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Judgment
Ismail, J.—This batch of tax revision cases u/s 38 of the Tamil Nadu General Sales Tax Act, 1959, hereinafter referred to as the Act, arises
out of a common order of the Tamil Nadu Sales Tax Appellate Tribunal, Additional Bench, Madurai, dated 6th October, 1971. The petitioners in
all these cases were paying tax in terms of Section 7 of the Act. After their assessments were completed with reference to that section and the
taxes payable by them were determined, it came to notice that certain transactions which the respective petitioners had, had not been brought to
account and, therefore, had escaped assessment to tax. Consequently, the assessments were reopened u/s 16 of the Act and the turnover
redetermined and on the basis of the turnover so determined in each case the tax was demanded from the petitioners. Simultaneously, penalty was
levied u/s 16(2) of the Act. The appeals preferred by the petitioners to the Appellate Assistant Commissioner, Commercial Taxes and the Sales
Tax Appellate Tribunal failed except with regard to the quantum of penalty. Hence the present revision petitions by the assessees.
Before we refer to the arguments advanced before us, it is necessary to refer to certain provisions of the Act. Section 2(p), (q) and (r) define
taxable turnover"", ""total turnover"" and ""turnover"" as follows:
(p) ''taxable turnover'' means the turnover on which a dealer shall be liable to pay tax as determined after making such deductions from his total
turnover and in such manner as may be prescribed ;
(q) ''total turnover'' means the aggregate turnover in all goods of a dealer at all places of business in the State, whether or not the whole or any
portion of such turnover is liable to tax;
(r) ''turnover'' means the aggregate amount for which goods are bought or sold, or supplied or distributed, by a dealer either directly or through
another, on his own account or on account of others whether for cash or for deferred payment or other valuable consideration, provided that the
proceeds of the sale by a person of agricultural or horticultural produce, other than tea, grown within the State by himself or on any land in which
he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, shall be excluded from his turnover;
Explanation (1).-''Agricultural or horticultural produce'' shall not include such produce as has been subjected to any physical, chemical or other
process for being made fit for consumption, save mere cleaning, grading, sorting or drying;
Explanation (2).-Subject to such conditions and restrictions, if any, as may be prescribed in this behalf-
(ii) the amount for which goods are sold shall include any sums charged for anything done by the dealer in respect of the goods sold at the time of,
or before the delivery thereof;
(iii) any cash or other discount on the price allowed in respect of any sale and any amount refunded in respect of articles returned by customers
shall not be included in the turnover; and
(iv) where for accommodating a particular customer, a dealer obtains goods from another dealer and immediately disposes of the same to the said
customer, the sale in respect of such goods shall be included in the turnover of the latter dealer but not in that of the former.
Section 3(1) is the charging section and that section, so far as is relevant and as was in force on the relevant date, was as follows:
Every dealer (other than a casual trader or agent of a non-resident dealer) whose total turnover for a year is not less than fifteen thousand rupees
and every casual trader or agent of a non-resident dealer, whatever be his turnover for the year, shall pay a tax for each year at the rate of three
per cent of his taxable turnover.
The provisos to this Sub-section are not relevant for the purpose of these cases. Section 7(1) of the Act is :
Notwithstanding anything contained in Sub-section (1) of Section 3, every dealer whose total turnover is not less than fifteen thousand rupees but
not more than seventy-five thousand rupees may at his option instead of paying the tax in accordance with the provisions of that Sub-section, pay
tax at the following rates, namely....
Thereafter occur different slabs ranging between fifteen thousand rupees and seventy-five thousand rupees and for each slab the tax is fixed as a
lump sum. For instance, the first slab is, where the total turnover is not less than fifteen thousand rupees, but is less than twenty thousand rupees
and the tax payable by the dealer is Rs. 180 per annum. The second slab is where the total turnover is not less than twenty thousand rupees, but is
less than twenty-five thousand rupees and the tax payable by the dealer is rupees two hundred and sixty per annum. The last slab is, where the
total turnover is not less than seventy thousand rupees, but is not more than seventy-five thousand rupees and the tax payable by the dealer is
rupees one thousand one hundred and ninety per annum. Thus, the provisions of Section 7(1) will clearly indicate two things: One is, it does not
refer to taxable turnover, but takes note of only total turnover. Secondly, the tax is not fixed at a particular percentage on the turnover, but at a
lump sum referable to a particular slab. Sub-section (2) of Section 7 is :
Any dealer who estimates his total turnover for a year to be not more than seventy-five thousand rupees may apply to the assessing authority to be
permitted to pay the tax under this section and on being so permitted he shall pay the tax due in advance during the year in monthly or prescribed
instalments and for that purpose shall submit such returns in such manner as may be prescribed.
According to Sub-section (3) of Section 7, the tax paid under Sub-section (2) shall be subject to such adjustment as may be prescribed on the
completion of final assessment in the manner prescribed. The only other statutory provision, which has to be noticed is Section 16 of the Act.
Clause (a) of Sub-section (1) of Section 16 of the Act says:
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 expiry of the year to which the tax relates, 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.
Clause (b) of Sub-section (1) of Section 16 relates to a case where the turnover of a dealer has been originally assessed at a rate lower than the
rate at which it should be assessed and it is not relevant for the purpose of this case. Sub-section (2) of Section 16 of the Act enables the assessing
authority, while he reassesses under Sub-section (1) of that section, to levy a penalty. It is under the provision of Section 16 that action was taken
in the case of the respective petitioners.
The nature of the action taken can now be indicated in the form of a tabular statement, as has been done by the Tribunal itself in its order and it
is as follows :
Thus, it will be seen that what has been done in this case is to find out the turnover suppressed by the assessees and add that turnover to the
original turnover fixed by the assessing authority and determine the tax payable on the turnover so determined and demand the tax after giving
credit for the tax already paid u/s 7 of the Act.
The learned counsel for the petitioners questions this action of reopening and reassessment made by the assessing authority in exercise of the
powers u/s 16 of the Act. According to the learned counsel, Section 16 does not authorise any such action in relation to cases covered by Section
7 of the Act. We are unable to accept this argument. The sole basis of the argument of the learned counsel is that Section 16 of the Act talks of
turnover escaping assessment and, therefore, the word ""turnover"" occurring in Section 16 must necessarily refer to only ""taxable turnover"" and that
as far as Section 7 is concerned, the suppressed or escaped turnover cannot be said to be taxable turnover at all. As we have pointed out already,
we are unable to accept this argument. We have extracted the definitions of ""taxable turnover"", ""total turnover"" and ""turnover"". Section 7 talks of
total turnover"" and Section 16 talks of ""turnover"" in general without specifying whether it is ""taxable turnover"" or ""total turnover"". As a matter of
fact, that Section 16 will take in turnover in general will be clear from the fact that Section 3 which is the charging section imposes the liability to tax
only when the turnover exceeds a particular limit. Even Section 3 uses only the word ""turnover"" and not ""taxable turnover"". In a particular case, the
assessee might not even be assessed on the ground that his total turnover did not exceed rupees fifteen thousand as provided for in Section 3(1).
Subsequently it may be found that he suppressed his turnover and, therefore, he would not be entitled to the exemption given u/s 3(1). In that
context the turnover, which would be added to the turnover of the assessee, would be only the total turnover and not taxable turnover for the
purpose of finding out whether the case fell within the limit prescribed in Section 3(1) or not. There is also another ground for holding that the
expression ""turnover"" in Section 16 is not confined only to ""taxable turnover"". We have extracted Section 7 already and it uses the expression
total turnover"" only. Out of the total turnover contemplated by Section 7 no part of it may be taxable turnover or the entirety may constitute
taxable turnover. The section does not take note of the portion of the total turnover which constitutes taxable turnover, when it prescribes the lump
sum rate of tax payable in respect of different slabs. As we have pointed out already, in the case of an assessee paying tax u/s 7, he might not have
any taxable turnover at all. From this point of view, the concept of taxable turnover and the payment of tax at a particular percentage of the said
taxable turnover is foreign to the scope of Section 7. All that Section 7 says is, once an assessee, having regard to the quantum of the total
turnover, exercises the option to be assessed u/s 7, Section 3(1) will not apply. But once the limit of turnover provided for in Section 7 is
overstepped, automatically the case will go out of Section 7 with the result Section 3(1) will become immediately applicable and that will be the
consequence of the non obstante clause occurring in Section 7. In the four cases before us, as we have pointed out already, the turnover originally
assessed plus the suppressed turnover exceeded the maximum limit prescribed in Section 7. Consequently, the moment the turnover was
redetermined and the redetermined turnover exceeded the maximum limit of the total turnover fixed in Section 7, the case would go out of Section
7 and would attract Section 3(1). Once Section 3(1) is attracted, there is no dispute that Section 16 will be automatically attracted. Therefore, we
have no hesitation whatever in holding that Section 16 is clearly applicable to the facts of the present cases and, accordingly, the reopening and
reassessments were done in accordance with law.
We have already indicated the fact that out of the total tax determined on the turnover redetermined pursuant to the action taken u/s 16, credit
has been given for the lump sum tax already paid in terms of Section 7. Consequently, the petitioners cannot have any grievance on this account
also. It may also be mentioned that though the said cases are not before the court, the Tribunal dealt with by the same order two other cases in
which even the redetermined turnover fell within the maximum limit prescribed by Section 7. Even in those cases, the assessing authority did not
have recourse to Section 3(1), but only applied the appropriate slab rate given in Section 7 itself.
The last argument attempted by the learned counsel for the petitioners was that Section 16 will not apply to the cases covered by Section 7 is
apparent from the fact that the legislature itself introduced a new section in the form of Section 16-A by Tamil Nadu Act No. 31 of 1972. The said
Section is as follows :
16-A. Assessment of turnover not declared u/s 7(1) Where for any reason, any part of the turnover of business of a dealer who has been
permitted to pay the tax u/s 7 has escaped assessment from the tax, the assessing authority may, at any time within a period of five years from the
expiry of the year to which the tax relates, determine to the best of its judgment the turnover which has escaped assessment and reassess the tax
payable on the total turnover (including the turnover already assessed u/s 7)-
(i) in case where such total turnover is not more than one lakh of rupees in accordance with the provisions contained in Sub-section (1) of Section
7 ; and
(ii) in other cases where the total turnover is more than one lakh of rupees in accordance with the other provisions contained in this Act.
(2) Before making the reassessment under Sub-section (1), the assessing authority may make such enquiry as it may consider necessary and give
the dealer concerned a reasonable opportunity to show cause against such reassessment.
(3) The amount of tax already paid by the dealer concerned in pursuance of the permission to compound u/s 7 shall be adjusted towards the
amount of tax due as the result of reassessment under Sub-section (1).
(4) The provisions of Sub-sections (2) to (4) of Section 16 shall, as far as may be, apply to reassessment under Sub-section (1) as they apply to
the reassessment of escaped turnover under Sub-section (1) of Section 16.
One word of explanation is necessary in respect of the turnover of one lakh of rupees mentioned in this section. Section 7 originally had the
maximum turnover fixed only as rupees seventy-five thousand. Subsequently that was amended by Tamil Nadu Act No. 25 of 1971 raising that
maximum to rupees one lakh. Since Tamil Nadu Act No. 31 of 1972 came into force subsequent to Tamil Nadu Act No. 25 of 1971, it takes note
of that increase in the maximum. Thus, a perusal of the different provisions of Section 16-A will clearly show that it constitutes the legislative
recognition of what the assessing authorities and the Tribunal have done in the present cases. We have already indicated that the action of the
assessing authority and the Tribunal in the present cases clearly fell within the scope of Section 16 itself. In that context, the enactment of Section
16-A may be said to be only declaratory of the law as flowing from Section 16 with a view to place the position beyond all doubt. This Section
(Section 16-A) constitutes merely an express provision of what is already impliedly contained in Section 16 read with Section 7 and Section 3 of
the Act.
Under these circumstances, we are unable to hold that the enactment of Section 16-A in any way gives an indication that Section 16 did not
apply and was not intended to apply to cases covered by Section 7 of the Act.
Hence, these tax revision cases fail and they are dismissed with costs. Counsel''s fee Rs. 150 in each of the cases.