Madras High Court
G.Ganesh Kumar vs The Assistant Commissioner (St) on 24 January, 2019
Author: G.R.Swaminathan
Bench: G.R.Swaminathan
1
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED: 24.01.2019
CORAM:
THE HONOURABLE MR.JUSTICE G.R.SWAMINATHAN
W.P.(MD)Nos.24960 and 24961 of 2018
and
M.P.(MD)Nos.22617, 22618 and 22619 of 2018
G.Ganesh Kumar ... Petitioner in W.P.(MD)No.24960 of 2018
C.Vijaya Kumar ... Petitioner in W.P.(MD)No.24961 of 2018
Vs.
The Assistant Commissioner (ST),
Tuticorin III Assessment Circle,
Tuticorin. ... Respondents in both W.Ps.
COMMON PRAYER: Petition filed under Article 226 of the
Constitution of India praying to issue a Writ of Certiorari, to
call for the impugned proceedings of the respondent in
TNVAT/33825924643/2015-2016 and quash the impugned order
dated 08.05.2018 and the amended order dated 30.05.2018 insofar
as it treats the petitioner as a partner in the dissolved partnership
firm M/s.Sea Trust during the assessment year 2015-2016.
For Petitioner :Mr.G.Prabhu Rajadurai
(in both W.Ps.)
For Respondent : Mr.Aayiram K.Selvakumar
(in both W.Ps.) Additional Government Pleader
http://www.judis.nic.in
2
COMMON ORDER
In both these writ petitions, the orders impugned are one and the same.
2.The case of the writ petitioners is that they along with one D.Arunshankar formed a partnership firm in the name and style of 'Sea Trust'. The firm was however not registered with the Registrar of Firms. However, they got themselves registered both under the CST Act and TANVAT Act.
3.It is the specific case of the writ petitioners that the firm had no business transactions. Ultimately, it came to be dissolved on 31.12.2013. A deed of dissolution was executed and it was duly notarized.
4.While so, the respondent came to know that IE Code assigned in favour of the said firm namely, Sea Trust was utilized for making import of 47 consignments during the year 2015-2016. Based on the said data, the respondent issued pre-revision notices to all the three persons namely, D.Arunshankar, C.Vijayakumar and G.Ganeshkumar dated 05.02.2018. All the three persons filed their respective objections in response to the pre-revision notices. The stand taken by the writ petitioners was rejected and the impugned order dated 08.05.2018 came to be passed followed by an amendment dated 30.05.2018. As a result, the petitioners were levied with a tax amount of Rs.2,28,98,400/- (Rupees Two Crores http://www.judis.nic.in 3 Twenty Eight Lakhs Ninety Eight Thousand and Four Hundred Only) and penalty to the tune of Rs.3,43,47,600/- (Rupees Three Crores Forty Three Lakhs Forty Seven Thousand and Six Hundred Only). Questioning the same, the present writ petitions have been filed at the instance of Thiru.G.Ganeshkumar and C.Vijayumar.
5.Heard Mr.P.Rajkumar and Mr.G.Prabhu Rajadurai, learned counsel appearing for the petitioners and Mr.Aayiram K.Selvakumar, learned Additional Government Pleader appearing for the respondent.
6.The stand of the respondent is that the mandate set out in Rule 5(4) of TNVAT Rules, 2007 was not complied with. Rule 5(4) reads as follows:-
“5.(4) (a) On dissolution of partnership firm, a copy of the deed of dissolution shall be furnished by all partners to the registering authority within thirty days from the date of the dissolution.
(b)When a registered dealer dies, his executor, administrator or other legal representative shall within thirty days of his taking charge as such executor, administrator, or other legal representative furnish the details in *[in electronic Form B along with the connected documents”]* Omitted[Form E prescribed under this rule]Omitted to the registering authority.
The respondent therefore came to the conclusion that the defence http://www.judis.nic.inof dissolution of the partnership firm is an after thought. According 4 to the respondent, the dissolution deed dated 31.12.2013 is a concocted paper. In this view of the matter, the respondent chose to reject the stand of the writ petitioners and confirmed the proposals set out in the pre-revision notices.
7.As rightly pointed out by the learned counsel appearing for the writ petitioners, the respondent could have very easily unearthed the truth by conducting an enquiry with the customs authority as well as the Tuticorin Port Authorities. Whenever an import is made, the importer will have to engage the services of a shipping agent and freight forwarders for clearing and forwarding the consignments. The transaction would involve payment of customs duty. The shipping agent should pay port charges and freight forwarders should pay customs and other duties. Since the E-governance is now in place, all the payments have to be made online. Therefore, even a cursory enquiry would have revealed who imported the consignments. Thiru.Ganesh Kumar is presently working in the G.M.P company which is located in Tuticorin, as Manager and he is earning about Rs.20,000/-.
8.The specific allegation of the writ petitioners is that Thiru.D.Arunshankar had misused the IE Code for a petty consideration of Rs.1000/- per container. In this regard, they lodged a police complaint also. The said Arunshankar appeared before the Inspector of Police, District Crime Branch, Tuticorin and http://www.judis.nic.in 5 admitted that he was responsible for what had happened. He also gave a statement before the police authorities to that effect. Recording the same, the police complaint given by the writ petitioners was closed. The petition disposal slip dated 27.06.2018 is enclosed in the typed set of papers. It is also relevant to note here that D.Arunshankar appeared before the respondent authority and gave a statement confirming the stand of the writ petitioners herein. It is enclosed at page 19 of the typed set of papers.
9.A learned Judge of the Madras High Court, by order dated 04.07.2017 in W.P.No.42574 and 42575 of 2016 held as follows:-
“4.After hearing the learned counsel for the parties and perusing the materials on record, including the elaborate counter affidavit filed by the first respondent, it is seen that the materials available with the respondent/Department to issue show cause notice for the assessment year 2010-2011, dated 21.03.2013, is the audit slip, dated 26.11.2012. Similarly, the materials available for issuance of show cause notice for the assessment year 2011-2012, dated 24.12.2013, is the audit slip, dated 10.07.2013. When the petitioner's case is that they have not carried out any such business involving huge transactions and he has approached the customs Department Income Tax Department and the Bank, where transactions have been effected and statement appeared to have recorded from the petitioner, and according to the petitioner, no other incriminating evidence has been detected by the Audit Officials http://www.judis.nic.in against the petitioner, the first respondent/Assessing Officer, 6 should have endeavoured to secure some facts from the customs Department, Income Tax Department and the aforesaid three Banks. Till date, none of these Authorities have initiated any action in respect of the huge transactions, having effected in the Bank accounts standing in the name of the petitioner. Therefore, it may be true that the audit could give a cause to commence the proceedings, but before issuing a show cause notice to the dealer, the Assessing Officer should have sufficient material to connect the petitioner to that of the transactions, especially, in the light of the stand taken by the petitioner in the petitions for rectification.
5.Therefore, this Court is of the view that, a detailed enquiry is required to be done and if necessary, the first respondent /Assessing can seek for appropriate orders from the Higher Officers, so that, the Assessing Officer can address the Customs Department, Income Tax Department and the aforementioned three Banks, and then, to proceed with the matter, if this procedure is not followed, it would be a case, where, without specifying that there were verifiable material connecting the petitioner with the transactions, proceedings would deemed to have commenced.
6.Thus, as already stated above, the case on hand is being a very peculiar case, this Court is inclined to mould the relief sought for by the petitioner. Accordingly, both the writ petitions are allowed, and the impugned orders, dated 21.11.2016 are set aside. Consequently, the ex parte assessment orders dated 21.03.2013 and 29.06.2015 are also set aside and the matters are remanded to the first respondent at the stage of the show cause notices. The first respondent is directed to ask necessary enquiries with the Customs http://www.judis.nic.in Department, Income Tax Department and the Banks, viz., 7 Kotak Mahindra Bank, Mylapore standard Chartered Bank, Rajaji Salai and DCB Bank, Broadway, where, transactions have been effected, and after receipt of the requisite information, the first respondent is directed to issue fresh show cause notice to the petitioner, and thereafter proceed with the matter in accordance with law. Considering the peculiar facts and circumstances, the second respondent is directed to disclose the information secured by them as and when a request is made by the first respondent. No costs. Consequently, connected writ miscellaneous petitions are closed.”
10.As rightly pointed out by the learned counsel appearing for the writ petitioners, the liability of a dissolved firm is only up to the date of dissolution and not thereafter.
11.Section 36 of the TANVAT Act, 2006 reads as follows:-
36.Liability to tax of partitioned Hindu Family, dissolved firm etc- Where a dealer is a Hindu undivided family, firm, or other association of persons, and such family, firm or association is partitioned, or dissolved, as the case may be:-
(a) the tax payable under this Act by such family, firm or association of persons for the period up to the date of such partition or dissolution shall be assessed as if no such partition or dissolution had taken place and all the provisions of this Act shall apply accordingly; and
(b) every person who was at the time of such partition, or dissolution, a member or partner of the Hindu undivided family, firm, or association of persons and the legal http://www.judis.nic.in representative of any such person who is deceased shall, 8 nothwithstanding such partition or dissolution, be jointly and severally liable for the payment of tax, penalty or other amount payable under this Act by such family, firm or association of person, whether assessment is made prior to or after such partition, or dissolution.
12.In the present case, the specific stand of the writ petitioner is that the firm was dissolved on 31.12.2013. The writ petitioners have enclosed the bank statement in the typed set of papers. The account was opened with the Corporation Bank, Tuticorin and closed on 01.08.2013 itself. It is not the case of the respondent that the firm is having account with any other bank. The only ground on which the respondent had rejected the stand of the writ petitioners is that the requirement to inform the dissolution within a period of 30 days was not complied with.
13.As rightly pointed out by the learned counsel appearing for the writ petitioners, even though the requirement has been set out in the said statutory provision, it has not prescribed any consequence for non-compliance. Therefore, the said requirement will have to be construed as only directory and not mandatory.
14.The Hon'ble Supreme Court in the decision reported in (1980) 1 SCC 403, (Sharif-Ud-Din vs. Abdul Gani Lone) has laid down the principles for construing a particular statutory requirement as directory or mandatory. The relevant portion of the aforesaid decision reads as under :
http://www.judis.nic.in 9 “The difference between a mandatory rule and a directory rule is that while the former must be strictly observed, in the case of the latter substantial compliance may be sufficient to achieve the object regarding which the rule is enacted. Certain broad propositions which can be deduced from several decisions of courts regarding the rules of construction that should be followed in determining whether a provision of law is directory or mandatory may be summarised thus: The fact that the statute uses the word “shall” while laying down a duty is not conclusive on the question whether it is a mandatory or directory provision. In order to find out the true character of the legislation, the court has to ascertain the object which the provision of law in question has to subserve and its design and the context in which it is enacted. If the object of a law is to be defeated by non-compliance with it, it has to be regarded as mandatory. But when a provision of law relates to the performance of any public duty and the invalidation of any act done in disregard of that provision causes serious prejudice to those for whose benefit it is enacted and at the same time who have no control over the performance of the duty, such provision should be treated as a directory one. Where, however, a provision of law prescribes that a certain act has to be done in a particular manner by a person in order to acquire a right and it is coupled with another provision which confers an immunity on another when such act is not done in that manner, http://www.judis.nic.in the former has to be regarded as a mandatory one. A 10 procedural rule ordinarily should not be construed as mandatory if the defect in the act done in pursuance of it can be cured by permitting appropriate rectification to be carried out at a subsequent stage unless by according such permission to rectify the error later on, another rule would be contravened. Whenever a statute prescribes that a particular act is to be done in a particular manner and also lays down that failure to comply with the said requirement leads to a specific consequence, it would be difficult to hold that the requirement is not mandatory and the specified consequence should not follow.”
15.I am therefore of the view that the respondent herein has proceeded to pass the impugned order in this case without conducting a proper enquiry. In the very nature of things, the respondent ought to have found out who paid the customs charge and the port charge before proceeding the matter. It is true that the writ petitioners and the said Arunshankar formed the firm in question and obtained IE Code. But beyond that, there is no other material to attribute any overt-act on the part of the writ petitioners. Therefore, merely on the strength of the data indicating the utilisation of the import and export code assigned to the firm in question, the petitioners herein could not have been mulcted with the liability.
http://www.judis.nic.in 11
16.In this view of the matter, the order impugned in these writ petitions is quashed and the writ petitions are allowed. The matter is remitted to the respondent to conduct a proper and detailed enquiry and pass orders afresh in accordance with law. No costs. Consequently, M.P.(MD)Nos.22617, 22618 and 22619 of 2018 are closed.
24.01.2019
Index :Yes/No
Internet : Yes/No
rmi
To
The Assistant Commissioner (ST),
Tuticorin III Assessment Circle,
Tuticorin.
http://www.judis.nic.in
12
G.R.SWAMINATHAN,J.
rmi
W.P.(MD)Nos.24960 and 24961 of 2018
and
M.P.(MD)Nos.22617, 22618 and 22619 of 2018 24.01.2019 http://www.judis.nic.in