M.A.R. Arunachalam Chettiar and Co vs State of Tamil Nadu

Ramaprasada Rao, C.J.—The Board of Revenue in exercise of its powers of revision suo motu took up the file of the appellant-assessee,

who escaped the levy of penalty because of the order of the Appellate Assistant Commissioner, who cancelled the penalty levied on the

transaction in question, which we shall presently refer to, by the assessing officer under the Tamil Nadu General Sales Tax Act, 1959. During the

year 1973-74, the appellant, who is a registered dealer at the time when he sold jaggery which attracted tax at the point of purchase and not at the

point of sale, collected such tax and admittedly disclosed the same in the bills issued by him. The assessing officer therefore was satisfied that the

appellant as a registered dealer not only contravened the provisions of Section 22(1) of the Act, but also that such contravention attracted the

penal provision u/s 22(2) of the Act. On appeal by the assessee, the Appellate Assistant Commissioner cancelled the penalty. The Board of

Revenue in its suo motu power of revision restored the order of penalty. The present tax case is against such order of the Board of Revenue.

Factually it has been found that the appellant, though he contended that he was a commission agent, did not prove that he acted only as such.

The only material on which the appellant relied to prove his status as commission agent was that in the bills issued by him at the time when he

parted with jaggery to his purchasers, he charged the same price as paid by him at the time of his purchase from his dealers. This circumstance will

not by itself be sufficient to decide whether the appellant is a dealer or a commission agent. As the status of a commission agent carries with it

certain rights and also certain duties, it is for the person who projects such a status before the taxing officers to establish by acceptable evidence

that he was acting as such. This contention was not accepted by the original authority as well as by the Board of Revenue. We are not inclined to

dislodge that finding of fact.

The next contention is that there is no violation of the provisions of the Act. Section 22(1) says that a registered dealer shall not collect any

amount by way of tax, except in accordance with the provisions of the Act and the Rules made thereunder. As every dealer, as also every citizen,

is expected to know the law, because there is no excuse if a citizen pleads ignorance of law, the appellant should be presumed to know the law.

He was a registered dealer. He should be aware that in the case of dealings in jaggery, the transaction is susceptible to tax only at the point of

purchase and not at the point of sale. The bills issued by the appellant showed that he sold jaggery to the purchasers from whom he charged not

only commission (a self-styled expression used by the appellant) but also collected as tax an independent amount and this is said to represent sales

tax of 5 per cent on the total consideration as shown in the bill. It cannot be pretended by the appellant that the adoption of the percentage of five

in the bill of sale is an imaginary figure. It is also not in dispute that the purchase tax on jaggery is five per cent at the purchase point. Obviously,

therefore, the registered dealer, who is presumed to know the law and who is therefore deemed to be aware of the provision, that the rate of tax at

the point of purchase of jaggery as fixed by the Act is five per cent, charged the same percentage of tax at the time when he sold the goods. He not

only did this, but also called it a tax. What is urged before us is that there is no styling of the tax shown in the bill as sales tax. This would not make

any difference at all. We have already referred to the fact that he charged five per cent as tax. This cannot be said to have been weaved out from

his own imagination. It can reasonably be assumed that he collected five per cent as sales tax at the point of sale, knowing that such tax was

payable only at the point of purchase.

One other singular feature noticed in this case is that the appellant did not appeal before the Appellate Assistant Commissioner against the order

of assessment. He only appealed against the levy of penalty, which again supports our view that he treated the transactions as sales simpliciter and,

therefore, the tax collected by him should be characterised as sales tax at the point of sale. This is undoubtedly a violation of the statutory

prescription, which activity would come within the meaning of Section 22(1) of the Act.

The next question argued by the Learned Counsel for the appellant is that it is not necessary that the authority levying penalty should invariably

penalise the defaulting assessee at the maximum rate prescribed. u/s 22(2), if any violation of the provisions of Section 22(1) is discovered, the

appropriate authority may by order in writing impose upon him by way of penalty a sum not exceeding one and a half times such amount. Placing

accent on the provision that the penalty should not exceed one and a half times the amount collected, it is contended that the levy of penalty at one

and a half times at all times should not be automatic. Though it is not necessary for us to express any opinion on this question in this case, yet, we

are not satisfied that the Board of Revenue, when it imposed penalty which the assessing authority itself thought of, was acting in any unreasonable

way or in an arbitrary way. The argument on the quantum of penalty is, therefore, not sustainable. It is now rather well-settled that in cases where

there is a violation of the provisions of a taxing statute, the State has power not only to forfeit the amount collected, but also to levy a penalty as

provided for in the taxing statute. This is what has been done by the revisional authority in the exercise of its suo motu power. We are, therefore,

unable to interfere with the order of the Board of Revenue which sustained the penalty imposed by the original authority. The appeal is dismissed.