The State of Tamil Nadu vs Balanja Industries

Swamikkannu, J.—This is a revision case, filed by the State of Tamil Nadu represented by the Deputy Commissioner of Commercial Taxes,

Madras Division, against the judgment of the Sales Tax Appellate Tribunal (Main Bench), Madras, dated 10th July, 1978, passed in T.A. No.

1231 of 1977, confirming the order of the Appellate Assistant Commissioner (CT)-II, Madras, with respect to the suppression of the turnover, but

cancelling the penalty that had been imposed on the respondent herein by the Appellate Assistant Commissioner (CT)-II, Madras, who confirmed

the said penalty that was imposed by the assessing officer.

The case of the Revenue-petitioner is that the respondents herein, namely, M/s. Balanja Industries, Mangalore, imported ivory boards from

Japan, cleared the goods at Madras Port and sold them to M/s. Makanchand, dealers in papers and boards, at No. 100, Narayana Mudali Street,

Madras 1, in bill No. 1 dated 28th April, 1975 for Rs. 91,521. The respondents raised the invoice in bill No. Pro-01 dated 28th April, 1975 for

the sale value of 31 bales of ivory boards for Rs. 91,521.10, sales tax and surcharge of Rs. 7,687.77, thus making the total value at Rs.

99,208.77. Accordingly, the assessing officer brought the sales to tax and also levied penalty of Rs. 10,983 u/s 12(3) of the Act. The contention

that was raised by the respondents herein before the Tribunal was that during the relevant period M/s. Sha Makanchand Hira Chand acted only as

a financier; that these goods were kept as stock in their account books; and that the respondents herein have sold the goods to Sha Makanchand

Hira Chand as per the invoice No. 11/76-77 dated 16th March, 1977.

The Tribunal held that even on merits, the instant case is not a good case for the respondents herein. The respondents herein mainly confined the

arguments against the levy of penalty. According to the respondents herein, they bona fide believed that the sales were completed only as per the

later invoice No. 11/76-77 dated 16th March, 1977 and as such there was no intention to conceal the sales. The Tribunal relied on the decision in

Thvl. Kathiresan Yarn Stores, Salem Vs. The State of Tamil Nadu, , and held that the circumstances of the case disclose that the respondents

herein did not deliberately suppress the turnover, and that they could have reasonably believed that the sales were completed only on the later

date, i.e., 16th March, 1977. Therefore, the penalty, according to the Tribunal, is not called for, and in the result, the Tribunal confirmed the

assessment; but cancelled the penalty imposed on the respondents herein, against which order, the Revenue has come forward with this revision

before this Court.

In the instant case before us, notice had been sent to the respondents herein and also served on them; yet, the respondents are not represented

by anyone. So, we had heard Mr. K. S. Bakthavatsalam, learned Additional Government Pleader for Revenue, and deliver the order in this

revision. The learned Government Pleader contends that as per section 12(3) of the Tamil Nadu General Sales Tax Act, 1959, the present

assessment in question was made, namely, 1975-76.

Section 12(3) of the Tamil Nadu General Sales Tax Act, 1959 (Tamil Nadu Act No. 1 of 1959) reads as follows :

Procedure to be followed by the assessing authority. - (1) The assessment of a dealer shall be on the basis of the prescribed return relating to

his turnover submitted in the prescribed manner within the prescribed period.

(2) ..............

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

section (2), or by a separate order, direct the dealer to pay a penalty not exceeding one and a half times the amount of tax due on the turnover that

was not wilfully disclosed by the dealer in his return or in the case of wilful failure to submit a return, a penalty not exceeding one and a half times

the tax assessed, as the case may be :

Provided that no penalty under this sub-section shall be imposed unless the dealer affected has had a reasonable opportunity of showing cause

against such imposition :

Provided further that no such penalty shall be imposed after a period of five years from the expiry of the year to which the assessment under sub-

section (2) relates.

He has also pointed out that the Tribunal has wrongly applied the ratio in Thvl. Kathiresan Yarn Stores, Salem Vs. The State of Tamil Nadu, ,

to the facts of the instant case before us which are different from the facts of that case. He has also submitted that this is not the best judgment

assessment; on the other hand, it is a case where the respondents herein have not proved that the goods were entrusted to the Madras dealer for

safe custody for the finance; but they have not denied that the goods were delivered to M/s. Makanchand Hira Chand, No. 100, Narayana Mudali

Street, Madras 1, as early as in April, 1975, and the said transaction had taken place more than one and half years prior to the date of assessment

order and obtained money on the goods. The assessing authority also found, as a matter of fact, that the respondents have not taken back or cared

for the consignment delivered to the Madras dealer, and this aspect of the case falsified the version of the respondents, that they handed over the

goods for custody only for the finance and the same clearly proves that the goods were sold against the finance received. This aspect of the case

has been confirmed by the Appellate Assistant Commissioner. Further the Madras dealers'' account showed transactions as outright purchases and

this also afforded as a ground to reject the contention of the dealers. Further the dealers'' letter dated 15th April, 1975 addressed to the Madras

dealer reads as follows :

Balanja Industries Telephone :

8/209, Kambla Cross Road,

Bangalore, 575 003 Office : 6054

Factory : 8215

Telegram : Balanja

Factory at Kulur (S.K.)

Dated 15-4-75

Sha Makanchand Hira Chand,

100, Narayana Mudali Street,

Madras 1.

Dear Sir,

With reference to the telephone talk we had with you regarding delivery of about 31 bales of ivory boards we request you to kindly contact Mr.

Pandian, our representative and kindly take delivery of the material against payment.

Thanking you,

Yours faithfully,

For Balanja Industries,

Sd ........

These aspects are not now in dispute. In this case, we are concerned with whether the Tribunal is justified in setting aside the penalty that has

been imposed by the assessing authority which in turn was confirmed by the Appellate Assistant Commissioner. While dealing with this aspect, we

have no necessarily incorporate the observations of this Court in Perianna Pillai v. Commissioner, Board of Revenue (C.T.) [1980] 46 STC 94,

regarding the scope and ambit of section 12(3) of the Tamil Nadu General Sales Tax Act, which read as follows :

(Page 98) : Consequently, whenever it is found that a particular turnover has been suppressed or concealed, that can only mean that there had

been a wilful non-disclosure of correct turnover. In this particular case, as we have pointed out already, the Joint Commercial Tax Officer, while

declining to comply with the request of the appellant to drop the proceedings for the levy of penalty, has said that the anamath account and the slips

were unearthed by him. That itself will clearly show what exactly the conclusion he came to with regard to the character of non-disclosure.

We find that the ratio in Thvl. Kathiresan Yarn Stores, Salem Vs. The State of Tamil Nadu, is not applicable to the facts of the instant case

before us, because the assessment in the instant case is not on the basis of ""best judgment assessment"". And what is more, the entire facts of the

case, when scrutinised clearly, established the character of wilful suppression of the material facts by the respondent which justifies the imposition

of penalty as per section 12(3) of the Tamil Nadu General Sales Tax Act, 1959, which we have extracted supra. On a careful perusal of the entire

facts, we are inclined to allow this tax revision case.

Accordingly, we restore the imposition of penalty as levied by the assessing authority, which in turn was confirmed by the Appellate Assistant

Commissioner. We set aside this part of the judgment of the Tribunal, namely, the cancellation of penalty and restore the penalty as imposed on the

respondents herein by the assessing authorities.

Though no one appeared for the respondents nor the respondents appeared in person in the instant case before, yet we feel that we have to

necessarily award costs. Therefore, the tax revision case is allowed with costs. Counsel''s fee Rs. 500.

Petition allowed.