by the appellant they could not be regarded as anything but mere offers in view of the specific terms in exhibit-I (the dealership agreement) according to which it was open to the appellant to supply or not to supply the dealer with any vehicle in response to such order. What was, therefore, relevant was the acceptance of firm orders occasioning the movement of vehicles out of the State of Bihar.
18.The second respondent ought to have embarked upon the exercise to examine the Form F declaration and render a finding on the aspect of appropriation. However, since these two important issues having not been dealt with by the second respondent, impugned order calls for interference.
19.Accordingly, this writ petition is allowed, impugned order is set aside and the finding rendered by the second respondent on the issue relating to stock transfer to Pondicherry Depot is set aside with the following directions:
(i) The second respondent is directed to furnish the copies of the seized documents, which have been marked as book D and E within a reasonable time on costs being remitted by the petitioner for making out such copies.
(ii) On receipt of the copies, the petitioner is granted 30 days time to submit their objections.
(iii) On receipt of the objections, the second respondent shall verify the entire records provided, afford an opportunity of personal hearing, verify the records and decide the twin issues, which have been pointed out in the preceding paragraphs on the legal principles set out on the issues.
20.In the impugned order, the second respondent has also confirmed the proposal to levy penalty under Section 12(3)(b) of the TNGST Act. It is a settled legal position that if the turnover is culled out from the books of accounts of the dealer and the conduct of the dealer is not contumacious or there is any mala fides with intent to evade payment of tax, the said provision would not stand attracted. Therefore, in the event, the second respondent proposes to rake up the issue relating to penalty, the petitioner is entitled to raise objections and the second respondent shall take note of the legal principles laid down in a catena of cases as to under what circumstances penalty is levyable.
21.This is so because in the impugned assessment order the second respondent refers to the records and the returns filed by the petitioner and that the petitioner is stated to have furnished higher figures and while submitting their objections, they have pointed out that the stock transfer amount has been taken as Rs.10,20,89,252/- whereas the correct figure is Rs.11,33,00,500/-. This would show that the conduct of the petitioner was not to evade taxes. No costs. Consequently, the connected miscellaneous petition is closed.
21.08.2017 Index:Yes/No abr To
1.The Commissioner, Office of the Special Commissioner & Commissioner of Commercial Taxes, The State of Tamil Nadu, Chepauk, Chennai 600 005.
2.The Assistant Commissioner (CT)(FAC), Fast Track Assessment Circle-II, Coimbatore 18.
3.The Commercial Tax Officer, No.II, 100 ft. Road, Ellapillai Chavadi, Near Indira Gandhi Statue, Pondicherry 1.
4.The Secretary, The Union of India, Ministry of Finance, Department of Revenue North Block, New Delhi 110 001.
T.S.SIVAGNANAM, J.
abr W.P.No.4876 of 2005 21.08.2017