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Judgment
Chitra Venkataraman, J.—The above Tax Case (Revisions) arise out of the common order of the Tamil Nadu Sales Tax Appellate Tribunal
relating to the same assessee for the assessment years 2003-04 and 2004-05. Even though, the order sheet in T.C. (R) Nos. 6 and 7 of 2013
contains the question of law that related to levy of penalty, we find that the same relates to the denial of the claim for concessional levy; that the ''C''
forms produced by the assessee were bogus and consequently, the question of concessional levy did not arise. Hence, the correct question of law
to be considered by this Court are as follows:
Whether the Tribunal is correct in concluding that the petitioner has colluded with the buyers and obtained C forms to avail the concessional rate
in the absence of specific finding of the assessing officer?
Whether the Tribunal is correct in concluding that the payment of tax made by the petitioner under protest doubted the genuineness of the
petitioner?
Whether the Tribunal is correct in confirming the higher rate of tax and failed to follow the decision of the Honourable High Court reported in
Lanco Packers and others Vs. State of Tamil Nadu and others and Agfa-Gavert India Limited Vs. State of Tamil Nadu, ?
It is seen from the facts narrated that the assessee is a dealer in plywood and Hardboard. For the assessment years 2003-04 and 2004-05, the
assessee offered turnover on inter-State sales, claiming concessional rate of tax on the strength of ''C'' forms issued by three outside State dealers.
Even though in the original assessment, concessional rate of tax was granted to the assessee, it was subsequently found on investigation that ''C''
Forms produced by the outside State dealers were bogus; consequently, the assessment was reopened u/s 16(1)(b) of the Tamil Nadu General
Sales Tax Act on a turnover of Rs. 43,94,943/- for the assessment year 2003-04 and Rs. 96,42,661/- relating to the assessment year 2004-05.
Even though the assessee objected to this, it paid the differential tax along with the objections filed. Accordingly, their assessment was completed.
The appeal filed by the assessee as against the higher rate of tax was, however, rejected. As against this, the assessee went on further appeal
before the Tamil Nadu Sales Tax Appellate Tribunal. On the claim of the assessee on the higher rate of tax adopted, the Tribunal pointed out that
there was no need to interfere with the order of the Appellate Assistant Commissioner on the facts found by the Revenue that the ''C'' Forms were
bogus and the liability of the assessee to pay higher rate of tax was there under the provisions of the Act; consequently, the Tribunal confirmed the
assessment. Aggrieved by this, Tax Case (Revision) Nos. 6 and 7 of 2013 have been filed.
Apart from these two revisions, there are two other revisions, viz., T.C. (R) Nos. 8 and 9 of 2013 by the assessee raising the following
questions of law:
Whether the Tribunal is correcting in remanding the appeal filed by the Revenue, when the Revenue has not raised any ground with regard to
levy of penalty u/s 10(3) of Act I of 1959?
Whether the Tribunal is correct in giving direction to levy penalty u/s 10(3) of the Act read with Section 9(2) of the CST Act, 1956 while
remanding the matter?
It is seen from the order of the Appellate Assistant Commissioner that he ordered deletion of penalty on the ground that the revision being made
u/s 16(1)(b) of the Tamil Nadu General Sales Tax Act, the question of invoking Section 16(2) of the Tamil Nadu General Sales Tax Act did not
arise. Thus the first Appellate Authority deleted the levy of penalty. The Tribunal, however, viewed that it was only misquoting of the provision of
the Act; since the assessee had knowingly furnished bogus ''C'' forms, the element of mens rea was there, thus as per Section 9(2)(A) of the
Central Sales Tax read with Section 10(3) of the Tamil Nadu General Sales Tax Act, penalty was leviable. In so holding, the Tribunal set aside the
order of the first Appellate Authority and ordered levy of penalty u/s 9(2)(A) of the Central Sales Tax Act read with Section 10(3) of the Tamil
Nadu General Sales Tax Act.
The grievance of the petitioner is that while so holding, the Tribunal did not put the assessee on notice to make his submission. In any event, on
the fact that the assessee had no knowledge about the bogus character of the ''C'' forms and the assessment being one u/s 16(1)(b) of the Tamil
Nadu General Sales Tax Act, no penalty is leviable u/s 16(2) of the Tamil Nadu General Sales Tax Act. Hence, the present revisions have been
filed.
As far as Tax Case (Revision) Nos. 6 and 7 of 2013 are concerned, we do not find any justifiable ground to disturb the assessment, since in the
absence of valid ''C'' Forms, their assessment was rightly made. Consequently, both the revisions are dismissed. No costs.
As far as the levy of penalty is concerned, a reading of the order of the Tribunal restoring penalty proceedings shows that the notice u/s 16 of
the Tamil Nadu General Sales Tax Act proposed levy of tax at 16.8% and penalty u/s 16(2) of the Tamil Nadu General Sales Tax Act read with
Section 9(2-A) of the Central Sales Tax Act at 150% of the tax due for the wilful submission of non-genuine ''C'' Forms to avail concessional rate
of tax. Thus, by stating wilful submission of non-genuine forms, penalty was proposed u/s 16 of the Tamil Nadu General Sales Tax Act.
A reading of Section 16 of the Tamil Nadu General Sales Tax Act shows that penalty u/s 16(2) can be made only as regards the cases falling
u/s 16(1)(a). Thus the Legislature has consciously omitted cases falling u/s 16(1)(b) from levy of penalty u/s 16(2) of the Tamil Nadu General Sales
Tax Act. Section 16 of the Tamil Nadu General Sales Tax Act reads as under:
Section 16. Assessment of escaped turnover.-- (1) (a) Where, for any reason, the whole or any part of the turnover of business of a dealer has
escaped assessment to tax, the assessing authority may, subject to the provisions of sub-section (2), at any time within a period of five years from
the date of order of the final assessment by the assessing authority, determine to the best of its judgment the turnover which has escaped
assessment and assess the tax payable on such turnover after making such enquiry as it may consider necessary and after giving the dealer a
reasonable opportunity to show cause against such assessment.
...
Admittedly, going by the provision, the case on hand is one falling u/s 16(1)(b), it being an assessment made on the rejection of declaration forms.
Thus, going by the proceedings initiated, in the absence of any specific provision u/s 16 to cover cases u/s 16(1)(b), we have no hesitation in
setting aside the order of penalty.
As far as the Tribunal''s view invoking Section 10(3) of the Tamil Nadu General Sales Tax Act is concerned, the assessee claimed concessional
levy on the basis of the declaration forms furnished by the outstation purchaser. Given the degree of knowledge that an assessee may have, as to
whether the concessional forms were bogus or genuine, we do not find any justifiable ground to attribute motive to levy penalty in this case.
Learned Standing Counsel appearing for the Revenue pointed out that the ''C'' Forms were all written in hand by the outstation purchaser in the
same pattern. There was no official date, seal of the Department affixed and the assessee is in the business for over a period of 65 years. Hence,
there was a familiarity between the assessee and the purchaser. Quite apart, the same firm had issued genuine ''C'' forms to other depots, but
bogus one to the Madurai depot.
In the circumstances, penalty is called for in this case.
As far as the claim for levy of penalty is concerned, as rightly pointed out by the assessee, if the Tribunal proposed to levy penalty on a
provision different from what is available, then the assessee should have been put on notice to hear its arguments. However, the Tribunal upheld the
levy, holding the view that the same could be upheld under some other provision too. Admittedly, in a case of this nature, no penalty could be
levied u/s 16(2) of the Tamil Nadu General Sales Tax Act. However the Tribunal viewed that the collusion between the assessee and their buyer
were established. Hence, the Appellate Assistant Commissioner was not justified in deleting the penalty on the sole ground that it was levied under
wrong Section. We do not find any material for giving this positive finding, for, all that the Assessing Officer had stated in his notice was that it was
proposed to levy penalty u/s 16 of the Act at 150% of the tax due for wilful submission of ingenuine forms and avail concessional rate of tax. We
find that even to levy penalty u/s 10(3) of the Tamil Nadu General Sales Tax Act, the Assessing Officer must establish a knowledge on the part of
the assessee that he had produced the false certificate with a view to support that the transaction of sale is liable to be taxed at a lower rate. Such
levy of penalty is permissible only after giving the assessee a chance of hearing in that matter. If the Tribunal feels that it is a fit case for levy of
penalty u/s 10(3) read with Section 9(2) and that an order had been made quoting a wrong provision, then notice proposing levy of penalty must
contain the materials, which would lead the Tribunal to come to a conclusion that it is only a misquoting of the provision of the Act, which called for
correction at the hands of the Tribunal. As already pointed out, the show cause notice issued by the Assessing Authority gives no such room for
any inference to be drawn that the order suffered misquoting of the provisions of the Act.
In the circumstances, we do not find any justifiable ground to accept the reasoning of the Tribunal that when no penalty could be levied u/s
16(2) of the Tamil Nadu General Sales Tax Act, the same has to be read as one falling u/s 10(3) of the Tamil Nadu General Sales Tax Act.
In the decisions reported in Agfa-Gavert India Limited Vs. State of Tamil Nadu, and Lanco Packers and others Vs. State of Tamil Nadu and
others this Court pointed out to cases of issuance of bogus ''C'' Forms and held that if there is publication of notification in the official gazette as
regards the invalidity of ''C'' and ''F'' Forms much earlier to the furnishing of ''C'' and ''F'' forms, then the assessee-dealers-selling dealers could
have no defence at all. However, where there is no publication of notification, the dealers would be entitled to have the benefit of concessional rate
of tax.
As far as the present case is concerned, it is no doubt true that immediately on receipt of notice, the assessee paid the differential tax for the
reasons best known to the assessee, but one cannot infer any knowledge on the part of the assessee that the forms used by them to gain
concessional levy are only bogus forms and while confronted with the fact situation, they had reversed the claim. As pointed out by this Court, if at
all there had been any notification indicating the bogus nature of the ''C'' forms used by certain assessees, motive can be attributed to the assessee
for misusing his declaration to gain concessional tax rate. In the absence of any such control that the assessee could exercise over those
transactions or materials to attribute motive or knowledge, particularly where the tax rate is conditioned by the use of declaration forms, we do not
find any justifiable ground to annul the assessee with penal consequences. In the circumstances, we agree with the contentions made by the learned
counsel appearing for the assessee that there is no ground for attracting the provisions u/s 10(3) of the Tamil Nadu General Sales Tax Act, quite
apart from the relevance of this provision to the assessment under the Central Sales Tax Act and that the assessment herein is made only u/s 16(1)
(b) of the Tamil Nadu General Sales Tax Act, for which no penalty could be levied. In the circumstances, we set aside the order of the Tribunal.
Accordingly, Tax Case (Revision) Nos. 8 and 9 of 2013 are allowed. No costs.