WP/1364/2001 of M/S.TN CHLORATES LTD Vs REGISTRAR, TN TAXATION SPL on 10 December 2002

:ORDER

K.RAVIRAJA PANDIAN,J.

In this writ petition, the order dated 4.12.2000 made in Tax case (Appeal) No.2455 of 1997 by the Tamil Nadu Taxation Special Tribunal ischallenged.

2. The petitioner is a registered dealer under the Tamil Nadu GeneralSales Tax Act, (hereinafter referred to as "the Act".). For the assessmentyear 1985-86, it reported a total and taxable turnover of Rs.2,13,38,399/-.It is the case of the petitioner that the petitioner purchased PotassiumChloride for an amount of Rs.69,991-25ps, Rs.1,40 ,325/- and Rs.6,34,900/-from three registered dealers and used it in the manufacture of Potassium Chlorate. Since the purchases were made from registered dealers under theAct, the petitioner was not liable to pay tax. Originally, the AssessingOfficer granted exemption as claimed on such purchases. However, pursuant tothe inspection dated 10.9.1987, the original order was revised on the abovesaid turnover of purchases of Chloride made from (i) Industrial Chemicals (ii)Selva agency and (iii) Mani Agency on the ground that the three sellingdealers have not paid tax. The petitioner carried the revised order on appealbefore the first appellate authority and obtained an order of setting asidethe assessment on those transactions. However, the Joint Commissioner byinvoking his suo motu revisional power and after hearing the petitioner'sobjections, modified the order of revisional assessment by fastening theliability on the petitioner in respect of the purchase turnover from the threeselling dealers at 50:50 basis. As against the order of the JointCommissioner, the petitioner filed an appeal before the Special Tribunal under Section 38 of the Act. The Special Tribunal by its order, which is impugnedin the writ petition, confirmed the order. The correctness of the said orderis now put in issue in the present writ petition.

3. The learned counsel Mr.Sundareswaran appearing for the petitioner has contended that the purchases made by the petitioner were covered undervalid bills issued by the selling dealers, who were registered under the Actand hence the question of shifting levy of tax under Section 7-A of the Act isunjustified. He further contended that by producing the purchase bills, thepetitioner had proved that there were earlier sales by the selling dealers infavour of the petitioner. Hence, it is for the revenue to collect the taxfrom the dealers, who issued the bills. It is also submitted by the learnedcounsel that the entire amount has been paid by way of cheque and in suchcircumstances, it is for the Department to collect the tax from the sellingdealers and mulcting the liability on the petitioner is not correct.

4. On the other hand, the learned Government Pleader submitted thatthe very point has been considered by the authorities as well as the SpecialTribunal in the revision and appeal under the provisions of the Tamil NaduGeneral Sales Tax Act. The fact finding authorities ultimately found that theselling dealers were not in existence and the petitioner has produced onlybills from non-existing dealers. It was also found on fact that the sellingdealers neither carried on business nor handled the goods and the addressesgiven were bogus. When the petitioner claims that it is entitled to thebenefit of the second sale and if the initial burden is discharged by theDepartment, it is for the petitioner, who claims the benefit to prove that thedealers are genuine dealers and the purchase turnover for which exemption isclaimed have already suffered tax. In the absence of any such materials, itis futile to contend that the order impugned is not correct.

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

6. Mr.Sundareswaran, learned counsel appearing for the petitioner hasvehemently contended that when the purchasing dealers are registered dealers,and the petitioner has produced the relevant purchase bills before theauthorities, it is for the revenue to collect the amount from the selling dealers and it is not for the petitioner to prove the selling dealers weregenuine dealers or the dealers were in existence, particularly when theselling dealers issued with registration certificates from the Department. Heconcentrated much only on this issue and for that matter, he relied on thejudgment of this Court in LAKSHMI STEEL TRADERS VS. BOARD OF REVENUE(COMMERCIAL TAXES) reported in (1991) 82 STC 409, wherein this Court has heldthus:

"If a dealer establishes that a particular turnover represents second sales ofgoods taxable at the point of first sale and the first sale was by a dealerliable to pay tax, then the revenue cannot deny the exemption on the secondsales merely on the ground that the registration certificate of the firstdealer was cancelled during the assessment year in question or immediatelybefore the purchase by the dealer, namely the second seller. However, thedealer (second seller) must establish that the first sale was a taxable sale;whether the tax had been paid by the first seller or not is not the concern ofthe dealer (second seller). The Revenue cannot take advantage of the fact ofcancellation of the registration certificate of the first seller either on hisapplication or otherwise, without further investing as to whether the billsissued by such seller were real or bogus bills. In the event of the Revenueestablishing that the bills produced by the dealer (second seller) are bogusand were not really issued by the first seller, then the dealer cannot claimexemption on the alleged second sales."

7. We fail to conceive as to how this judgment is applicable to the facts ofthe present case. In fact, in our opinion, the said judgment instead ofadvancing the case of the petitioner, it demolishes the petitioner's case. Asruled by the Judgment, in the present case, the Assessing Officer, the JointCommissioner as well as the Special Tribunal recorded a very clear findingthat the three selling dealers were non-existing and never carried on anybusiness. The addresses, both business address and residential address givenin the Registration Certificates are bogus. The summons sent to the addresseswere returned with postal endorsement "No such addressee". On physicalverification also, it was found that the three dealers never carried on anybusiness. The cheques issued by the petitioner were realized by one Raja, whois nothing to do with the three dealers. By recording the above findings, therevenue established that the bills produced by the petitioner are bogus. Thedecision of this Court in the case of GOVINDAN & CO. VS. STATE OF TAMIL NADU(1975) 35 STC 50, which has been subsequently confirmed by the Supreme Courtin STATE OF TAMIL NADU VS. RAMAN & CO. reported in (1994) 93 STC 1994 isalso to the same effect. In the absence of any materials placed by thepetitioner to prove the contrary either before the authorities or even beforethis Court, there is no scope for interference by this Court.

8. The learned counsel Mr.Sundareswaran has submitted that in the order ofthe Special Tribunal, there is a finding to the effect that the Raja Agency isalso another bogus dealer and the said finding is unwarranted in the facts andcircumstances of the case as it would adversely affect the petitioner in othercases pending before the authorities. The facts in issue in the present caserelated only to the three agencies viz., Industrial Chemicals, Selva Agencyand Many Agency from whom the said purchases were said to have been made bythe petitioner. In the circumstances of the case, we are of the view that thesaid finding is unnecessary. Hence, the finding is vacated.

For the reasons stated above, we are of the view that there isabsolutely no error apparent on the face of the record in the order of theSpecial Tribunal so as to interfere with the same in the present writpetition. Hence, the writ petition is dismissed. However, there is no orderas to costs.

Index :YesWebsite: Yes

To:

1. The RegistrarTamil Nadu Taxation SpecialTribunal, Singaravelar MaligaiSecond Floor, Chennai2.The Joint Commissioner (SMR),State of Tamil Nadu,Ezilagam, Chepauk,Chennai-5.