Madras High Court
S.P.G. Ramasamy Nadar And Sons vs Commercial Tax Officer-Iii And Ors. on 25 February, 2004
Equivalent citations: [2004]136STC606(MAD)
Author: P.K. Misra
Bench: P.K. Misra
ORDER A.S. Venkatachalamoorthy, J.
1. The petitioners are dealers in cardamom, chillies, etc., and they effected purchases of cardamom from other State dealers, within the State dealers and from non-dealers in this State. There are direct exports, inter-State sales, inter-State consignment sales, sales to local dealers and sales to local consumers. Cardamom was taxable at the point of first sale up to March 31, 1990 and thereafter the point of taxation in respect of cardamom was shifted to the point of last purchase. However, the petitioners failed to report the last purchase turnover of cardamom in the monthly returns and also to pay the tax thereon. They only furnished the turnover of cardamom sold to local consumers, but, only in response to a notice, they disclosed the turnover of cardamom at Rs. 18,73,621 in the form of a statement before the assessing officer. Tax was paid by the petitioners only after the final assessment order was passed. A notice was issued to the petitioners calling for objections as to why a penalty at 150 per cent on the tax due, surcharge at 10 per cent and additional tax, should not be levied. The petitioner submitted objections, stating that since they have submitted a statement regarding the correct and complete particulars of the purchase turnover of cardamom, before checking the accounts, no penalty is leviable. They also objected for levy of proposed penalty under Section 12(2) of the TNGST Act, 1959 to the tune of Rs. 3,441. In respect of the cardamom sold to the local consumers also the petitioners have collected tax and surcharge.
2. The first respondent, however, rejected the objections made by the petitioner and, by his proceedings dated November 29, 1994, levied a penalty under Section 12(5)(iii) of the TNGST Act, 1959 by stating that they have not reported the last purchase of cardamom and paid the tax due thereon. The first respondent also came to the conclusion that the returns filed by them are incorrect and incomplete.
3. Being aggrieved by the said order, the petitioners filed an appeal before the second respondent and the second respondent was pleased to allow the appeal and set aside the levy of penalty on the ground that the petitioners have furnished the correct turnover to the assessing authority before final assessment by way of filing statements and in those circumstances, omission to include the turnover of cardamom cannot be said to be wilful.
4. This order of the second respondent was suo motu revised by the third respondent, who took the view that since the petitioners did not disclose the last purchase turnover of cardamom in the statutory returns filed and also failed to pay the tax dues thereon even at the time of filing statement, levy of penalty is fully justified.
5. The petitioner thereafter filed an appeal before the fourth respondent/Tamil Nadu Taxation Special Tribunal, under Section 37 of the Act, who dismissed the appeal, by holding that the question of bona fide or wilfulness will not be a factor to get over the incomplete returns. The fourth respondent also held that even if the statement filed at the time of final assessment is accepted as "revised returns", it cannot be a "complete return" since there was no proof of payment of tax due accompanied the return.
6. The prayer that is sought for in this writ petition is for the issuance of a writ of certiorari to call for the records on the file of the fourth respondent in T.C.(A) No. 79 of 1999 and to quash the order dated 5-4-2002*, confirming the order of the third respondent in Ref. No. F2/63641/95--SMR. No. 288 of 1996, dated May 28, 1998.
7. The petitioners failed to report the last purchase turnover of cardamom in the monthly returns and naturally the tax due thereon was also not paid. They disclosed only the turnover of cardamom sold to local consumers and for which also, they collected tax and surcharges. The stand taken by the petitioners is that since they have filed statement, disclosing the turnover before the final assessment order, it cannot be said that the omission to include the turnover in the monthly returns was wilful and hence, penalty ought not to have been levied. In support of his contention, the petitioners would place reliance on the ruling reported in [1993] 89 STC 349 (Mad.) (State of Tamil Nadu v. P.S. Srinivasa Iyengar and Sons).
*Reported as S.P.G. Ramasamy Nadar & Sons v. State of Tamil Nadu [2004] 136 STC 599 (TNTST).
8. The settled legal position is that for the purpose of levying penalty, all the circumstances of the case will have to be carefully scrutinised and the question whether penalty should be imposed must be considered on the basis of the judicial determination of the question whether grounds exist for the imposition of such penalty.
[Refer : [1978] 42 STC 121 (Mad.) [FB] (Kathiresan Yarn Stores v. State of Tamil Nadu)]
9. This Court has also ruled in [1994] 94 STC 157 [App.] (State of Tamil Nadu v. Indian Silk Traders) to the effect that the facts of each case have to be carefully, analysed before coming to the conclusion whether a particular return is incorrect or incomplete and whether the assessee returned an incomplete or incorrect return, more with a view to postpone the tax legitimately due to the Government, or under a bona fide belief that his return was in accordance with law.
10. Coining to the present case, the petitioners claim to be reputed and established dealers in cardamom, chillies, etc., for nearly four decades. They failed to disclose the details in the monthly returns. It is rather difficult to accept that such mistakes had crept in bona fide, and the intention was obvious, viz., to postpone the tax legitimately due to the Government or to defraud the revenue. Their merely filing a statement in response to a notice and their paying the tax due ultimately after the final assessment order, would not come to their rescue. As rightly pointed out by the fourth respondent that even if the statement filed at the time of final assessment is treated as "revised returns", the same cannot be accepted as a "complete return" since there was no proof of payment of tax due accompanied the return. The petitioners, obviously, submitted incorrect and incomplete returns with a view to postpone the tax legitimately due to the Government.
11. We may also point out that the ruling relied on, viz., State of Tamil Nadu v. P.S. Srinivasa Iyengar & Sons [1993] 89 STC 349 (Mad.) was a case, where the Tribunal, considering the facts and circumstances of that case, came to the conclusion that the mistake was bona fide and that the omission to include the turnover has not been proved to be wilful and this was questioned by the State, by filing the tax case before this Court. The court came to the conclusion that there was no scope for invocation of Section 12(4) of the Tamil Nadu General Sales Tax Act, 1959. We find that both the third and fourth respondents have considered each and every circumstance of the case and came to the conclusion that the failure to disclose the details in the monthly returns can only be treated as wilful and in those circumstances, the levy of penalty is fully justified.
12. The tax due is indicated as Rs. 56,209 and the additional tax is Rs. 23,420. Learned counsel appearing for the petitioner contended that as per the then provisions of the Tamil Nadu Additional Sales Tax Act, no penalty can be imposed on this additional tax. Learned counsel for the State fairly concedes that the said claim of the petitioner is correct. That being so, the levy of penalty on additional tax has to be held as illegal.
13. The next question is as to whether levy of penalty on the surcharge is legal and proper ?
Learned counsel, appearing for the Revenue, would draw the attention of this Court to a ruling of this Court reported in [1985] 58 STC 143 [Deputy Commissioner (C.T.) v. M. Murugesan and Bros.] and submit that the Tamil Nadu Sales Tax (Surcharge) Act (24 of 1971) would clearly stipulate that all the provisions of the Tamil Nadu Sales Tax Act, which apply to the levy of sales tax, will be applicable to levy of surcharge and that being so, penalty can be levied on surcharge as well.
However, learned counsel, appearing for the petitioner, would draw the attention of this Court to a ruling of this Court in Karthik Roller Flour Mills Pvt. Ltd. v. State of Tamil Nadu (Writ Petition Nos. 6777 and 6778 of 2001, dated 14-08-2002), where, a division Bench of this Court, after pointing out the subsequent rulings of the Supreme Court in the case of J.K. Synthetics [1994] 94 STC 422 and in the case of India Carbon Ltd. [1997] 106 STC 460, held that the ruling reported in Deputy Commissioner (C.T.) v. M. Murugesan and Bros. [1985] 58 STC 143 (Mad.) is no longer a good law. We find considerable force in the submission made by the learned counsel for the petitioner. The levy of penalty on surcharge cannot be sustained.
14. In the light of the foregoing discussion, this Court holds that levy of penalty on the additional tax and surcharge cannot be sustained.
15. Writ petition is allowed to the extent indicated above. Connected W.P. M.P. stands closed.