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2014 DIGILAW 4340 (MAD)

Continental Packaging v. State of Tamil Nadu

2014-11-19

R.KARUPPIAH, R.SUDHAKAR

body2014
Order R. Sudhakar, J. 1. The above Tax Case (Revisions) are filed by the assessee as against the order of the Tamil Nadu Sales Tax Appellate Tribunal raising the following substantial questions of law: T.C.(A)Nos.42 & 43 of 2014: "1. Whether in the facts and circumstances of the case, the Tribunal was right in having endorsed the action of the Assessing Officer in assessment of the entire turnover when admittedly the slips recovered forms only a part of the turnover? 2. Whether the action of the Tribunal in having overlooked the generalization of assessment made by the Assessing Officer and restored the same is contrary to the decision of the Hon'ble apex Court in Tata Engineering & Locomotive Co. Ltd. Vs Asst Commnr of Commercial Taxes, Jamshedpur & another reported in 26 STC 354? 3. Whether in the facts and circumstances of the case, the Tribunal was correct in having concluded that the appellant had sold only HDPE bags and not HDPE fabrics solely on the basis of the description adopted by transporter in his Lorry Way Bills dehors the other materials like Purchase orders, Invoices which prove otherwise? 4. Whether in the facts and circumstances of the case, the Tribunal was right in having restored the assessment made by the Assessing Officer solely on the premise that statement recorded by the Transporter in favour of this appellant cannot be accepted? T.C.(A)No.42 of 2014: 5. Whether the Tribunal was correct in having confirmed the levy of penalty under Section 12(5)(iii) of the TNGST Act, 1959 on the face of the fact that all figures were culled out from the lorry way bills maintained by this appellant in the regular course of business and claimed as exemption and not a Best Judgment assessment in stricto senso? T.C.(A)No.43 of 2014: 6. Whether the Tribunal was correct in having confirmed the levy of penalty under Section 16(2) of the TNGST Act, 1959 on the face of the fact that all figures were culled out from the lorry way bills maintained by this appellant in the regular course of business and claimed as exemption and not a Best Judgment assessment in stricto senso?" 2. After several rounds of litigation, i.e., from the Assessing Officer to the Appellate Tribunal, the assessee/petitioner is now before this Court. 3. The assessment in these cases pertains to the assessment years 1987-88 and 1988-89. After several rounds of litigation, i.e., from the Assessing Officer to the Appellate Tribunal, the assessee/petitioner is now before this Court. 3. The assessment in these cases pertains to the assessment years 1987-88 and 1988-89. The petitioner/assessee is engaged in the business of sale of HDPE fabrics and bags. The sale of HDPE fabric is exempted from sales tax, whereas the HDPE bags are not exempted from sales tax. 4. The brief facts as recorded by the Tribunal in its order are as follows: For the assessment year 1987-88, the assessee Tvl. Continental Packaging at Plot No.6, First Main Road, Pammal, Chennai - 76 were originally assessed on a total and taxable turnover of Rs.33,32,017/- and Rs.6,90,831/- respectively under the TNGST Act, 1959, in the proceedings dated 18.8.88. Subsequently, based on the inspection on 21.7.99 by the Enforcement Wing, the assessment was revised and re-determined the total and taxable turnover of Rs.33,32,017/-and Rs.6,90,331/- respectively in the proceedings dated 27.11.89. The taxable turnover included interalia, the disallowance of claim of exemption on sales of HDPE fabrics to the extent of Rs.6,11,263/- as per the D7 record recovered at the time of inspection on 04.08.88. Against which, the assessee preferred an appeal before the Appellate Assistant Commissioner (CT)-V Kancheepuram. The Appellate Assistant Commissioner, in his order dated 30.5.95 (common order), had sustained 50% of the suppression and modified the penalty accordingly. Against the order of the Appellate Assistant Commissioner, the assessee had preferred second appeal before the Tribunal and the Tribunal by order dated 25.11.97 remanded the assessment back to the Assessing Officer for de novo assessment. Based on the remanded order, the Assessing Officer had revised the assessment order and re-determined the total and taxable turnover of Rs.33,23,018/- and Rs.13,01,595/- respectively in his order dated 28.6.2002. The Assessing Officer had also levied Surcharge of Rs.3,524/-, Additional Surcharge of Rs.3,524/-, Additional Sales Tax of Rs.16,270/- and penalty of Rs.50,429/-being 150% of the tax due on the actual suppression levied without quoting the Section under which he had levied penalty. Again, the aggrieved assessee preferred an appeal before the Appellate Assistant Commissioner, who vide his order dated 11.10.2004 made in AP No.187/02, based on records produced and arguments put forth, set aside the addition made and allowed the appeal with consequential levies of Surcharge, Additional Surcharge, Additional Sales Tax and also penalty levied by the Assessing Officer. Again, the aggrieved assessee preferred an appeal before the Appellate Assistant Commissioner, who vide his order dated 11.10.2004 made in AP No.187/02, based on records produced and arguments put forth, set aside the addition made and allowed the appeal with consequential levies of Surcharge, Additional Surcharge, Additional Sales Tax and also penalty levied by the Assessing Officer. Not satisfied with the order of the first Appellate Authority, the State has preferred an appeal before the Tribunal seeking restoration of the assessment made on the turnover of Rs.6,11,263.50 pertaining to the claim of sales of HDPE Fabrics and also Surcharge of Rs.1,528/-, Additional Surcharge of Rs.1,528/-, Additional Sales Tax of Rs.16,270/-besides penalty of Rs.50,429/-. 5. For the assessment year 1988-89, the assessee was originally assessed on a total and taxable turnover of Rs.42,49,530/- and Rs.22,75,457/-respectively under the TNGST Act, 1959, in the proceedings dated 30.12.89. The taxable turnover included interalia, the disallowance of claim of exemption on sales of HDPE Fabrics to the extent of Rs.9,63,299/- (upto June 88) as per the D7 records recovered at the time of inspection on 04.08.88. Against which, the assessee preferred an appeal before the Appellate Assistant Commissioner (CT), V, Kancheepuram. The Appellate Assistant Commissioner, in his order dated 30.5.95 (Common order) had sustained 50% of the suppressions and modified the penalty accordingly. Against the order of the Appellate Assistant Commissioner, the assessee had preferred second appeal before the Tribunal and the Tribunal remanded the assessment back to the Assessing Officer. Based on the remanded order, the Assessing Officer had revised the assessment order and re-determined the total and taxable turnover of Rs.42,49,531/- and Rs.19,33,720/-respectively in his order dated 28.6.2002. The Assessing Officer had also levied Surcharge of Rs.6,804/-, Additional Surcharge of Rs.6,804/-Additional Sales Tax of Rs.24,172/- and penalty of Rs.56,391/-being 150% of the tax due on the actual suppression levied under Section 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959. Again, the aggrieved assessee preferred an appeal before the Appellate Assistant Commissioner, who vide his order dated 11.10.2004 made in AP No.220/02, based on records produced and arguments put forth, set aside the addition made and allowed the appeal with consequential levies of Surcharge, Additional Surcharge, Additional Sales Tax and also penalty levied by the Assessing Officer. Again, the aggrieved assessee preferred an appeal before the Appellate Assistant Commissioner, who vide his order dated 11.10.2004 made in AP No.220/02, based on records produced and arguments put forth, set aside the addition made and allowed the appeal with consequential levies of Surcharge, Additional Surcharge, Additional Sales Tax and also penalty levied by the Assessing Officer. Not satisfied with the order of the first appellate authority, the State has preferred an appeal before the Tribunal seeking restoration of the assessment made on the turnover of Rs.6,26,561.55 pertaining to claim of sales of HDPE Fabrics and also Surcharge of Rs.1,566/-, Additional Surcharge of Rs.1,566/-, Additional Sales Tax of Rs.7,831/-besides penalty of Rs.56,321/- levied under Section 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959. 6. The Tribunal, considering the various material evidence, framed two points for consideration, which read as follows: "(i) Whether the assessment made on Rs.6,11,263.50 at 5% (STA No.393/06) and Rs.6,26,561.55 at 5% (STA No.468/06) along with consequential surcharge, Addl. Surcharge, Addl. Sales Tax are sustainable? (ii) Whether the levy of penalty under Section 16(2) of the Tamil Nadu General Sales Tax Act, 1959 for the year 1987-88 (STA No.393/06) and levy of penalty under Section 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959 for the year 1988-89 (STA No.468/06) are warranted?" 7. The Tribunal rejected the claim of the assessee with regard to the first point holding as follows: "11. While the assessment relating to the year 1987-88 was the revision assessment proceedings, the assessment pertaining to the year 1988-89 was the original assessment proceedings. In the first round of litigation, this Tribunal, while remanding the cases back to the Assessing Officer for de novo assessment, had categorically held that if at all disallowance is to be made, it ought to have been only with reference to the records so secured. This Tribunal has also recorded a very clear finding to the effect that "as rightly pointed out by the learned State Representative, the assessment of Tvl. Indag Products Limited does not show any indication of the buyers having incurred the stitching charges. This Tribunal has also recorded a very clear finding to the effect that "as rightly pointed out by the learned State Representative, the assessment of Tvl. Indag Products Limited does not show any indication of the buyers having incurred the stitching charges. Pursuant to the above remand order of this Tribunal, the assessing officer had revised the assessment for the year 1987-88 determining the total and taxable turnover at Rs.33,23,018/- and Rs.13,01,595/-respectively and while doing so, he had increased the sale value of fabrics, based on D7 records, by Rs.6,11,263/-and restricted the exemption claim. Thereby he allowed exemption only Rs.20,21.423/-. For the year 1988-89, he had redetermined the total and taxable turnover of Rs.42,49,531/- and Rs.19,33,720/- respectively and restricted the exemption claim Rs.23,15,811/-. Thus he has increased the sale value of fabrics based on fabrics by Rs.6,26,561/-. It is to be mentioned here that while issuing notice, the Assessing Officer has attached the details of 117 slips of lorry way bills and the turnover covered in this lorry way bills. It is also seen from the assessment orders that as directed by this Tribunal in the remand order dated 25.11.1997, the Assessing Officer had taken into account only the turnovers covered in the lorry way bills recovered and restricted the exemption claim only to that extent. As rightly contended by the learned State Representative, the letter of Tvl. Southern Roadways Limited stating that though they had mentioned in the lorry way bills that the description of item transported was 'bags' the party had actually sent only plastic fabric, could not be considered as a valid evidence as the letter was addressed to the assessee/Tvl.Continental packaging and between the assessee and Tvl.Southern Roadways Limited there is a beneficial relationship. In as much as the assessee is giving regular business to Tvl.Southern Roadways Limited the letter of Tvl.Southern Roadways Limited could not be accepted as valid evidence. We are in full agreement with the above contention of the learned State Representative and thus we reject this evidence. Further, this Tribunal in its order dated 25.11.1997 had categorically held that the perusal of assesment of Tvl.Indag Products Limited did not show any indication of the buyers having incurred the stitching charges and therefore the statement given by one Shri.V.Srinivasan, Accounts Officer of Tvl.Indag Products Limited, could not be considered as an evidence. 12. Further, this Tribunal in its order dated 25.11.1997 had categorically held that the perusal of assesment of Tvl.Indag Products Limited did not show any indication of the buyers having incurred the stitching charges and therefore the statement given by one Shri.V.Srinivasan, Accounts Officer of Tvl.Indag Products Limited, could not be considered as an evidence. 12. The contention of the assessee that they had sold only HDPE fabrics to Tvl.Indag Products Limited and accordingly invoices were raised on them stating that the products sold were only 'HDPE fabrics'. This contention is not acceptable on the ground that when the products sold by the assessees were only HDPE fabrics, there is no necessity to mention in the lorry way bills, the description of the item as “HDPE bags”. This contention is not acceptable on the ground that when the products sold by the assessees were only HDPE fabrics, there is no necessity to mention in the lorry way bills, the description of the item as 'HDPE bags', it is to be mentioned here that Tvl. Southern Roadways Limited being a transporter could have easily mentioned in the recovered lorry bills that the item transported were only HDPE fabrics, had the items transported were really HDPE fabrics. 13. Perusal of D7 records recovered along with the assessment records would reveal that the Assessing Officer had rightly held that the items which were transported were only HDPE bags even though in the invoices they had mentioned as HDPE fabrics as it had been categorically proved through the recovered Lorry Way bills that they had only HDPE bags and however they had raised invoices as if they had sold HDPE fabrics. Further, the assessee, though this Tribunal in its earlier order held that the assessment of Tvl.Indag Products Limited did not show any stitching charges incurred by them, had proved otherwise to conclude that the assessee had sold HDPE fabrics and these fabrics were stitched by the buyers at their premises, except producing the statement recorded by one Shri V.Srininvasan, Accounts Officer of Tvl.Indag Products Limited. The first appellate authority without considering all these facts had simply set aside the orders of the Assessing Officer, which is our considered view, is not correct. The first appellate authority without considering all these facts had simply set aside the orders of the Assessing Officer, which is our considered view, is not correct. Hence, we hold that the order of the first appellate authority is not in order and we, setting aside the orders of the first appellate authority and restore the orders of the Assessing Officer, for both the assessment years under appeal.” 8. With reference to levy of penalty (Point No. ii), the Tribunal held as follows: “From the above, it is clear that the penalty under section 16(2) could be leviable by the Assessing Officer, if he satisfied that the escape from assessment is due to willful non-disclosure of assessable turnover and thereafter he may direct the dealer to pay, by way of penalty, a sum which shall not less than 50% but which shall not be more than 150% of the tax so assessed. From the reading of Section 12(5)(iii), it is clear that the Assessing Authority may direct the dealer to pay by way of penalty, a sum which shall not be less than 50% but shall not be more than 150% of the difference in tax payable on the turnover disclosed in the return and that determined by the Assessing Authority. From the above, it is also clear that it is to be discretionary power of the Assessing Officer to levy any quantum of penalty between 50% and 150% depending upon the situation. The Assessing Officer in both the cases had levied penalty at 150% of the tax due on the suppressed turnover. Had the inspection not been conducted and incriminating records were recovered, the suppression would not have been noticed by the department. Thus levy of penalty is warranted in these cases. However, taking into consideration the fact that all the turnovers covered in the way bills had been taken as taxable turnover by reducing the exemption claim and taking into account the tax due for the year 1987-88 and 198889 are only Rs.12,228/- and Rs.28,615/- respectively, and paucity of time we are of the considered view that levy of maximum penalty at 150% of the tax due is not at all fair in these cases and therefore we are of the considered view that only the penalty at 75% of the tax due would be fair and meet the ends of justice. Hence we, by setting aside the order of the first appellate authority for both the years fix the penalty at Rs.25,215/- for the year 1987-88 and Rs.28,196/- for the year 1988-89.” 9. Aggrieved by the orders of the Tribunal, the assessee has filed the present Tax Case (Revisions). 10. Heard learned counsel appearing for the assessee and the learned Special Government Pleader appearing for the Revenue and perused the materials placed before this Court. 11. We are not inclined to go into the first order passed by the Assessing Authority. The disputed question of fact as pointed out by the learned counsel appearing for the petitioner is that what was found as discrepancy in relation of the assessment year 1987-88 is 16 slips and for the assessment year 1988-89, 4 slips. That order has already been set aside by the Tribunal and remanded the matter to the Assessing Officer in the first round of litigation for considering the entire issue De Novo. The said order of the Tribunal has been extracted in the second order of the Assessing Officer dated 28.6.2012, which reads as follows: “2. The dealers preferred second appeal before the Tamil Nadu Sales Tax Appellate Tribunal (Main Bench), Chennai 104 and in order third cited, the following orders were passed by the Tribunal. “...That the entire matter has to go back to the learned Assessing Officer not only for De Novo appraisal of the entire facts and circumstances but also place the entire materials that has been gathered by the Revenue but available only in the D3 file and not specifically put to the appellants for proper rebuttal.... “The Enhancement petition filed in this regard would also stand remitted to the Assessing Officer and it is open to the learned Assessing Officer to draw his own conclusion having regard to the materials on hand and generalizing the issue at large....” 12. It is based on this remand order for de novo consideration, we find the Assessing Authority had taken all D7 records and found that there were 117 lorry receipts showing sale of sacks and fabrics. Based on this, the Assessing Officer re-determined the taxable turnover in respect of the assessment year 1987-88 after allowing exemptions in the following manner: “5. It is based on this remand order for de novo consideration, we find the Assessing Authority had taken all D7 records and found that there were 117 lorry receipts showing sale of sacks and fabrics. Based on this, the Assessing Officer re-determined the taxable turnover in respect of the assessment year 1987-88 after allowing exemptions in the following manner: “5. In view of the above, it was proposed to revise the assessment of the dealers for the year 1987-88 under the TNGST Act 1959 as detailed below, after due verification of the records and statements, in pursuance of the order of the Tamil Nadu Sales Tax Appellate Tribunal read above. Taxable turnover declared by the dealers and as per accounts Rs. 6,90,331.00 ADD: Sales of bags as per D7 records Recovered at the time of inspection on 4.8.88 Rs. 6,11,263.50 Taxable turnover proposed to refixed (Sales of polythene sacks) Rs. 13,01,595.00 - 5% ADD: Exemption claimed but restricted and allowed Rs. 20,21,423.00 Total Turnover proposed to be refixed Rs. 33,23,018.00 6. It was also proposed to levy surcharges and additional surcharge at 5% and 5% respectively of the tax due. It was also proposed to levy additional tax at 1.25% of the taxable turnover of Rs.13,01,595/-. It was further proposed to levy penalty at 150% of the tax, SC, ASC due on the actual suppression of Rs.6,11,263/- as found on inspection.” 13. The above proposal was confirmed based on D7 records. Similarly, for the assessment year 1988-89, based on the remand order of the Tribunal the proposal was made in the following manner: “4. In view of the above, it was proposed to revise the assessment of the dealers for the year 1988-89 under the TNGST Act 1959 as detailed below, after due verification of the records and statements, in pursuance of the order of the Tamil Nadu Sales Tax Appellate Tribunal read above. Taxable turnover as per Returns and account (Sales of sacks from 1.7.88 to 6.10.88) Rs. 3,52,180.00 5% Sales of Sacks from 7.10.88 to 31.3.89 (G.O.P. 1316 dt. 7.10.98) Rs. 9,54,978.00 2% ADD: Sales of bags as per D7 records Recovered at the time of inspection on 4.8.88 (Sales upto June 88) Rs. 6,26,561.55 5% Taxable turnover proposed to be refixed Rs. 19,33,720.00 ADD: Exemption claimed but restricted and allowed Rs. 23,15,811.00 Total Turnover proposed to be refixed Rs. 42,49,531.00 5. 7.10.98) Rs. 9,54,978.00 2% ADD: Sales of bags as per D7 records Recovered at the time of inspection on 4.8.88 (Sales upto June 88) Rs. 6,26,561.55 5% Taxable turnover proposed to be refixed Rs. 19,33,720.00 ADD: Exemption claimed but restricted and allowed Rs. 23,15,811.00 Total Turnover proposed to be refixed Rs. 42,49,531.00 5. It was also proposed to levy surcharges and additional surcharge at 10% and 10% respectively of the tax due. It was also proposed to levy additional tax at 1.25% of the taxable turnover of Rs.19,33,720/-. It was further proposed to levy penalty at 150% of the tax, SC, ASC due on the actual suppression of Rs.6,26,562/- under Section 12(5) of the TNGST Act, 1959.” 14. The Assessing Authority in respect of the assessment year 1988-89 was proceeded to determine the sale of bags as fabrics on the basis of verification of 113 slips. 15. After analysing the documents, a detailed order has been passed in both the cases rejecting the plea of the petitioner on the basis of the materials, which showed that the buyer of the goods had not produced any record for stitching charges, which makes it clear that what was sold was only bags and not HDPE fabrics. 16. In this view of the matter, the Assessing Authority levied penalty at 150%, which came to be reduced to 75% by the Tribunal considering the facts and circumstances of the case. 17. We find that the discrepancy, as attempted to be pointed out by the learned counsel appearing for the petitioner that there was an error in the number of slips in the first round of litigation and therefore, there is error in the determination of escaped assessment in respect of HDPE bags. This was corrected by the tribunal by way of remand. But, on remand from the Tribunal, we find the second order was passed by the Assessing Authority after detailed verification of D7 records and the lorry receipts to come to a conclusion as to the quantum and sales of bags, allegedly HDPE fabrics. We find such a determination made by the Assessing Authority has been rightly confirmed by the Tribunal. We are not inclined to go into individual slips to find fault with the calculation made by the Assessing Authority, which was confirmed by the Tribunal. Being pure question of fact, we find no error in the order of the Tribunal. We find such a determination made by the Assessing Authority has been rightly confirmed by the Tribunal. We are not inclined to go into individual slips to find fault with the calculation made by the Assessing Authority, which was confirmed by the Tribunal. Being pure question of fact, we find no error in the order of the Tribunal. We find no question of law much less any substantial question of law arises for consideration in these revisions. 18. Insofar as levy of penalty under Section 16(2) of the TNGST Act, for the assessment year 1987-88 and under Section 12(5)(iii) of the TNGST Act for the assessment year 1988-89 is concerned, the provision of Section 16(2) Section 12(5)(iii) of the TNGST Act provides for levy of penalty between 50% and 150%. The Assessing Authority levied penalty at 150%, whereas the Tribunal has thought it fit to reduce the same at 75%. We find no reason to interfere with the discretion exercised by the Tribunal in the case of suppression of material fact with an intention to avail wrongful benefit. 19. In the result, both the Tax Case (Revisions) are dismissed. No costs. Consequently, M.P.No.1 of 2014 is also dismissed.