Kerala High Court
Deputy Commissioner Of Sales Tax (Law), ... vs Imperial Trading Company on 19 August, 1989
Equivalent citations: [1990]76STC183(KER)
Author: K.S. Paripoornan
Bench: K.S. Paripoornan
JUDGMENT K.S. Paripoornan, J.
1. The Revenue is the petitioner in these two revisions. The revisions are filed against the common order passed by the Sales Tax Appellate Tribunal dated 26th September, 1988, in T.A. Nos. 436 and 437 of 1988, setting aside the orders cancelling the registration granted to the respondent/assessee-firm under the Kerala General Sales Tax Act, 1963, as also under the Central Sales Tax Act, 1956. By the said order, the Appellate Tribunal also disposed of the appeals preferred by the assessee/respondent against the provisional assessments effected for December, 1987 and January to March, 1988. The appeals filed against the provisional assessments are T.A. Nos. 404 to 407 of 1988.
2. The respondent/assessee is a firm, a. dealer in hill produce, mainly pepper. The firm filed a return in form No. 9, for the months of April, 1987 to January, 1988, disclosing "nil" turnover. The Revenue got information that the assessee-firm purchased 525.95 quintals of pepper, valued at Rs. 11,89,940 in December, 1987, from Premier Spices, Hill Produce Dealers, Cochin, as per sale bills dated 27th December, 1987 and 29th December, 1987. Declarations in form No. 25, issued by the assessee-firm, were available with the sellers. On this basis, a provisional assessment was made for December, 1987, against the assessee. Similarly, for January, 1988, the Revenue got information that the assessee purchased black pepper for Rs. 26,53,820 from Alok Spices, Cochin. In view of the fact that the assessee had filed only a "nil" return, the assessing authority issued a notice as to why the purchase turnover aforesaid should not be brought to tax. The assessee conceded the above taxable turnover, by filing a return on 28th March, 1988. It also filed declarations in form No. 25 obtained from one Girish Traders. The assessing authority held that Girish Traders is a non-existent firm and rejected the declarations and brought to tax the above turnover in the hands of the assessee. For the month of February, 1988, the turnover conceded was Rs. 18,67,780. The assessee claimed exemption on the ground that it was sold to local dealers. There was no proof therefor. A fresh return was filed on 4th April, 1988, disclosing a turnover of Rs. 45,21,599.99 along with declarations in form No. 25 obtained from Jupitor Traders. The assessing authority found that Jupitor Traders was a business concern of the younger brother of one of the partners of the assessee-firm and the registration of the said firm was cancelled as early as 18th December, 1987. The assessing authority brought to tax the said turnover after rejecting the declaration forms filed. For March, 1988, the return reported was Rs. 28,42,702.50. Here also the assessee-firm claimed exemption on Rs. 26,562.50, as local sales to Jupitor Traders, which was negatived and an assessment order was passed bringing the reported turnover to tax. The above four provisional assessments were upheld in appeals by the Deputy Commissioner of Sales Tax. The second appeals filed from the aforesaid provisional assessments before the Appellate Tribunal were numbered as T.A. Nos. 404 to 407 of 1988.
3. The assessing authority initiated proceedings to cancel the registration certificates granted to the assessee, under Section 14 of the Kerala General Sales Tax Act and under Section 7 of the Central Sales Tax Act. He found that the declaration forms given by the assessee to Premier Spices, for the month of December, 1987, had the seal and signature of the assessee and signed by one of the partners and the plea of the assessee that the forms were concocted and forged, was without substance. Similarly, in connection with the assessment for January, 1988, the assessing authority held that the declaration filed by the assessee in form No. 25 from Girish Traders, a non-existent firm, was false. So also, relating to the month of February, 1988, the declaration in form No. 25 obtained from Jupitor Traders, was found to be false and unauthorised. There was a surprise inspection of the business premises on 18th February, 1988 and records were seized. The inspection disclosed that the assessee was filing false returns. Taking into account the above factors and after affording an opportunity to the assessee, the assessing authority proposed to cancel the registration certificates. During the course of the said proceedings, the partners of the assessee-firm appeared in the office on 5th April, 1988 and admitted orally that the declarations were false and that they were filed with intent to prolong the payment of tax till final assessments were completed. The partners of the firm also stated that they filed the declarations from non-existent dealers since their attempt to get the declarations from the existing dealers, was futile. This fact has been recorded in the assessment files and is available along with other papers and statements given by the partners. On the above facts, the assessing authority held that if the registration is allowed to continue, the assessee will further transact business culminating in huge loss of revenue to the State and in the interest of the revenue and the public good the registration granted under the Kerala General Sales Tax Act and Central Sales Tax Act should be cancelled to avoid further leakage of revenue. It was so done by order dated 18th April, 1988.
4. In the appeals, filed before the Deputy Commissioner of Sales Tax, by order dated 8th July, 1988, the orders passed by the assessing authority were affirmed. The appellate authority held that in the instant case the assessing authority has made out a prima facie case that the dealers had made wilful attempt to evade tax by filing incorrect returns supported by bogus declarations in form No. 25 and this is sufficient reason to cancel the registration granted by the department.
5. The Sales Tax Appellate Tribunal heard all the four assessment appeals as also two registration appeals and passed a consolidated order dated 26th September, 1988. We are not very much concerned with the nature of the order passed in the assessment appeals as it only discloses the background, that led to the cancellation of registration. The Appellate Tribunal quashed the assessment order made for the month of December, 1987, and upheld the other provisional assessments for the months of January, February and March, 1988. The Appellate Tribunal was of the view that the facts and circumstances that led to the provisional assessments and cancellation of the certificates of registration, are interlinked or connected. The Appellate Tribunal set aside the order passed by the assessing authority and affirmed by the Deputy Commissioner of Sales Tax cancelling the registration certificates under the Kerala General Sales Tax Act and Central Sales Tax Act and allowed T.A. Nos. 436 and 437 of 1988. In coming to the said conclusion, the Appellate Tribunal held as follows : (1) Purchase of pepper in December, 1987, from Premier Spices, was not established. (2) There was an inspection of the business premises on 18th February, 1988 (the Appellate Tribunal stated that it was on 1st January, 1988). The fact of seizure of the books by the inspecting staff of the department cannot be lost sight of. The books have not been returned. The assessee could not look into the account books and the justification put forward for filing the "nil" returns or claiming exemption by producing false declarations in form No. 25 for these two months is a convincing excuse. (3) The Bench decision of this Court in Deputy Commissioner of Sales Tax v. Natarajan Chettiar [1988] 69 STC 153 is distinguishable. (4) By not producing valid declarations in form No. 25, the assessee-firm failed to prove their claim of exemption and thus incurred liability to taxation. The officer made no attempt to demand additional security. (5) Since no turnover was reported, there was no failure to pay the admitted tax. (6) The failure to produce the declarations in form No. 25 will only entail liability to taxation ; that is not a "good and sufficient" reason to cancel the registration.
6. Aggrieved by the common order passed by the Appellate Tribunal dated 26th September, 1988, in T.A. Nos. 436 and 437 of 1988, setting aside the cancellation of the registration certificates under the Kerala General Sales Tax Act and Central Sales Tax Act, the Revenue has come up in revisions.
7. We heard counsel. The entire records were produced before us. The facts have been stated in detail in the preceding paragraphs. In our view, the Appellate Tribunal failed to understand the true scope of the power vested in the assessing authority under Section 14(7) of the Kerala General Sales Tax Act and Section 7 of the Central Sales Tax Act and also the Bench decision of this Court in Natarajan Chettiar's case [1988] 69 STC 153. The Appellate Tribunal totally failed to note that the declaration in form No. 25 filed for January, 1988, obtained from Girish Traders, was false. Similarly, the Appellate Tribunal ignored or failed to note that the declaration in form No. 25 filed for February, 1988, from Jupitor Traders, was false and the registration of Jupitor Traders, was cancelled as early as 18th December, 1987 and it was a concern of the younger brother of one of the partners of the assessee-firm. Besides, the Appellate Tribunal ignored the unambiguous admission of the assessee made before the assessing authority on 5th April, 1988, that the declarations filed by them are false, that they were filed with an intention to prolong the payment of tax till final assessments are completed, and they filed the above false declarations obtained from a non-existent dealer (Girish Traders) since their attempt to get declarations from the existing dealers, was found futile. In the order cancelling the registration, the assessing authority has stated thus:
"The partners of the firm Imperial Trading Company appeared in the office on 5th April, 1988 and admitted orally that the declarations are false and that they were filed with intent to prolong the payment of tax till final assessments are completed. When questioned as to why these declarations were obtained from a non-existent dealer (Girish Traders, Cochin-2) they said that this is because that their attempt to get declarations from the existing dealers, found futile."
We examined the original assessment files. The officer has made detailed notings to the above effect. This unambiguous and categoric admission has not been disputed, either in the appeal memorandum filed before the first appellate authority (Deputy Commissioner of Sales Tax) or in the appeal memorandum filed before the second appellate authority (Sales Tax Appellate Tribunal). The admission made by the assessee was one of the important reasons relied on by the assessing authority to cancel the registration certificates. Even though the order cancelling the registration certificates contained the above admission, and it is also borne out by the detailed notings of the officer to the above effect in the assessment records, there is no whisper about the said crucial fact, in the order passed by the Sales Tax Appellate Tribunal. We are at a loss to know how it is open to the Appellate Tribunal to ignore the above admission of the assessee mentioned in the order passed by the assessing authority and also substantiated by the appropriate notings in the assessment files itself. When we repeatedly questioned the assessee's counsel, as to whether the above admission has been retracted or explained, at any stage, by the assessee-firm, counsel for the assessee submitted the reply in the negative.
8. It is true that an admission made by a person is relevant, but not conclusive. It is open to a person, who has admitted a fact, to explain or clarify under what circumstances it was made or to prove that what was stated was untrue. In the absence of any denial or explanation therefor, an admission is almost conclusive regarding the facts contained therein. It dispenses with proof. In this case, the partners of the assessee-firm appeared before the assessing authority and admitted that the declarations filed are false and that they were filed with intent to prolong the payment of tax till final assessments are completed. They had also admitted that the declarations were obtained from a nonexistent dealer since their attempt to get declarations from the existing dealers, was futile. In the absence of any denial, explanation or clarification of the said admission, the particulars or facts stated therein are perilously conclusive, that the assessee wilfully filed false declarations with intent to withhold or delay the payment of lawful tax due. This seems to be the only reasonable conclusion possible, in the circumstances. Even so, as to why the above admissions were not even adverted to and totally ignored by the Sales Tax Appellate Tribunal is not intelligible or clear to us at all. In our opinion, as the ultimate fact-finding authority, it was the duty of the Appellate Tribunal to advert to all facts and circumstances to enter a proper finding. In this case, it has failed to do so. The Appellate Tribunal has totally ignored the vital admission of the assessee which has great impact in the order to be passed. On this short ground, the order of the Appellate Tribunal dated 26th September, 1988, deserves to be set aside.
9. We should also state that the Appellate Tribunal omitted to bear in mind that declarations in form No. 25 filed by the assessee-firm for January and February, 1988, were found to be false. The declaration obtained from Girish Traders, a non-existent firm, for January, 1988, was false. The declaration in form No. 25 obtained from Jupitor Traders, for the month of February, 1988, was from a firm whose registration was cancelled as early as 18th December, 1987 and Jupitor Traders was a concern belonging to the younger brother of one of the partners of the assessee-firm. The inspection made on 18th February, 1988 and seizure of documents then has no relevance or impact regarding the false declarations in form No, 25. It may be that the assessee could not look into the accounts and the quantum of turnover could not be furnished in the return due, since the account books were not returned in time. But, it is a far cry to state that due to the delay in the return of the account books the assessee had to file false declarations from nonexistent firms. The Appellate Tribunal was in error in stating that by not producing valid declarations in form No. 25, the assessee only incurred liability to taxation. We have noticed that declarations in form No. 25 filed were false. No doubt, the assessee incurred the liability to taxation ; that apart, it may also afford a "good and sufficient" reason to cancel the registration, since the attempt of the assessee was to defraud the Revenue and to transact business resulting in huge loss to the State. The fact that it was open to the assessing authority to demand additional security and it was not done or the fact that there was no question of failure to pay the admitted tax, since the assessee filed a "nil" return, will not in any way deter the assessing authority to cancel the registration, if on the facts disclosed, the assessing authority is satisfied that the assessee is attempting to defraud the Revenue or otherwise acted wilfully to defeat or delay the payment of legitimate tax due to the Government.
10. The Sales Tax Appellate Tribunal seems to have misunderstood the scope of the power of the assessing authority under Section 14(7) of the Kerala General Sales Tax Act and under Section 7 of the Central Sales Tax Act as also the Bench decision of this Court in Natarajan Chettiar's case [1988] 69 STC 153. The words "good and sufficient reasons" in the context of Section 14(7) of the Act only mean "appropriate" or "suitable" or "satisfactory" or "fit" and "enough" or "adequate" reasons for cancelling the registration. Interpreting the said words, this Court held as follows :
"The meaning of the words 'good and sufficient reasons' depends upon the context. In the context of the Sales Tax Act, the words 'good and sufficient reasons' occurring in Section 14(7) should receive a reasonable interpretation, which will effectuate and render meaningful the levy, assessment and recovery or collection of the tax assessed or due under the Act. The said words should not be construed in any restricted sense. Section 14 is a machinery provision. It should receive such an interpretation which will render it possible to achieve effective, speedy and proper implementation of the provisions of the Act and in particular appropriate measures to safeguard the interests of the Revenue............ The fact that the assessing authority has got power to finalise the assessment to the best of his judgment in cases where the returns were not filed or that he has got the power to resort to coercive recovery proceedings for realising tax arrears cannot, in any way, deter the assessing authority to invoke the powers vested in him under Section 14(7) of the Act in appropriate cases. The power Vested in the officer under Section 14(7) is prima facie an enabling one. But the discretion is vested in a statutory authority who is bound to see that the objects of the provisions of the statute read as a whole, are properly effectuated and implemented. Since the power is vested in the assessing authority under Section 14(7) of the Act for public good, we are of the view that the power vested in the officer is in the nature of a compellable duty in circumstances where the exercise of the power is necessitated or warranted...............We have no doubt in our mind that in the case of a recalcitrant or contumacious dealer (assessee), who without justifiable reasons, fails to file the returns within the specified time or fails to remit the admitted tax due, it is only 'appropriate' or 'fit' and 'enough' or 'adequate' reason to invoke the provisions of Section 14(7) of the Act."
In the said case, the question was whether the non-filing of the return or non-remittance of the tax for a few years can form "good and sufficient reasons" for cancellation of certificate of registration. It was held to be so. But, those are not exhaustive of the circumstances under which the registration certificate can be cancelled for "good and sufficient reasons". As stated in the said decision itself, the crucial words "good and sufficient reasons" should receive a reasonable view, which will effectuate and render meaningful the levy, assessment and recovery or collection of tax assessed or due under the Act. The said words should receive such an interpretation which will render it possible to achieve effective, speedy and proper implementation of the provisions of the Act and in particular appropriate measures to safeguard the interests of the Revenue. In this particular case, where a dealer himself has admitted that he had filed false declarations with intent to prolong or delay the payment of lawful tax due, and the said declarations were filed due to inability to get proper declarations from an existing dealer, prima facie it can be stated that the dealer wilfully attempted to evade tax by filing false declarations and if in such a case the assessing authority cancelled the registration, it can certainly afford "good and sufficient reason" for cancellation of the registration certificate. The Sales Tax Appellate Tribunal was in error in distinguishing the judgment of this Court in Natarajan Chettiar's case [1988] 69 STC 153, by referring to a few isolated passages out of context and even without endeavouring to understand the ratio of the decision. This is also a clear legal error. This error has led to a wrong approach to the entire question and the resultant conclusion.
11. For the above reasons, we set aside the common order of the Appellate Tribunal dated 26th September, 1988, in T.A. Nos. 436 and 437 of 1988 and remit the matter to the Sales Tax Appellate Tribunal for a fresh consideration in accordance with law and in the light of the observations contained hereinabove. The tax revision cases are allowed.