w w w . L a w y e r S e r v i c e s . i n



M/s. M M P M Syed Mohamed rep. By legal heir v/s The State of Tamil Nadu represented by the Joint Commissioner (CT)(SMR)


Company & Directors' Information:- SMR INDIA PRIVATE LIMITED [Active] CIN = U17290DL2012PTC237165

    Tax Case (Revision) No.880 of 2006

    Decided On, 24 June 2011

    At, High Court of Judicature at Madras

    By, THE HONOURABLE MRS. JUSTICE CHITRA VENKATARAMAN & THE HONOURABLE MR. JUSTICE P.P.S. JANARTHANA RAJA

    For the Appellant: V. Sundareswaran, Advocate. For the Respondent: R. Sivaraman, Spl.G.P.(T).



Judgment Text

(Prayer: REVISION filed before the Tamil Nadu Taxation Special Tribunal to revise the order dated 16.2.2000 made in Ref.No.N1/F3/36361/97 (SMR No.II)/762/98) on the file of the Joint Commissioner. After the abolition of the Tribunal, the same is transferred to this Court.)

(Order of the Court was made by CHITRA VENKATARAMAN,J.)

1. The assessee has preferred this revision as against the order of the Joint Commissioner of Income Tax relating to the assessment year 1993-94. The assessee, who is a dealer in hides and skins, was subjected to inspection by the Enforcement Wing Officers on 22.3.1994, wherein it was noticed that the accounts for the said year were not placed before the Officer for check. It was also found that no records were maintained. As regards the claim for job work for tanning the raw skins, the verification of the stock account also did not support of the case of the assessee. It was also noticed that during the assessment year under consideration, the assessee claimed to have purchased raw hides and skins to the tune of Rs.49,06,107/- from outside the State. Even though the assessee contended that payments were made through the bank, they being inter-state purchases, the said claim was rejected by the Assessing Officer on the ground that the assessee had created records as though the raw hides and skins were purchased from outside the State. In the circumstances, in the absence of any records to substantiate that the said turnover pertained to inter-state purchase, the claim of the assessee was rejected. Thus the sale of raw hides and skins was brought for assessment as last purchase under the provisions of the Tamil Nadu General Sales Tax Act. In the light of the rejection of the return filed, the Assessing Authority levied penalty at 1 times of the tax due at Rs.3,67,701/- under Section 12(3)(b)(v) of the Tamil Nadu General Sales Tax Act.

2. Aggrieved by the same, the assessee went on appeal before the Appellate Assistant Commissioner, who granted partial relief in respect of the turnover of sale of raw skins for exports at Rs.14,78,007/-. A further sum of Rs.21,62,834/- was also granted exemption as export sales out of the turnover of Rs.49,06,107/- claimed as inter-state purchases relating to export sales and the assessment on the balance turnover at 4% as a last purchaser within the State was upheld. The Appellate Assistant Commissioner granted the relief by cancelling the assessment to the tune of Rs.36,36,259/- with the corresponding relief under surcharge and additional tax. As regards the levy of penalty, the Appellate Assistant Commissioner cancelled the levy of penalty in toto, on the ground that the entire turnover was culled out from the books of accounts and no further additions were made; consequently, the assessment would not come under the provisions of the Act, attracting levy of penalty.

3. Finding the order of the Appellate Assistant Commissioner as regards the cancellation of levy of penalty prejudicial to the interest of the Revenue, the Special Commissioner and Commissioner of Commercial Taxes initiated proceedings under Section 34 of the Tamil Nadu General Sales Tax Act to revise the order of the Appellate Assistant Commissioner. Accordingly, notice was issued to the assessee calling for objection as to why penalty should not be restored. The assessee filed its reply on 20th July, 1998 questioning the jurisdiction of the Joint Commissioner to revise the order of the Appellate Assistant Commissioner, having regard to the amendment brought forth to Section 34 of the Tamil Nadu General Sales Tax Act, enabling the Commissioner to revise the order of assessment alone. Even on merits, the assessee contended that since the turnover was available in the books of accounts, the question of reopening the assessment did not arise. The Joint Commissioner considered the claim of the assessee, thereby set aside the order of the Appellate Assistant Commissioner by restoring the order of the Assessing Officer on the penalty levied. Aggrieved by the same, the present Revision has been filed by the assessee challenging the levy of penalty.

4. Learned counsel appearing for the assessee pointed out to the difference in the language in Section 34 of the Tamil Nadu General Sales Tax Act, which relates to the suo motu revisional powers of the Joint Commissioner. He pointed out that till Act 60 of 1997 was made, the Joint Commissioner had the jurisdiction to revise the orders of the Appellate Assistant Commissioner or the Appellate Deputy Commissioner under Sections 31 and 31-A respectively. However, with the passing of the Amending Act 60 of 1997, the jurisdiction of the Joint Commissioner to revise the orders are restricted to the orders passed under Sections 4-A, 12, 12-A, 14, 15 and 16(1) or (2) of the Tamil Nadu General Sales Tax Act by the Appropriate Authority and under Sections 32(1) and 33(3) by the Deputy Commissioner (Appeals). Thus when the jurisdiction of the Joint Commissioner is restricted to the orders referred to therein and there is a specific exclusion of the orders passed by the Appellate Assistant Commissioner under Section 31(3) or by the Appellate Deputy Commissioner under Section 31-A, the proceedings taken against the assessee to revise the order of the Appellate Assistant Commissioner is void ab initio.

5. Learned counsel appearing for the assessee made particular reference to Section 14 of the Amending Act 60 of 1997 that the saving clause would not, in any manner, help the Revenue, since the proceedings initiated and pending before the commencement of Section 11 of the Amending Act alone are saved for assumption of jurisdiction under Section 34 of the Tamil Nadu General Sales Tax Act. He further pointed out that Section 11 of the Amending Act came into force on 1.4.1998. Thus going by the said date, when the notice was served only on 12.5.1998, the proceedings could not be held to have been initiated and pending to fall under the saving provision as contained under Section 14 of Act 60 of 1997. He further pointed out that notice was served only after passing of Act 60 of 1997, which received the assent of the Governor on 28th October, 1997. Apart from the jurisdictional aspect, learned counsel submitted that when the turnover is very much available in the books of accounts, the question of levy of penalty does not arise.

6. Per contra, learned Special Government Pleader supports the case of the Joint Commissioner.

7. Heard the learned counsel appearing for the assessee and the learned Special Government Pleader appearing for the Revenue and perused the material records placed before this Court.

8. Before going into the merits of the levy of penalty, it is necessary to look into the provisions of Section 34 that it existed originally during the relevant assessment year and the subsequent provision brought about by reason of the amendment to Section 34 under Act 60 of 1997. The amendment came into force on 1.4.1998.

9. Section 34 of the Tamil Nadu General Sales Tax Act, prior to 1.4.1998, reads as follows:

"Section 34. Special Powers of Joint Commissioner of Commercial Taxes – (1) The Joint Commissioner of Commercial Taxes may, of his own motion, call for and examine an order passed or proceeding recorded by the appropriate authority under section 4-A, section 12, section 12-A, section 14, section 15 or sub-section (1) or (2) of section 16 or an order passed by the Appellate Assistant Commissioner under sub-section (3) of section 31 or by the Appellate Deputy Commissioner under sub-section (3) of Section 31-A or by the Deputy Commissioner under sub-section (1) of section 32 or sub-section (3) of section 33 and if such order or proceeding recorded is prejudicial to the interests of revenue, may make such inquiry or cause such inquiry to be made and, subject to the provisions of this Act, may initiate proceedings to revise, modify or set aside such order or proceeding and may pass such order thereon as he thinks fit."

10. Section 34 of the Tamil Nadu General Sales Tax Act after the amendment, reads as follows:

"Section 34. Special Powers of Joint Commissioner of Commercial Taxes – (1) The Joint Commissioner of Commercial Taxes may, of his own motion, call for and examine an order passed or proceeding recorded by the appropriate authority under section 4-A, section 12, section 12-A, section 14, section 15 or sub-section (1) or (2) of section 16 or an order passed by the Deputy Commissioner under sub-section (1) of section 32 or sub-section (3) of section 33 and if such order or proceeding recorded is prejudicial to the interests of revenue, may make such inquiry or cause such inquiry to be made and, subject to the provisions of this Act, may initiate proceedings to revise, modify or set aside such order or proceeding and may pass such order thereon as he thinks fit."

11. Section 14 of Act 60 of 1997, which is a saving provision to Section 34, reads as follows:

"Section 14. Disposal of pending cases before Joint Commissioner of Commercial Taxes – All proceedings initiated under sub-section (1) of section 34 of the principal Act and pending before the Joint Commissioner of Commercial Taxes immediately before the date of commencement of section 11 of this Act shall be heard and disposed of by the Joint Commissioner of Commercial Taxes as if, this Act had not been passed."

12. Thus a reading of Section 14 of Act 60 of 1997 shows that only those proceedings initiated under Section 34(1) of the principal Act and pending immediately before the date of commencement of the amended Section 34 of the Act, could be heard for the purpose of passing orders. If the initiation itself is beyond the date prescribed under the amended Section, then the proceedings are void ab initio, on the ground of want of jurisdiction.

13. Thus in respect of proceedings already initiated under the amended provision to revise the order of the Appellate Assistant Commissioner, Section 14 saves those proceeding – the only condition being proceedings initiated and pending before the Joint Commissioner immediately before the date of commencement of Section 11 of the Act.

14. In order to find out whether there had been any initiation of proceedings under Section 34 of the Tamil Nadu General Sales Tax Act, we called for the files from the Office of the Joint Commissioner. We find from the records that the Joint Commissioner had issued the notice on suo motu revision, on the last date of the assessment year, i.e., on 31.3.1998. The said notice was sought to be served through the office of the Assistant Commissioner, which carries the signature and the date as 21.4.1998. The said notice was served on the assessee on 12.5.1998.

15. On the purport of the phrase 'pending', in the decision reported in (2007) 10 VST 716 (Mad) (State of Tamil Nadu and another V. K.Damodarasamy Naidu & Bros and another), this Court had an occasion to consider a similar issue arising under the Tamil Nadu Sales Tax Settlement of Disputes Act, 17 of 2002. The facts therein were that the assessment of the assessee was subjected to suo motu revision under Section 34 by the Joint Commissioner. The proceedings by the Joint Commissioner therein resulted in the restoration of an order of assessment. The review application filed by the assessee was rejected by the Joint Commissioner. The said order was challenged by the assessee in a Writ Petition before this Court, which was later on transferred to the Tamil Nadu Taxation Special Tribunal. The said Tribunal disposed of the Writ Petition with a direction to the assessee to avail the statutory remedy available under the Act. Thus, the assessee filed a Tax Case before Special Tribunal as against the order of the Joint Commissioner on 29th January, 1999. The appeal papers were returned on 23rd June, 2003 for compliance of certain defects, which was once again re-presented on 25th June, 2003. In the meantime, the Tamil Nadu Sales Tax (Settlement of Disputes) Act, 2002 was enacted. The assessee filed an application under Section 5 of the said Act to have the disputes settled. However, the same was rejected by the Designated Authority on the ground that the appeal filed before the Tribunal was yet to be posted for admission and only when the case was admitted, it could be treated as an appeal 'pending' as prescribed under Clause (i) of Section 4(1) of the Act. Aggrieved by the same, the assessee filed an Original Petition before the Tamil Nadu Taxation Special Tribunal, which was allowed by the Special Tribunal, holding that the assessee was entitled for a certificate of settlement. As against the same, the Revenue came up on appeal before this Court. While considering the meaning of the phrase 'pending' referring to the definition as given in Black's Law Dictionary, The Concise Oxford Dictionary and P.Ramanatha Aiyar's The Law Lexicon, 1987, this Court held: "if an appeal is filed before the Tribunal on a particular day, the appeal is regarded to be filed on such date and it is pending for consideration till it is finally determined." This Court further held: "with reference to the terminology employed in the Section "file" and "pending", it is impermissible to import any additional word in the provision that in order to be eligible to file an application under Section 5 of the 2002 Act, the appeal must be admitted as the word "admission" has not been used in Section 4 of the 2002 Act." In the circumstances, this Court followed the decisions of the Apex Court reported in (2005) 277 ITR 435 (Commissioner of Income Tax V. Shatrusailya Digvijaysingh Jadeja); (2003) 259 ITR 258 (sc) (Dr.Mrs. Renuka Datla V. CIT); (1954) AIR SC 73 (Raja Kulkarni V. State of Bombay); (2007) 9 RC 239 (Swan Mills Ltd. V. Union of India) and (2004) 5 SCC 1 (Tirupati Balaji Developers (P) Ltd. V. State of Bihar) and held that the assessee was entitled to have the eligibility for settlement to be considered by the Designated Authority.

16. As far as the present case is concerned, it is no doubt true that Section 14 of Act 60 of 1997 saves the actions, wherein there is an initiation of proceedings by the Joint Commissioner and pending immediately before the date of commencement of Section 11 of the Amending Act. As already pointed out, a look at the files of the Joint Commissioner shows that he had already initiated proceedings by signing the notice on 31.3.1998, to be issued to the assessee, calling for his objections. Thus, as on the date of the Amending Act, the Joint Commissioner had the necessary jurisdiction available for exercise of his revisional jurisdiction. The fact that the Assistant Commissioner had signed the service copy on 21.4.1998 and the notice was served only subsequently on 12.5.1998 by the office of the Assistant Commissioner, does not mean that the initiation was done only on the service of notice on 21.4.1998. What is relevant herein to be noted for saving the action as per Section 14 of the Amending Act is that the initiation must be by the Joint Commissioner within the period of limitation and before the Amending Act came into force, that is, as on the effective date of 1.4.1998, the proceedings must be pending before him. Thus, with the original of the notice dated 31.3.1998 available in the file and the Joint Commissioner signing the same on the same date, the mere fact that the Assistant Commissioner had signed the service copy on 21.4.1998 does not mean that the proceedings was initiated only on 21.4.1998. In the circumstances, we have no hesitation in holding that the proceedings was initiated within the time prescribed under Section 34 of the Tamil Nadu General Sales Tax Act and the same is protected by Section 14 of Act 60 of 1997.

17. Thus applying the law declared by this Court in the decision reported in (2007) 10 VST 716 (Mad) (State of Tamil Nadu and another V. K.Damodarasamy Naidu & Bros and another) (to which one of us is a party), we hold that the proceedings initiated on 31.3.1998, even though served subsequently, is a "pending proceeding" on the files of the Joint Commissioner.

18. Learned counsel appearing for the assessee took the plea that with the chances of the Joint Commissioner dropping the proceedings on considering the objections, the mere initiation of proceedings, by itself, could not be treated as pending to fall under the saving Section 14 of Act 60 of 1997. He further pointed out that Section 34 begins with a satisfaction to be recorded by the Joint Commissioner to invoke the revisional jurisdiction. Merely because the jurisdiction is available as under Section 34 of the Act and a notice had been issued herein, one cannot treat the issuance of notice as a proceedings pending before the Joint Commissioner.

19. We do not think that one has to look at Section 34 of the Tamil Nadu General Sales Tax Act in a hypothetical manner as projected by the learned counsel for the purpose of understanding the scope and width of Section 14 of Act 60 of 1997. Given the fact that a decision was already taken and a notice had been signed by the Joint Commissioner on 31.3.1998 initiating revisional proceedings, applying the decision of this Court as to the meaning of the phrase 'pending', we hold that the proceedings of the Joint Commissioner are saved by the provision under Section 14 of the Amending Act 60 of 1997.

20. In the light of what we have already considered earlier as to the date of notice, we have no hesitation in rejecting the plea of the assessee that Section 14 of Act 60 of 1997 does not cover the case on hand. On the other hand, we hold that going by the facts herein, Section 14 of Act 60 of 1997 saves all actions in the present case as one falling under Section 14 of Act 60 of 1997.

21. As regards the merits of the case, it is not denied by the assessee that they had accepted the order of the Appellate Assistant Commissioner rejecting the claim of the assessee to the tune of Rs.38.00 lakhs, on which the assessee has to pay the tax, treating him as last purchaser in the State.

22. Learned counsel appearing for the petitioner, however, submitted that when the turnover is available in the books of accounts, the question of treating this transaction as one under best of judgment, does not arise. He pointed out that the Officer had not denied the fact that the turnover was very much available in the books of accounts; consequently, Section 12(3)(b) of the Tamil Nadu General Sales Tax Act cannot be invoked in this case. In any event, having regard to the explanation which had been appended to the Section, although long after the assessment year under consideration, the assessment does not call for levy of penalty.

23. We do not agree with this submission too. A perusal of Section 12(3)(b) of the Tamil Nadu General Sales Tax Act shows that in a case of submission of incorrect or incomplete return, in addition to the tax assessed under sub-section (2), on the difference between the tax assessed and the tax returned, the Assessing Officer shall direct the dealer to pay by way of penalty at the graded percentage. Section 12(3)(b) gives the percentage at which the penalty has to be levied.

24. Going by the provisions of the Act, when Section 12(3)(b) does not reserve any discretion with the Assessing Officer to consider the levy of penalty, penalty provision stood attracted herein, under the stated circumstance of failure to submit the return or in the case of submission of incorrect or incomplete return. The mere fact that the turnover was drawn in the books of accounts, by itself, would not, in any manner, save the assessee from the operation of the provisions of Section 12(3)(b), which is concerned about the submission of incorrect or incomplete return. It must be noted herein that the accounts maintained by the assessee is of relevance not just on the turnovers disclosed. The accounts are relevant even as regards the character of the transaction shown therein.

25. Section 2(p) of the Tamil Nadu General Sales Tax Act defines "Taxable turnover" to mean, the turnover on which a dealer shall be liable to pay tax as determined after making such deductions from his total turnover and in such manner as may be prescribed. Section 2(r) of the Tamil Nadu General Sales Tax Act defines "turnover" to mean, the aggregate amount for which goods are bought or sold, or delivered or supplied or otherwise disposed of in any of the ways referred to in clause (n), by a dealer either directly or through another, or his own account or on account of others whether for cash or for deferred payment or other valuation consideration, provided that the proceeds of the sale by a person of agricultural or horticultural produce, other than tea, and rubber (natural rubber latex and all varieties and grades of raw rubber) grown within the State by himself or on any land in which he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, shall be excluded from his turnover.

26. With the definition of "sale" under Section 2(n), "taxable turnover" under Section 2(p) and the classification of goods as under the First Schedule and Second Schedule as declared goods to fix the rate of tax and their assessability and the exempted goods, with notifications issued under Section 17 granting exemption as well as reduction in rate of tax, the maintenance of accounts under the Sales Tax Act assumes much importance in the matter of assessment. Thus, when the taxable turnover is one to be determined with reference to the nature of transaction and their assessability, the description of turnover disclosed both as to the quantum and the character, assumes significance, meaning thereby, that acceptance or rejection of accounts may be with reference to either of the above, viz., quantum and character, or both. Only when the assessment accepts the books on both fronts, that the assessment could be characterised as an assessment based on books of accounts. Accounts under the provisions of the Act is not just mere figures. Accounts means turnover with reference to the nature of transactions also. It is also of relevance to note herein that considering the possibility of a dispute that may arise in the matter of tax treatment of certain transactions and explanation appended to Section 12(3) of the Act to restrict the operation of the provisions of sub-section (b) only to actual suppression, a mere rejection of a claim for a concessional rate, by reason of non-filing of the declaration form, would not attract penal provisions. Thus going by the Explanation to Section 12(3)(b) of the Act, estimation of turnover and rejection of claim for exemption or concessional rate, which are subject to the furnishing of declaration forms, would not invite penal provisions and that actual suppressions alone would attract penal provision. Since the explanation to the said provision was inserted under Act 60 of 1997, effective only from 1.4.1998, the benefit of the same could not be extended to the assessee herein. Thus, the accounts maintained by the assessee is of relevance both on the aspect of the nature of transaction stated therein as well as to the turnover given therein for the purpose of understanding Section 12(3) of the Tamil Nadu General Sales Tax Act.

27. It is admitted by the assessee herein that the turnover of Rs.49,06,107/- treated as local sales in the assessment, was considered by the Appellate Assistant Commissioner. On this, the turnover of Rs.21,62,834/- was exempted as export turnover on the basis of the mater

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ials produced by the assessee. However, in respect of the balance of the turnover, the claim of the assessee that it represented purchase from outside the State, the Assessing Officer pointed out that the assessee had created records that it had purchased raw hides and skins from outside the State. The Assessing Officer further pointed out that none of the dealers from whom the assessee had claimed to have purchased from outside the State were in existence and some of them had denied about the transactions. In the circumstances, finding the claim as a bogus claim and that the assessee had created records as though it had purchased from outside the State, the Assessing Authority levied tax under the Tamil Nadu General Sales Tax Act. The said findings of the Assessing Officer was confirmed by the Appellate Authority. The assessee had accepted the order of the Appellate Assistant Commissioner on this and the same had reached finality. Having regard to the fact that the disclosed return was found incorrect with reference to the character of the transaction claimed as inter-state sale and that the claim itself was a bogus one with created records, we do not find any justification in accepting the claim of the assessee. 28. In the circumstances, we do not find any justification to allow the Tax Case. However, it must be pointed out herein that while passing the order of revision, the Joint Commissioner considered restoring the levy of penalty as given in the order, which means, the relief granted to the assessee on quantum assessment also was taken in for restoring the penalty. As far as the Revenue is concerned, the Appellate Assistant Commissioner's order, granting relief to the turnover of Rs.36,36,259/-, was not the subject matter of revision. If that be so, the Joint Commissioner should have considered Section 12(3)(b)(i) of the Tamil Nadu General Sales Tax Act, as to the quantum of penalty payable by the assessee. Since the order does not deal with this aspect of the matter, in fairness to the claim of the assessee, we feel that the proper course herein would be to set aside the levy of penalty and thereby direct the Assessing Officer to quantify the penalty payable in respect of the turnover, which was rejected by the Appellate Assistant Commissioner. Thus, the Assessing Officer shall re-fix the penalty in tune with the order of the Appellate Assistant Commissioner by granting relief to the assessee on the turnover of Rs.36,36,259/-, and pass orders on the portion which was upheld by the Appellate Assistant Commissioner. 29. Accordingly, the Tax Case (Revision) stands disposed of. No costs.
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