Viswam and Company v. State of Tamil Nadu — 1991 DIGILAW 158 (MAD)

Judgment :- RAJU, J. The above tax revision case has been filed by the assessee which is a firm carrying on business in the purchase and sale of groundnut and groundnut kernel. For the assessment year 1974-75, the assessee was originally assessed on a total and taxable turnover of Rs. 3, 38, 43, 928.30 and Rs. 1, 39, 71, 444.91, respectively under the provisions of the Tamil Nadu General Sales Tax Act, 1959, hereinafter referred to as "the Act". Subsequently, the authorities came to know that the assessee also purchased groundnut kernel from the decorticating mills at Alangudi to the tune of Rs. 40, 46, 275.73. On the view that the nature of the business activities and dealings of those decorticators does not constitute them to be dealers so as to render them the first purchasers of the commodity in question, the purchases effected by the assessee were treated as first purchases in the State liable to tax. Consequently, proceedings have been initiated under section 16 of the Act proposing to assess them on the purchases effected by them from the decorticating mills at Alangudi and inviting their objections to the said proposal. The assessee seems to have opposed the proposal on the ground that the tax has been paid already by the decorticators and that the assessee should be permitted to go through the records of the decorticators and examine the representatives of the said decorticators. The assessing authority rejected the plea of the assessee on the ground that the decorticators from whom the assessee purchased the commodity in question were held to be not dealers as per the orders of the Sales Tax Appellate Tribunal (Additional Bench), Madurai, in T.A. Nos. 546 to 556 of 1976 and that, therefore, they cannot be treated as dealers so as to render them liable to tax treating them as first purchasers. Consequently, the purchases of the assessee from the decorticators were treated as first purchases exigible to tax under the Act. Time was given by the authorities to the assessee to enable them to look into the records of the decorticators and to get the refund of tax, if any, paid by them and since the said time also expired by April 24, 1980, the assessing authority overruled the objections and confirmed the proposed proposal by an order dated May 7, 1980 revising the earlier assessment. 2. 2. Aggrieved, the assessee filed an appeal before the first appellate authority objecting to the assessment to tax of a turnover of Rs. 40, 46, 275.73 at 3 per cent. The first appellate authority, after referring to the judgment of the Tribunal in the appeals of the decorticators and similar other cases, confirmed the revised proceedings and the levy on the turnover in question by its proceedings dated September 6, 1980. Thereupon, the assessee filed a further appeal before the Tribunal. The Tribunal, by its order dated March 25, 1981, while rejecting the appeal, confirmed the orders of the authorities below. Hence the above revision before this Court. 3. Mr. K. Ramagopal, learned counsel appearing for the petitioner contended that there had been violation of the principles of natural justice, in that they have been denied an effective opportunity of summoning the decorticating mills or their representatives as well as copies of the proceedings in the cases relating to those mills which, according to the learned counsel, vitiate the proceedings against the assessee. Learned counsel also submitted that they are not the first purchasers of the goods in question and the decorticating mills were really the first purchasers and the department erred in relying upon or accepting the self-serving claim of those decorticating mills that they are not dealers liable to tax in their capacity as first purchasers and thereby saddling the assessee with liability on purchases which were really second purchases. The learned Additional Government Pleader (C.T.), while taking us elaborately through the order of the Tribunal, submitted that there was no justification in the claim of alleged denial of opportunity and violation of the principles of natural justice. The learned Government Pleader also contended that the question as to whether the assessees are the first purchasers in respect of the transactions in question, being a question of fact which was found concurrently by all the authorities against them, the same cannot be challenged in the present revision before this Court and the said finding of fact rendered by the authorities below is not vitiated by any infirmity as such which could be corrected within the scope of the present revision proceedings. 4. 4. After a careful consideration of the respective submissions of the learned counsel on either side and the materials on record in the light of the decisions placed before us for consideration, in our view, no interference is called for in favour of the assessee in this revision petition. Learned counsel for the petitioner, in support of the plea of violation of the principles of natural justice, relied upon the decisions reported in State of Kerala v. Shaduli Yusuff 1977 (6) CTR 260, 1977 AIR(SC) 1627, 1977 (39) STC 478, 1977 (2) SCC 777 , 1977 (3) SCR 233 , 1977 UJ 318 (SC) and S. L. Kapoor v. Jagmohan 1981 AIR(SC) 136, 1980 (4) SCC 379 , 1981 (1) SCR 746 . In the first of the decisions referred to above, which arose under the Kerala General Sales Tax Act and the rules made thereunder, the Apex Court had an occasion to consider the question of opportunity to be given to an assessee while rejecting his accounts and making a best judgment assessment on the basis of certain entries in third party's accounts. It was in that context the said court came to the conclusion that inasmuch as the evidentiary materials procured from third parties were sought to be relied upon for showing that the return and the accounts submitted by the assessee in that case were incorrect and incomplete, the assessee would be entitled to have such third parties summoned as witnesses for cross-examination for the purpose of establishing the truth and exposing falsehood. The failure to summon for cross-examination such third parties was found to vitiate the orders of assessment made against the assessee in that case. That principle of audi alteram partem is applicable to the proceedings before the taxing authorities while discharging quasi-judicial functions, is beyond controversy. But at the same time, it cannot be denied that the scope and content of the opportunity contemplated by the said rule is of a variable content depending on the nature of the inquiry, the framework of the law under which it is held, the constitution of the authority holding the inquiry, the nature and character of the rights affected, the materials sought to be relied upon and the consequences flowing from the decision. Therefore, it may not be possible to say that in every case a particular and specified procedure has to be invariably followed irrespective of the peculiar features and exigencies of the case. 5. We are of the view that the procedure required to be adopted for giving an opportunity to a person in a particular case based on principles of natural justice will necessarily depend upon the facts and circumstances of each case. Unlike the case before the Supreme Court referred to above, the case on hand did not concern reliance of any entries in the accounts maintained by or any statements obtained from third parties. The information that was sought to be taken into account in the case on hand was the orders of the statutory Tribunal which, while adjudicating an issue between the department and the decorticating mills from whom the petitioner/assessee before us effected purchases of groundnut kernel, categorically found such decorticating mills to be not dealers within the meaning of the Act to render them liable to tax. By no stretch of imagination could it be said that taxability or otherwise of those decorticating mills and their business dealings can be the subject-matter of an issue or adjudication in the present proceedings. When the liability of the decorticating mills was the subject-matter of earlier proceedings and which culminated in an order of the Tribunal and also before this Court, the said fact necessarily and inevitably constituted sufficient and prima facie material and proof that those decorticating mills are not first purchasers. That being the position, the onus upon the petitioners to prove that the purchases made by them are really second purchases not exigible to tax in their hands is very heavy. This information with the relevant particulars has been indisputably furnished to the petitioners and as could be seen from the order of the assessing authority itself, the assessees were given time to enable them to look into the records and take appropriate action at their end. The decorticators in question are not departmental people and if the assessee wanted them, nothing prevented them from examining them or any of their representatives on their side to substantiate their stand. The decorticators in question are not departmental people and if the assessee wanted them, nothing prevented them from examining them or any of their representatives on their side to substantiate their stand. Not only the assessee seems to have miserably failed in this regard, but from the order of the Tribunal, it could be seen that the petitioners also placed reliance upon an affidavit which contained a graphic description of the nature of the transaction of the decorticating mills. There is no controversy before us that similar and identical affidavits from other decorticators were also placed and are available on record. Thus the affidavit that the petitioners have referred to before the Tribunal appears to be one such furnished by one of the decorticating mills before the Commissioner of Commercial Taxes for waiver of additional sales tax. Though learned counsel for the petitioner had some doubts initially to confirm as to on whose behalf the said affidavit was relied upon before the Tribunal, ground No. 8 in the revision before us admits of the position that it was the petitioner/assessee who relied upon them for a particular purpose. Having placed reliance upon the said affidavit, it does not lie in the mouth of the petitioner to contend that it was correct in one respect and not in respect of others. Consequently, no valid objection could be taken to the action of the Tribunal in referring to them in detail and the Tribunal coming to a conclusion that paragraph 1 of the said affidavit squarely supports the finding as well as the stand of the Revenue that the decorticating mills were not dealers and that it is the assessee who, in law, will constitute the first purchasers of the goods in question. 6. The decision in the second of the cases referred to on behalf of the petitioner in this regard equally has no relevance or application to the present case since that was a case where, without giving any opportunity by way of even a show cause notice, an order of supersession of a Municipal Committee has been passed which justifiably came in for criticism in the hands of the Apex Court. The case on hand is not one of total denial of any opportunity but whether the opportunity that the assessee had, constitutes sufficient compliance with the principles of natural justice. The case on hand is not one of total denial of any opportunity but whether the opportunity that the assessee had, constitutes sufficient compliance with the principles of natural justice. Hence the said decision will have no application to the case on hand. When the plea of alleged denial of opportunity is considered in the above situation and surrounding, we fail to understand as to how the petitioners could genuinely claim or make genuine and legal grievance of the denial of opportunity. The opportunity given in the case on hand to the petitioners, having regard to the peculiar facts and circumstances of the case, constitutes just and sufficient compliance with the principles of natural justice. Consequently having regard to the nature of the materials referred to as well as the purpose for which it has been sought to be relied upon and the very action of the assessee himself in relying upon the affidavit of the decorticating mills before the authorities, we consider that the plea of denial of opportunity and violation of principles of natural justice has no merit whatsoever. The plea on behalf of the petitioner sounds to be more technical than real and more ingenuous rather than being genuine. Consequently, we have no hesitation in repelling the same. 7. The further plea on behalf of the petitioner that their transactions are second purchases and that consequently they are not liable to tax, equally merits rejection in our hands and does not commend our acceptance. This Court, on more than one occasion, in series of decisions, has categorically held that if an assessee claims that he is not liable to tax on the ground that his sales or purchases are second sales or purchases, he is bound to show that there was an earlier taxable sale or purchase, though it was not necessary for the assessee to prove that the earlier sale and actually suffered tax. The onus was on the assessee to establish that the decorticating mills were dealers and first purchasers to be able to substantiate that they are second purchasers and thereby get an exemption of their liability on that ground. It remains now to be considered whether the petitioner before us has discharged the onus cast upon him, which on the peculiar facts of the case, is very heavy. It remains now to be considered whether the petitioner before us has discharged the onus cast upon him, which on the peculiar facts of the case, is very heavy. The answer, in the light of the materials referred to above by us and as carefully considered by the Tribunal, could be only one and that is, that the petitioner has not discharged the said burden. In our view, the Tribunal has dealt with this issue keeping in consideration the relevant aspects and rightly arrived at a factual finding that the petitioner alone was the first purchaser and we do not consider that the said finding of the Tribunal suffers any legal infirmity or opposed to law so as to warrant our interference in this revision before us. The materials referred to and relied upon by the authorities below and that too by the Tribunal have great relevance and sufficient nexus to the purpose and gravamen of the issue to be adjudicated. The decision reported in Deputy Commissioner (CT) v. Sivakumar and Company 1980 (45) STC 436 (Mad.) relied upon by the learned counsel for the petitioner has no direct relevance to the specific issue before us and does not, in any way, held the petitioner to substantiate their claim. In that case, the court was more concerned with the mandatory character of rule 26(13) of the Tamil Nadu General Sales Tax Rules and whether the production of form No. XXI was a must and there could be other modes of proof of the facts contemplated under the said rule. In the case on hand the question is whether the petitioner has really discharged the burden, and in our view, the petitioner has not substantiated with sufficient and proper material that they are only second purchasers and as such their transactions in question do not attract the levy under the Act. That apart, in case the appellants have paid any sales tax to the mills, it is for them to take appropriate proceedings to recover the same, but they cannot escape their liability on the plea that they have already paid tax to the mills, which in law they were not obliged to pay. 8. That apart, in case the appellants have paid any sales tax to the mills, it is for them to take appropriate proceedings to recover the same, but they cannot escape their liability on the plea that they have already paid tax to the mills, which in law they were not obliged to pay. 8. For all the reasons stated above, we see no reason to interfere with the order of the Tribunal and consequently the tax revision case fails and shall stand dismissed; but in the circumstances of the case, there will be no order as to costs.