WP/4627/2000 of T.N. CHLORATES LTD. Vs 1. T.N. TAXATION SPL. TRIBUNAL on 10 December 2002

:ORDER

K.RAVIRAJA PANDIAN,J.

The writ petition is filed against the order of the Special Tribunaldated 15.12.1999 made in Tax Case (Revision) No.1585 of 1997.2. The petitioner is a registered dealer. The petitioner claimedexemption from tax on the purchase of Potassium Chloride from Mani Agency fora sum of Rs.7,65,000/- during the assessment year 1986-87. Though the saidMani Agency has taken registration certificate on 19.12.1985, they hadreported their closure of business from 31.5.1986. However, the purchasebills produced by the petitioner were after the period of closure i.e., from1.8.1986 said to have been issued by Mani Agency. Therefore, the purchase bills alleged to have been effected by the petitioner from 1.8.1986 from thesaid Mani Agency were verified by the Department. On enquiry, it was foundthat the said Mani Agency never carried any business at the address given as aplace of business in the registration certificate and it also found onenquiries at the residential address that the property belonged to AntonyarKoil. For the past thirty years, no person by name Jayakumar was residingthere. Further, the summon sent by the Department to the Office address byregistered post with acknowledgement on 6.11.1987 has also been returned withan endorsement "no such addressee". The enquiry also revealed that no suchperson by name Jayakumar has ever carried on any business in that place. Onverification of the bank payment, it was found that one K.Raja received theamount in a sum of RS.85,000/- in person and the cheque issued was encashe dand handed over to said Raja. It is also further found that there wasvariation in the signatures in the bills which were issued to the petitionerfrom Mani Agency and the one issued to one Pandian Chemicals Limited. It wasalso found on fact that the said Mani Agency never produced any accounts orfiled any returns for the assessment years 1985-86 and 86-87. On that basis,the petitioner was levied purchase tax on the said turnover of Rs.7,65,000/-and also penalty was levied at 150 percent. On appeal, the levy of tax hasbeen confirmed. However, the first appellate authority has reduced thepenalty to fifty percent, which order has been sustained by the AppellateTribunal on further appeal. The appellate order has been confirmed by theSpecial Tribunal in the revision filed by the petitioner.

3. Mr.Sundareswaran, learned counsel appearing for the petitioner hassubmitted that the petitioner has produced the bill for the purchase and if atall the first sale has not suffered tax, it is for the revenue to collect thesame from the person, who effected the sale in favour of the petitioner. Hefurther contended that the entire transaction has been reflected in the booksof accounts and in the returns. Merely because the claim of exemption wasrejected and the purchase tax was imposed, the return filed by the petitionercannot be incorrect and incomplete and hence the penalty levied is against theprovisions of the Act.

4. On the other hand, the learned Government Pleader appearing for therespondents submitted that it is proved by the Department beyond any doubtthat the purchase made by the petitioner in respect of the turnover inquestion were all made from undisclosed sources. In order to cover up thatundisclosed sources, bill were produced from the persons who were not carriedon any business. The mere showing of transaction in the account and claimingexemption in the return would not absolve the petitioner from their deliberatenon-disclosure of the assessable turnover by suppressing the real source ofpurchase and by producing bogus bills. The attitude of the petitioner isnothing but wilful and intentional attempt to evade payment of tax legally dueto the Government and as such, the penalty imposed under Section 12(5) isquite in accordance with the provisions of the Act.

5. We heard the arguments of the learned counsel on either side andperused the materials on record.

6. Mr.Sundareswaran, learned counsel appearing for the petitioner concentrated much of his argument on the correctness of penalty since all the lower authorities have come to the conclusion that the selling dealer ie.,Mani Agency was a non-existing dealer and they never carried on any businessin chemicals viz., Potassium Chloride. In order to interfere with suchfinding of fact by the authorities, no material except the argument advancedby the learned counsel for the petitioner that all the purchases were coveredby the bills issued by Mani Agency has been produced. In the absence of anyattempt to prove that Many Agency was virtually carrying on business inPotassium Chloride and in the face of the factual finding recorded by theauthorities below that one Jayakumar has obtained a registration certificatein the name of Mani Agency in fertilizers and also reported the closure ofbusiness from 31.5.1986. The bills produced by the petitioner were all issuedsubsequent to that date. The dealer's place of business was inspected and onverification, it was found that no such agency was carried on in that place.The residential address given also is found to be bogus on the ground that theresidential premises were owned by one Antonyar Koil, Madurai and it has beenin occupation and possession of the person residing there for more than thirtyyears and it also further revealed on enquiry that no person in the name ofJayakumar was ever residing there and further the fact that the summons issuedby the Department to the address given in the Registration Certificate wasalso returned as no such person was present and the sale price issued byCheque was also encashed by one Raja of Raja Agencies. The mere argument thatthe purchases are covered by bills issued by Mani Agency cannot by any stretchof imagination be accepted. There is no error of law committed by theauthorities in coming to the conclusion that the Many Agency is non-existingand bogus dealer and the petitioner taking advantage of the bills said to havebeen issued by Many Agency has claimed exemption. Hence, the levy of purchasetax cannot at all be faulted.

7. Now, coming to the question of imposition of penalty under section

7. Now, coming to the question of imposition of penalty under section 12(3), nothing was agitated before the Special Tribunal in this aspect of thematter. The one and only point urged before the Special Tribunal, as seenfrom the order, was that the petitioner purchased goods from registereddealers and whose registration has not been cancelled and in suchcircumstances, there is absolutely no case to invoke Section 7-A of the Act.That has been repelled by the Special Tribunal. While repelling so, theSpecial Tribunal concluded that in terms of the ratio of the decision of theMadras High Court in the case of STATE OF TAMIL NADU VS. MAHALAKSHMI TEXTILEMILLS LTD. reported in (1996) 100 STC 269, the levy of penalty under Section12(5)(iii) of the Act is in order.

8. Section 12(5)(iii) provides that the assessing authority may imposepenalty in cases where the return submitted is found to be incorrect andincomplete between 50 to 150 percent on the difference in the tax payable onthe turnover disclosed in the returns and determined by the assessingauthority. So far as the present case is concerned, the turnover of thepurchase from Mani Agency has been shown in the return and claimed exemptionon the basis that the turnover was tax afforded turnover at the hands of theselling dealer. That has been rejected and tax has been determined by theassessing authority on the turnover. When no such ground has been raised orargument has been advanced before the Special Tribunal, we cannot allow thepetitioner to raise such an argument here in the writ petition.

9. However, the judgment in which heavy reliance has been made by thepetitioner in the case of STATE OF TAMIL NADU VS. INDIAN SILK TRADERSreported in (1994) 94 STC 157, in our view, would not advance the case of thepetitioner in the facts and circumstances of the case. In that case, it wasobserved by this Court that a "false" return is different from an "incorrectand incomplete" return. The words "false return" connotes certain amount ofdeliberateness or willfulness, or an element of suppression on the part of theassessee. On the other hand the words "incorrect and incomplete" do not implysuch deliberateness, suppression or willfulness in making a return. While theelement of deliberateness, willfulness or blameworthy conduct on the part ofthe assessee may not be necessary for invoking section 12(5) of the Act, thebona fides of the assessee have to be gone into before imposing penalty. Sofar as the present case is concerned, the assessing Officer has given a verycategorical finding that there has been wilful and intentional attempt toevade payment of tax legally, wilful non-disclosure of assessable turnover bysuppressing the real source of purchase and by production of bogus purchasebills in order to evade tax. On that ground, the return was also rejected asincorrect and incomplete. Hence, we are of the view that the imposition ofpenalty is in accordance with Section 12(5)(iii) and it requires nointerference from this Court.

10. The other decision in the case of STATE OF TAMIL NADU VS. MAHALAKSHMITEXTILE MILLS LTD. reported in (1996) 100 STC 269 has been considered in atotally different set of facts, in the sense, that the original return filedwas rectified by the assessee by filing a revised return before the completionof the assessment and paid the tax due thereon. In those circumstances, itwas held that since the tax due from the assessee has been paid prior to theassessment by filing a revised assessment, no penalty was exigible in thefacts of that case.

11. Mr.Sundareswaran also relied on the decision of this Court in the case ofE.I.D.PARRY (I) LTD VS. ASST. COMMISSIONER (C.T.) (S.C.) reported in (2000)117 STC 457 so as to contend that the penalty is not warranted in this case.Here again, we are not able to accept the submission of the learned counsel onthe simple fact that was a case where on the facts of the case it was foundthat the failure on the part of the assessee to include the freight andtransport charges in the taxable turnover was bona fide because of the variousjudgments rendered by this Court as to the includability of the freight andtransport charges in the sale price. That was not the case in the facts ofthe present case.

12. The learned Government Pleader on the other hand relied on the decisionof this Court in the case of CHENNAI TEXTILE CHEMICALS PRIVATE LTD. VS.STATE OF TAMIL NADU AND ANOTHER reported in (2002) 125 STC 107 to contend thatthe penalty is automatic. That was a case in which the constitutionalvalidity of Section 12(3) as amended by ActNo.2 5 of 1993 was considered andin that case, it was held that the penalty imposed by the Sales Tax Authorityis only a civil liability though it is penal in character. The element ofmens rea is not always inter related or an essential condition precedent tothe levy of civil liability in a taxation statute for violating a civilobligation and it can be dispensed with or excluded in the matter of levy of civil penalty in a taxation statute. But in the facts of the present case, itis categorically established by the authorities, the bogus purchase bills wereproduced in order to claim exemption from payment of tax legally due to theGovernment and the said action of production of bogus bills would tantamountto wilful non-disclosure of assessable turnover with a malafide intention toclaim the benefit of exemption.

13. The learned counsel appearing for the petitioner submitted an argument that penalty cannot be imposed on surcharge and additional tax on theground that there is no plenary or substantive provision in the surcharge Actand Additional Sales-tax Act at the relevant point of time. Here again, weare not able to countenance the argument that no such point was raised beforeany of the authorities including the Tribunal. This is the first time thatpoint has been raised before this Court at the time of argument based oncertain subsequent decisions. If the law position on the levy of penalty onsurcharge and additional sales tax is in favour of the petitioner, it is opento them to claim the benefit of the decision in their favour.For the fore-going reasons, we are of the view that there is no error of lawapparent on the face of the order of the Tribunal, which warrants anyinterference by this Court by invoking the provision of Article 226 of theConstitution of India. Hence, the writ petition is dismissed. However, thereis no order as to costs.

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Usk

To:

1. The RegistrarTamil Nadu Taxation SpecialTribunal, Singaravelar MaligaiSecond Floor, Chennai

2. The Deputy Commercial Tax OfficerMadurai Rural North Circle,State of Tamil Nadu,Madurai

3. Commissioner (SMR),State of Tamil Nadu,Ezilagam, Chepauk,Chennai-5.