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1994 Supreme(Mad) 467
High Court of Judicature at Madras
THE HONOURABLE CHIEF JUSTICE MR. K.A. SWAMI & THE HONOURABLE MR. JUSTICE SOMASUNDARAM
Heat Transfer Developments - Appellant
Versus
State of Tamil Nadu - Respondents
T.C. No. 142 of 1994 (Revision No. 39 of 1991)
Decided On : 25 June 1994
Purchases made from unregistered dealers are liable to sales tax under section 7-A of the Tamil Nadu General Sales Tax Act, 1959, and penalty can be levied under section 12(5)(iii) of the Act if the returns are incorrect and incomplete.
Headnote:
SALES TAX - SECTION 7-A OF THE TAMIL NADU GENERAL SALES TAX ACT, 1959 - PURCHASE OF GOODS FROM UNREGISTERED DEALERS - LEVY OF SALES TAX AND PENALTY - INTERPRETATION OF SECTION 7-A - APPLICABILITY OF PENALTY UNDER SECTION 12(5)(III) OF THE ACT - REASSESSMENT PROCEEDING UNDER SECTION 7-A - DISTINCTION FROM REASSESSMENT UNDER SECTION 16 OF THE ACT.
Fact of the Case:
The dealer purchased goods from unregistered dealers and used them in the manufacture of other goods. The purchases were shown in the accounts but not in the monthly returns as being subjected to sales tax. The assessing authority reassessed the tax under section 7-A of the Tamil Nadu General Sales Tax Act, 1959, and levied penalty under section 12(5)(iii) of the Act.
Finding of the Court:
The court held that the purchases were liable to sales tax under section 7-A of the Act, even though they were made from unregistered dealers. The court also held that the penalty levied under section 12(5)(iii) of the Act was justified, as the returns were incorrect and incomplete.
Issues: 1. Whether the purchases made from unregistered dealers were liable to sales tax under section 7-A of the Act? 2. Whether the penalty levied under section 12(5)(iii) of the Act was justified?
Ratio Decidendi: 1. The court held that section 7-A of the Act is a charging as well as a remedial provision, the object of which is to plug leakage and prevent evasion of tax. The court further held that the phrase 'in circumstances in which no tax is payable under section 3, 4 or 5' in section 7-A(1) does not mean that the purchases must be made from registered dealers. It is sufficient if the purchases are made from 'a registered dealer or from any other person' and the goods purchased are 'goods, the sale or purchase of which is liable to tax under this Act'. 2. The court held that the penalty levied under section 12(5)(iii) of the Act was justified, as the returns were incorrect and incomplete.
Final Decision: The court rejected the tax case and upheld the order of the Tribunal.
K. A. SWAMI, C.J.
This revision is preferred against the order dated September 3, 1991, passed by the Tamil Nadu Sales Tax Appellate Tribunal hereinafter referred to as "the Appellate Tribunal" in Appeal No. 760 of 1990, which appeal was preferred against the order of reassessment dated September 30, 1989, passed by the Deputy Commercial Tax Officer, Gandhipuram Circle, Coimbatore in TNGST No. 313379/87-88 under section7-A of the Tamil Nadu General Sales Tax Act, 1959, hereinafter referred to as "the TNGST Act".
2. The assessment relates to the purchases of bush, coupling, etc., of the value of Rs. 1, 29, 699 as liable to sales tax even though it mentioned those purchases in this accounts. Of course, the original assessing authority accepted the returns; but subsequently reassessment proceeding was taken up under section7-A of the TNGST Act by issuing appropriate notice thereunder. In the reassessment, the assessing authority (Deputy Commercial Tax Officer, Gandhipuram Circle) came to the conclusion that the bush, coupling, etc., of the value of Rs. 1, 29, 699 were purchased from unregistered dealers; therefore, the turnover was liable to sales tax. It was further found that as the returns were incorrect to the extent the aforesaid turnover was not shown as liable to tax, penalty was leviable as per section 12(5)(iii) of the TNGST Act. Accordingly, he assessed the tax on the turnover of Rs. 1, 29, 699 at eight per cent to a sum of Rs. 10, 376, surcharge at Rs. 519 and additional surcharge at Rs. 519, and also levied penalty of Rs. 3, 259.
3. Aggrieved by the aforesaid order of the Deputy Commercial Tax Officer, the dealer preferred an appeal before the Appellate Assistant Commissioner, Commercial Taxes, in Appeal No. 818 of 1989. The Appellate Assistant Commissioner agreed with the findings recorded by the Deputy Commercial Tax Officer and with regard to penalty he observed as follows :
"Knowing fully well that the purchases effected from an unregistered dealer in the State and when the turnover had not been reported in the monthly returns, and paid the due taxes the penalty is warranted under section 12(5)(iii) of the Act and so the penalty levied is also confirmed."*
4. The dealer preferred a further appeal before the Appellate Tribunal in Appeal No. 760 of 1990. It may be pointed out here that there was also another assessment proceeding against the very same dealer for the year 1988-89 in which also the dealer had preferred an appeal being Appeal No. 17 of 1991 before the Appellate Tribunal against the order dated October 25, 1990, passed by the Appellate Assistant Commissioner in Appeal No. 792 of 1989. The Appellate Tribunal has decided both the appeals by a common order. However, we confine our order to Appeal No. 760 of 1990 relating to the year 1987-88. The dealer has also preferred another tax revision in T.C. No. 143 of 1994 against the order dated September 3, 1991, passed by the Appellate Tribunal in Appeal No. 17 of 1991, which will be dealt with separately as it relates to the assessment year 1988-89.
5. Mr. R. Venkataraman, learned counsel for the dealer, has raised the following contentions :
(i) As the purchases in question were made from unregistered dealers, and at the point of purchase itself the sales tax was to be levied and the same was to be collected from the unregistered dealer, as such, the said transactions cannot be assessed to sales tax at the hands of the purchaser under section7-A of the TNGST Act,
(ii) this being a proceeding under section16 of the TNGST Act, no penalty is permissible,
(iii) even if it is considered that the proceeding is under section7-A of the TNGST Act, the Tribunal has failed to consider whether the penalty levied by the Appellate Assistant Commissioner is justified in law,(iv) the decisions of the assessing authority, the Appellate Assistant Commissioner and the Appellate Tribunal are opposed to the decision of a Division Bench of this Court in Viswanathan & Co. v. S
