The main legal point established in the judgment is that for the contravention of condition of Form XVII, tax and penalty could be imposed only against the purchasing dealer and not against the seller, as per Section 3(3) of the Act.

(Writ Appeal filed under Clause 15 of the Letters Patent against the order dated 9.8.2006 passed in W.P.No.25001 of 2006 on the file of this Court.)

A.P. Shah C.J.,

Admit. Learned Special Government Pleader appearing for the respondent waives service. By consent, the writ appeal is taken up for hearing.

2. The appellant/assessee is a dealer in machinery spares. For the assessment year 2003-2004, the appellant has reported a total and taxable turnover of Rs.73,88,596/- and Rs.73,69,588/- by filing Form A1 under the Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as ‘the Act’). The appellant’s accounts were called for by the assessing authority for scrutiny. Though the assessing authority has accepted the turnover reported by the appellant and also mentioned that the purchases were covered by proper bills, yet, rejected the turnover relating to concessional rate of tax against Form XVII on a turnover of Rs.5,78,734/- and assessed at 12% on the ground that the purchasers have not purchased the goods for the use in manufacture of other goods as either raw materials or consumables. Consequently, the assessing authority assessed the tax at Rs.62,263/- and imposed penalty of Rs.42,907/- under Section 12(3)(b) of the Act. The order of the assessing authority was challenged by the appellant in a writ petition on the ground that a turnover in a sum of Rs.14,85,636/- in respect of sale is covered by Form XVII. As the purchasing dealer has contravened the condition of Form XVII, tax and penalty could be imposed in respect of that turnover only against the purchasing dealer and not against the appellant, who is the selling dealer, as per Section 3(3) of the Act.

3. Before the learned single Judge, in support of his submission, the appellant placed reliance on the decision of a Division Bench of this Court in State of Tamil Nadu v. Madras Petro Chem Ltd., (89 STC 438), an unreported order of a Division Bench of this Court dated 4.12.2001 rendered in Writ Petition No.10610 of 2000 (State of Tamil Nadu v. Seema Udyog) and also an order made by a learned single Judge of this Court in Writ Petition No.7753 of 2006 dated 21.3.2006 (M/s.Screenwell India v, DTCO). The learned single Judge, however, held that the decisions relied upon by the appellant are no longer good law as Section 3(3) of the Act has been considerably amended and further more, Section 10, which provides for burden of proof on the dealer, who claims that he is not liable to pay tax, has not been taken up for consideration. The other important factor, according to the learned single Judge is that sub-clause (3) has been introduced to Section 10 by Amendment Act 60/1997 with effect from 6.11.1997 which provides that, ‘where any dealer knowingly produces a false bill, vouchers, declaration, certificate or other document with a view to support or make any claim that a transaction of sale or purchase effected by him is not liable to be taxed or liable to be taxed at a lower rate, the assessing authority shall on detecting such production direct the dealer producing such document to pay as penalty a sum ‘ (i) which shall be in the case of first such detection fifty percent of the tax due in respect of such transaction; and (ii) which shall be in the case of second or subsequent detections one hundred percent of the tax due in respect of such transaction.’ This piece of statutory provision has not been taken into consideration in any one of the judgments. At the time of rendering of the judgment of the Division Bench, sub-clause (3) was not incorporated in the section, and the earlier portion of the provisions which was in the statute book has not been agitated before the Court. The learned single Judge further observed that the assessment order is amenable to appellate provision provided under the Act and therefore, dismissed the writ petition with liberty to the appellant to file a statutory appeal as provided under the Act.

4. Having heard the learned counsel