Jothi Chemicals vs State of Tamil Nadu

K. Raviraja Pandian, J.—The correctness of the order of the Sales Tax Appellate Tribunal (Additional Bench), Madurai, dated July 13,

2001 in T.A. No. 265 of 1999 in bringing the value of the lorry sold by the assessee for taxation and the imposition of penalty u/s 12(5)(iii) of the

Tamil Nadu General Sales Tax Act, 1959 is put in issue in this revision.

The simple issue in dispute is that the assessee purchased a chassis from Ashok Leyland and he got the body built over the chassis. After using

the lorry for some time, he sold it. According to the Department, the lorry as such is totally a different commodity than that of chassis purchased.

For that addition made on the chassis as lorry, tax has to be levied, despite the material used for putting up the body has already suffered tax. As

this transaction has not been accepted by the assessee, penalty was also levied by the assessing officer.

When the matter is taken up for orders, learned Counsel Mr. Thiagarajan appearing for the assessee very cleverly submitted that in respect of

the assessment, the assessee is not disputing. However so far as the levy of penalty u/s 12(5)(iii) of the Act is concerned, it is submitted that the

assessee has not suppressed the turnover on the sale of lorry. The turnover is very much available in the books of account as well as returns. By no

stretch of imagination, the return so filed by the assessee/revision petitioner can be regarded as incorrect and incomplete return so as to attract the

penal provisions of Section 12(5)(iii).

We also heard the argument of the learned Counsel for the Revenue, who argued for sustaining the penalty and perused the material on record.

The provisions of Section 12(3) to 12(5) of the Tamil Nadu General Sales Tax Act, as they obtained during the relevant period are to the

following effect:

Section 12(3) In addition to the tax assessed under Sub-section (2), the assessing authority may, in the same order of assessment passed under

Sub-section (2), or by a separate order, direct the dealer to pay by way of penalty-

(a) a sum which shall not be less than fifty per cent but which shall not be more than one hundred and fifty per cent of the amount of tax due on the

turnover that was not wilfully disclosed by the dealer in his return, or

(b) a sum which shall not be less than fifty per cent but which shall not be more than one hundred and fifty per cent of the tax assessed in the case

of wilful failure to submit a return.

Section 12(4) Notwithstanding anything contained in Sub-sections (1), (2) and (3), the assessing authority may, if it is satisfied that the accounts

maintained by a dealer are correct, assess such dealer on the basis of such accounts, if such dealer has-

(i) failed to submit the prescribed return; or

(ii) failed to submit the prescribed return within such period as may be prescribed; or

(iii) if the return submitted is found to be incorrect or incomplete.

Section 12(5) The assessing authority may, in the order of assessment or by a separate order, direct that the dealer shall, in addition to the tax

assessed under Sub-section (4), pay by way of penalty, a sum-

(i) which, in the case referred to in Clause (i) of Sub-section (4), shall not be less than fifty per cent but which shall not be more than one hundred

and fifty per cent of the amount of tax payable;

(ii) which, in the case referred to in Clause (ii) of Sub-section (4), shall be equal to two per cent of the tax payable for every month or part thereof

during which the default in the submission of the return continued, subject to a maximum of fifty per cent of the tax; and

(iii) which, in the case referred to in Clause (iii) of Sub-section (4), shall not be less than fifty per cent but shall not be more than one hundred and

fifty per cent of the difference in tax payable on the turnover disclosed in the return and that determined by the assessing authority:

Provided that no penalty under Sub-sections (3) and (5) shall be imposed after a period of five years from the expiry of the year to which the

assessment relates and unless the dealer affected has had a reasonable opportunity of showing cause against such imposition.

Having regard to the above statutory provision, if we apply the said provision to the facts of the present case, we are of the view that all the

authorities have admitted that the entire turnover has been reflected in the books of account and also stated in the returns filed by the assessee.

Hence, for the invocation of Sub-clause (iii) of Section 12(5), the pre-condition is that the return submitted is found to be incorrect and incomplete

as per Section 12(4)(iii). None of the authorities below including the Tribunal has given a finding that the return submitted by the assessee is found

to be incorrect and incomplete. Hence, in the absence of such a finding, the levy of penalty u/s 12(5)(iii) is not in consonance with the penal

provision provided. Hence, we are of the view that the penalty imposed has to be deleted and the same is deleted. To that extent, the appellant

succeeds. With this observation, the tax case revision is disposed of.