Tvl. Indira Industries vs The State of Tamil Nadu

Chitra Venkataraman, J.—The assessee has filed this Tax Case (Revision) as against the order passed by the Sales Tax Appellate Tribunal

(Main Bench) Chennai dated 05.07.2012 in STA No. 242 of 2008, relating to the assessment year 2005-2006, raising the following substantial

question of law:

Whether on the facts and in the circumstances of the case, the Honourable Tribunal was right in upholding the levy of penalty u/s 12(3)(b) of the

TNGST Act, 1959 without considering the proviso to Section 12(3) of the TNGST Act is correct in law?

The only question raised by the assessee is as to whether the levy of penalty u/s 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959 was

justifiable particularly when there was no suppression pointed out by the Revenue that the claim of the assessee related only to concessional rate of

tax.

The assessee herein, is a manufacturer of Industrial Noise Control Machineries and Components. Based on the inspection conducted on

12.09.2002, the Assessing Officer found that the petitioner has effected first sales of machineries to BHEL, Hyderabad, and delivered the same to

Tamil Nadu Electricity Board, Courtallam within Tamil Nadu and the assessee claimed concessional rate of tax at 4% based on the Notification

No. II(i)/CT/19(b-10)/02 dated 27.03.2002. The claim was rejected on the ground that the assessee had not produced necessary Certificate from

the Tamil Nadu Electricity Board for claiming concessional rate of tax. The Sales Tax Appellate Tribunal further pointed out that there were

corrections made in the invoices and in the delivery challan and there was no evidence to prove movement of goods from within the State to other

State with reference to the claim of inter-state sale. Thus, based on the records, the Sales Tax Appellate Tribunal confirmed the assessment holding

that there was no recorded evidence to establish that the transfer of goods were from Ranipet to Hyderabad and Hyderabad to Courtallam. While

confirming the order of assessment, as regards levy of penalty, the Sales Tax Appellate Tribunal held that the provisions of Section 12(3)(b) of the

Tamil Nadu General Sales Tax Act, 1959 stood attracted since there was difference between the tax assessed and tax paid.

Learned Senior Counsel appearing for the assessee pointed out that when the turnover in question is very much available in the books of

accounts and that the assessment on the assessee was as per the details available in the books of accounts, the question of levy of penalty was

unsustainable. Thus when the assessment is based on the turnover disclosed in books of accounts, the Sales Tax Appellate Tribunal failed to take

note of the Explanation to Section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959 introduced in Act 22 of 2002 effective from

01.07.2002.

We have heard Mr. Thiyagarajan, learned Senior counsel for the petitioner and Mr. A.R. Jayaprathap, learned Government Advocate (Taxes)

for the respondent.

As rightly submitted by learned Senior Counsel for the assessee, the only issue before the Authorities was as to whether the turnover in question

attracted concessional rate of tax or to be assessed at 12%.

Based on the materials, the Sales Tax Appellate Tribunal confirmed the view of the Assessing Officer that the dealer sold the goods to BHEL,

Hyderabad to deliver the same to Courtallam as per the directions of the buyer. Thus, taking into account the documentary evidence filed and

available, the Sales Tax Appellate Tribunal confirmed the assessment. However, as regards the levy of penalty Explanation to Section 12(3)(b) of

the Tamil Nadu General Sales Tax Act, is relevant, which reads as under:

Section 12. Procedure to be followed by the Assessing Authority

(1)(a) ..........

(1)(b) ...........

(1)(c) ............

12(1-A) ...........

12(1-B) ...........

12(2) ................

Section 12(3) In addition to the tax assessed [under Section (1) or (2)], the Assessing Authority shall, in the same order of assessment passed

[under Sub-Section (1) or (2)] or by a separate order, direct the dealer to pay by way of penalty, a sum-

(a) ..........

(b) which shall be, in the case of submission of incorrect or incomplete return,-

(i) twenty-five per cent of the difference of the tax assessed and the tax paid as per return, if the tax paid as per the return fall short of tax assessed

on final assessment by not more than five per cent

(i-a) fifty percent of the difference of the tax assessed and the tax paid as per return, if the tax paid as per the return falls short of the tax assessed

on final assessment by more than five per cent but not more than fifteen per cent;

(ii) seventy five percent of the difference of the tax assessed and the tax paid as per return, if the tax paid as per the return falls short of the tax

assessed on final assessment by more than fifteen per cent but not more than twenty five per cent;

(iii) one hundred percent of the difference of the tax assessed and the tax paid as per return, if the tax paid as per the return falls short of the tax

assessed on final assessment by more than twenty five per cent but not more than fifty per cent;

(iv) one hundred and twenty five percent of the difference of the tax assessed and the tax paid as per the return, if the tax paid as per the return

falls short of the tax assessed on the final assessment by more than fifty per cent, but not more than seventy five per cent;

(v) one hundred and fifty percent of the difference of the tax assessed and the tax paid as per the return, if the tax paid as per the return falls short

of the tax assessed on the final assessment by more than seventy five per cent;

(c) ....

Provided that no penalty under this sub-section shall be imposed after the period of five years from the date of the order of the final assessment

under this section and unless the dealer affected has had a reasonable opportunity of showing cause against such imposition;

Provided further that no penalty under this sub-section or the interest under sub-section (3) of section 24 of the Act, shall be imposed on the oil

companies as explained in the Explanation II of the Eleventh Schedule if the difference of tax due as per accounts and the tax paid as per the

returns is less than five per cent and revised return is filed along with the difference of tax due within a period of three months from the due date for

filling the monthly return.

Explanation For the purposes of levy of penalty under clause (b) above, the tax assessed on the following kinds of turnover shall be deducted from

the tax assessed on final assessment:-

(i) Turnover representing additions to the turnover as per books made by the assessing authority without any reference to any specific concealment

of turnover from the accounts;

(ii) Any turnover estimated by the Assessing Authority with reference to any specific concealment of any turnover from the accounts;

(iii) Any turnover on which tax is paid at the concessional rate subject to the condition of furnishing any declaration but where such declaration

could not be furnished at the time of assessment.

Thus when the turnover assessed under the assessment order is drawn from the books of accounts itself, and there being no reference to any

specific concealment of the turnover in the accounts, the question of invoking Section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959

would not arise. The Explanation to Section 12(3)(b) of the Act specifies the turnover which merited to be excluded for the purpose of levy of

penalty, one such being the turnover representing addition related to book turnover itself. Thus, even while calculating the turnover for the purpose

of levy of penalty, the turnover, which are already available in the books of accounts are to be excluded and only those turnover which are

estimated having reference to a specific concealment alone, the purpose of addition, invite the penal provisions under the Tamil Nadu General

Sales Tax Act, 1959. In the decision reported in Appollo Saline Pharmaceuticals (P) Ltd. Vs. Commercial Tax Officer (FAC) and Others, this

Court pointed out that when the assessment is based on the accounts turnover, the question of levy of penalty does not arise. In the circumstances,

applying the said decision reported in Appollo Saline Pharmaceuticals (P) Ltd. Vs. Commercial Tax Officer (FAC) and Others, and the

explanation to Section 12(3)(b) of the Tamil Nadu General Sales Tax Act, the order of the Sales Tax Appellate Tribunal in levying penalty u/s

12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959 is set aside and the Tax Case (Revision) is allowed. No costs.