State Taxation Tribunal - Tamil Nadu
Madurai District Co-Operative ... vs Joint Commissioner (Revision ... on 3 April, 2000
Equivalent citations: [2001]122STC477(TRIBUNAL)
JUDGMENT
J. Kanakaraj, J. (Chairman)
1. The appellant/assessee is a co-operative spinning mill manufacturing hank-yarn of various counts. They reported a total and taxable turnover of Rs. 5,63,13,469.81 and Rs. 4,20,70,255.15 respectively for the assessment year 1982-83. The assessees had not disclosed a turnover of Rs. 37,79,900.54 in their returns and that turnover related to purchase of local cotton, being taxable as the last purchase in the State. After getting objections from the assessee an order of assessment was made on January 30, 1984 in the following manner :
"Sales turnover of yarn Rs. 3,56,62,869.00 at 3% Sales turnover of cotton waste 4,07,797.00 at 4% Sales turnover of cone yarn 19,93,760.00 at 4% Sales turnover of Misc. goods 35,668.00 at 5% Purchase turnover of local cotton...
77,50,061.00 at 3% Taxable turnover determined 4,58,50,155.00 Add : Exemption allowed purchase turnover of country cotton 1,43,46,717.00 Total turnover determined 6,01,96,872.00"
Tax due on Rs.
4,34,12,930.00 at 3% Rs. 13,02,387.90 Tax due on Rs. 24,01,557.00 at 4% Rs. 96,062.28 Tax due on Rs. 35,668.00 at 5% Rs. 1,783.40 Rs. 14,00,233.58"
It was also indicated that the non-disclosure of taxable turnover entails penalty under Section 12(5) of the Tamil Nadu General Sales Tax Act to the tune of Rs. 1,13,397. However, no penalty was actually imposed in the order of assessment and a separate notice was issued on January 18, 1988 proposing to levy penalty as above and calling for objections from the assessee. In the objections it was stated that the Tamil Nadu Co-operative Marketing Federation alone fixed the rates and therefore the correct turnover could not be disclosed. It was however, stated that they filed a revised return to the department. By a final order dated January 13, 1989 the objections were overruled, stating that the contention that a revised return was filed was not true because the records did not bear out a filing of any revised return.
2. On an appeal to the Appellate Assistant Commissioner the very same explanation that the assessee did not receive invoice from the suppliers even though goods had been received and that at the time of final assessment the assessee had brought this turnover to the notice of the assessing authority was urged. Then there was no intention on the part of the assessee to hide the turnover. The Appellate Assistant Commissioner held that there was no wilful failure to disclose the turnover of cotton. Therefore, there was no deliberate intention on the part of the assessee to hide the turnover. He accordingly set aside the order imposing penalty. The matter was taken up on suo motu revision by the Joint Commissioner. The Joint Commissioner has dealt with the objections of the assessee and held against them in the following manner :
"The dealer contended before the Appellate Assistant Commissioner that they did not receive invoices from the suppliers even though the goods have been recovered and accounted by them. The sale is complete as soon as the goods are delivered and hence the dealer should have reported the turnover and paid tax thereon as soon as they received the goods. The Appellate Assistant Commissioner has also held that there is no wilful failure to disclose the turnover on cotton. For the levy of penalty under Section 12(5)(iii) of the Act no wilful failure is required."
3. The appellant challenges the said order of the Joint Commissioner in the present appeal. Mr. T. Ramesh, representing the appellant urged the following points before us :
1. The proceedings imposing penalty on January 13, 1989 is barred by limitation prescribed in the proviso to Section 12(5) of the Tamil Nadu. General Sales Tax Act, 1959.
2. There was neither 'mens rea' nor motive to suppress the disputed turnover and consequently no penalty can be imposed.
3. Factually the Joint Commissioner had failed to see that the purchase of cotton was duly accounted for and included in the statement as reflected in the revised return filed by the assessee, voluntarily, before finalisation of the order of assessment. The Joint Commissioner did not also consider the explanation of the assessee that the purchase invoices had not been received from TANFED and therefore the assessee had a justifiable reason for not disclosing the purchase of cotton at the relevant time.
4. Mr. R. Mahadevan, the learned Government Advocate, supported the order of the Joint Commissioner by relying on certain decisions. He also argued that no mens rea is required to impose penalty under Section 12(5) of the Tamil Nadu General Sales Tax Act, 1959.
5. We have considered the rival submissions and we will proceed to deal with the points argued by the counsel for the appellant. Taking up the question of limitation first, the assessment order is 1982-83 and the notice proposing levy of penalty under Section 12(5) of the Tamil Nadu General Sales Tax Act, 1959 was issued in January 18, 1988. The proviso to Section 12(5) of the Tamil Nadu General Sales Tax Act, 1959 as it stood at the relevant time is as follows :
"Provided that no penalty under Sub-sections (3) and (5) shall be imposed after a period of five years from the expiry of the year to which the assessment relates and unless the dealer affected has had a reasonable opportunity of showing cause against such imposition."
6. Therefore, limitation runs from April 1, 1983 and the notice issued on January 18, 1988, is definitely within the prescribed period of 5 years. But what is argued by Mr. T. Ramesh is, that the final order was passed only on January 13, 1989 which is well beyond 5 years from April 1, 1983. This being a point of limitation, we will consider the same, even though the point was not raised at the earlier stage. Strong reliance is placed by Mr. T. Ramesh for the appellant on the judgment of the Madras High Court in (R. Subba Reddy v. State of Tamil Nadu [1993] 91 STC 112). The division Bench of the Madras High Court observed as follows :
"Under proviso to Sub-section (5) of Section 12 of the Act, penalty cannot be imposed after the period of five years from the expiry of the order to which the assessment relates. There is no dispute in this case that the assessment year in question is 1972-73. The penalty has been imposed by an order dated September 30, 1982. Though the relevant section underwent a change in 1979, we are not concerned with that. As the section stood during the assessment year in question 1972-73 penalty should have been imposed before March 31, 1978. The fact that the notice has been issued on March 1, 1978, will not take away the rigour of the section by which the penalty ought to have been imposed."
7. While doing so, the Madras High Court refused to take note of the amendment introduced and which came into effect on December 1, 1972 because the assessment in that judgment related to 1972-73. However, the said amendment did not introduce any change in the proviso to Section 12(5) of the Tamil Nadu General Sales Tax Act, 1959.
The Madras High Court has not referred to any previous decision on the aspect. Actually there is a line of cases which held in that it is sufficient to initiate the proceedings before the period of limitation and it is not necessary that final orders should be passed before the period of limitation. The earliest decision on this aspect and which is a binding decision, was rendered by the Supreme Court of India (Sales Tax Officer, Special Circle, Ernakulam v. Sudarsanam lyengar & Sons [1970] 25 STC 252). The Supreme Court of India was interpreting Rule 33(1) of the Travancore-Cochin General Sales Tax Rules, 1950. That rule was as follows :
"Rule 33(1) : If for any reason the whole or any part of the turnover of business of a dealer or licensee has escaped assessment to tax in any year or if the licence fee has escaped levy in any year, the assessing authority or licensing authority, as the case may be, subject to the provisions of sub-rule (2) may at any time within three years next succeeding that to which the tax or licence fee relates determine to the best of his judgment the turnover which has escaped assessment and assess the tax payable or levy the licence fee in such turnover after issuing a notice to the dealer or licensee and after making such enquiry as he considers necessary."
8. The words used in that rule is "determine" within a period of three years from the starting point. It was argued that the word "determine" would only indicate a final determination of the turnover which escaped assessment. It was further argued that certain decisions which interpreted the words "proceed to assess" cannot be relied upon for the purpose of Rule 33(1) observes the Supreme Court :
"We find it difficult to accept that in the context of sales tax legislation the use of the words 'proceed to assess' and 'determine' would lead to different consequences or results. In this connection the words which follow the word 'determine' in Rule 33 must be accorded their due signification. The words 'assess the tax payable' cannot be ignored and it is clearly meant that the assessment has to be made within the period prescribed. Assessment is a comprehensive word and can denote the entirety of proceedings which are taken with regard to it. It cannot and does not mean a final order of assessment alone unless there is something in the context of a particular provision which compels such a meaning being attributed to it. In our judgment despite the phraseology employed in Rule 33 the principle which has been laid in other cases relating to analogous provisions in sales tax statute must be followed as otherwise the purpose of a provision like Rule 33 can be completely defeated by taking certain collateral proceedings and obtaining a stay order as was done in the present case or by unduly delaying assessment proceedings beyond a period of three years."
9. We are concerned in the present case with the word "imposed" used in the proviso to Section 12(5) of the Tamil Nadu General Sales Tax Act, 1959. We certainly do not see any difference between the word "determine" and the word "imposed" used in Section 12(5). In asmuch as the Supreme Court decision was not considered by the Madras High Court in R. Subba Eeddy v. State of Tamil Nadu [1993] 91 STC 112. We are required to follow the judgment of the Supreme Court.
10. Further, the Karnataka High Court in [Habib Solvent Extracts Pvt. Limited v. Joint Commissioner of Commercial Taxes (Admn.) [1998] 110 STC 390] also says that it is not necessary to complete the proceedings before the limitation period and it is sufficient if the proceedings are initiated within the period of limitation. Similarly, in [1999] 112 STC 578 (Satyanarayana Engineering Works v. Assistant Commissioner of Commercial Taxes, Davanagere) the Karnataka High Court reiterated this point. In that case the Karnataka High Court went to the extent of saying that it is sufficient if the concerned authority calls for the records within the period of limitation. We attempted to get the proper definition of the word "imposed" and we stumbled upon a decision reported in AIR 1962 SC 988 (Municipality of Anand v. State of Bombay). However that decision did not relate to any period of limitation and related to exhaustion of the power to prescribe conditions and restrictions by a municipality when the municipality had already exercised its power to impose a tax under Section 59 of the Bombay District Municipal Act. The Supreme Court in that case observed that the word "imposed" in Section 59 will have the following meaning :
"Hence, in our view 'impose' in Section 59 means the actual levy of the tax after authority to levy it has been acquired by rules duly made and sanctioned, and it is such imposition that is made subject to the general or special orders of the Government. Therefore, the Government can at any time by any such order prohibit the imposition of the tax."
11. For all the above reasons we do not accept the contentions of the appellant that the imposition of penalty under Section 12(5) had been made beyond the period of limitation. It was done within the period of limitation because the notice was admittedly issued on January 18, 1988 well within the period of limitation.
12. While arguing the merits of the case Mr. Ramesh repeatedly pointed out that the turnover had been disclosed in the revised return before the final order of assessment. But, what is lacking in this plea is that the tax was not paid on the turnover at the time of filing the revised return. In the judgment of the Madras High Court in State of Tamil Nadu v. Mahalakshmi Textile Mills Ltd. [1996] 100 STC 269 this aspect has been clearly brought out, namely, that relief can be granted if while filing the revised return the assessee pays the tax also. Such is not the case before us. In matters relating to penalty where mens rea is not an ingredient what the courts should look for is, whether the Revenue had been denied of its legitimate income at the relevant point of time and whether there had been delay in payment of the legitimate revenue due to the Government. Looked from this aspects of the case, the contention of the appellant has to be rejected. It is not correct to say that the assessee acted bona fide in disclosing the return at the time of final assessment by filing a revised return.
13. Regarding the reasons given by the appellant for not disclosing the purchase of cotton, we agree with the Joint Commissioner that sale is complete as soon as goods are delivered and the dealer ought to have disclosed the purchase of cotton in the monthly returns and also paid tax thereon. In this aspect of the case the assessee had failed and therefore, he has to suffer imposition of penalty. All the contentions are rejected and the order of the Joint Commissioner is upheld and the appeal is accordingly dismissed.
14. And this Tribunal doth further order that this order on being produced be punctually observed and carried into execution by all concerned.
15. Issued under my hand and the seal of this Tribunal on the 3rd day of April, 2000.