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Judgment
S. Manikumar, J.—The petitioner has sought for a writ of certiorari challenging the order of Commercial Tax Officer, Salem Rural Circle,
the second respondent herein dated 28.2.2007 and quash the same.
Brief facts leading to this writ petition are as follows:
The Managing Director of the Petitioner has sworn to an affidavit and submitted that the petitioner mill suffered huge loss and therefore a reference
was filed by the petitioner company to BIFR u/s 15(1) of Sick Industrial Companies Special Provisions Act on 29.7.2001 and after hearing the
objections by the creditors, the Bench of B.I.F.R. ultimately found that the company fulfilled all the criteria for declaring it as a sick company under
the BIFR Act and accordingly the company was declared as a sick company by an order dated 9.7.2002 and a petition was also registered on
8.8.2003. It is further submitted that the Bench also framed guidelines for preparation of rehabilitation scheme by BIFR and the matter is still
pending, however no scheme has so far been framed. The Petitioner has further submitted that since power supply was terminated due to non-
payment of dues to the Electricity Board, the petitioner-company purchased a HSD, SKO (Superior Kerosene Oil) and LDO from other states
and Form-C declaration were submitted as required under Central Sales Tax Act. The SKO was purchased for utilisation in the industry and there
was no complaint from the Central Sales Tax Authorities for the alleged misuse of SKO (Kerosene Oil) purchased from the outside of State. It is
contended that SKO was used only for the purpose of generation of electricity.
Due to loss suffered by the company in carrying on the business, the company was closed after 5.12.2003. It is further submitted that the
second respondent caused an inspection on 9.12.2003 and perused all the records and thereafter an assessment order dated 31.3.2006 was
passed for the year 2003-3004 for the tax payable on turn over of Rs. 32,38,493/- and the tax of Rs. 1,12,788/- was levied, which has already
been paid. Suddenly, on 4.9.2006 a notice was issued by the Commercial Tax Officer Salem Rural Circle, the second respondent herein, u/s 16 of
the Tamil Nadu General Sales Tax Act, proposing to revise the turn over from Rs. 32,38,493/- to Rs. 1,01,08,051/- and impose tax of Rs.
17,43,007/- and penalty of Rs. 24,45,329/-. The percentage of penalty sought to be levied was at 150 percent. On receipt of show cause notice,
the petitioner filed a petition challenging the jurisdiction of the second respondent to revise the assessment without any fresh material. According to
the petitioner, the revised notice was issued on the basis of the material, which was already available on record when the original assessment was
made and therefore the proposed revised assessment was impermissible. Without considering the objections in the proper perspective, the
Assessing Officer, the second respondent passed an order on 28.2.2007 reiterating the same details as contained in the show cause notice dated
4.9.2006, without any valid reasons.
It is the grievance of the petitioner that the decisions cited by the petitioner were not considered by the assessing officer. The petitioner has
further submitted that though an appeal remedy is provided under the statute, since the revised assessment order has been passed in violation of
principles of natural justice and without jurisdiction, considering the fact that the petitioner is a sick unit and huge tax amount alleged to be the due
and payable to the department and in view of the provisions of Section 22 of Sick Industrial companies Special Provisions Act, the petitioner is
constrained to prefer this writ petition. The petitioner has further submitted that even if an appeal is preferred, the Appellate Authority may not
entertain the appeal without payment of 25% of tax, and therefore the writ petition is maintainable in law and on facts.
The respondents in their counter affidavit submitted that the petitioners were manufacturers of cotton yarn and an assessee on the file of the
second respondent. In respect of assessment year 2003-2004, the petitioners were originally assessed on a total and taxable turnover of Rs.
32,38,493.00 by an order of assessment dated 31.3.2006 under the Tamilnadu General Sales Tax Act, 1959. Subsequent to the original
assessment, the respondent received incriminating records along with the statements recorded on 9.12.2003 during inspection by the Enforcement
Wing Officer on 9.12.2003. On the basis of the bills recovered and statements, it was prima facie found that the petitioner had effected purchase
of Superior Kerosene Oil to the tune of Rs. 29.16,246/-. In the absence of proportionate quantity of production of cotton yarn in correlation to the
quantity of raw materials purchased viz., Superior Kerosene Oil, it was proposed to treat the Superior Kerosene Oil to be sold locally without
using the same in manufacturing purpose. Further, from the check-post bills received from the check-post officer, it was found that several other
purchases of Superior Kerosene Oil had not been accounted for in the records maintained by the petitioner. Hence, a pre-revision notice dated
4.9.2006 was issued proposing to assess the escaped turnover. On receipt of the said notice, the petitioner filed their objections by their letter
dated NIL, which was received in the office on 29.12.2006. By letter dated 18.1.2007, the petitioners were called upon to appear on 31.1.2007
at 3 P.M. for a personal hearing along with relevant records. At the time of personal hearing, one Thiru Balaji, Accountant incharge of the
petitioner company furnished a statement to the effect that the petitioner had been running the mill only by using diesel generator and Superior
Kerosne Oil purchased locally and also from other States, for generating electricity in production of yarn and for company''s lighting purpose.
Taking into consideration of the available records, statements recorded during inspection and the statement furnished by the representative of the
company, a revised order of assessment was passed on 28.2.2007 confirming the proposal and consequently the total and taxable turnover was
redetermined at Rs. 1,01,08,051/-.
The averment that the order of original assessment dated 31.3.2006 was issued only after perusal of the records recovered during inspection is
denied. The respondents further submitted that at the time of passing of the original assessment, the records recovered by the Enforcing Wing
Officers on 9.12.2003 were not available for consideration and the same were received in the office only subsequent to the order of the original
assessment. Therefore, the contention of the petitioner that revision of assessment was made on the basis of the same materials and not on fresh
material is incorrect. On the other hand, the materials relied on for revising the assessment was only based on the fresh materials made available by
the Enforcement Wing and as such the impugned proceedings cannot be characterised as having been passed on mere change of opinion.
It is further submitted that the invoices recovered disclosed purchases made prior to 5.12.2003, the date when the company stopped
functioning. Records were recovered from the premises of the petitioner company and therefore the allegation that the respondent has acted on the
basis of materials not disclosed to the petitioner is improper. The respondents further submitted that the burden of proving that the particular
transaction is not liable to tax is on the dealer and in the absence of production of sufficient evidence by the dealer, the assessing authority is well
within his jurisdiction to arrive at the conclusion that sale had been effected in respect of un-utilised materials. As regards the status of the
petitioner, it is submitted that though the petitioner company had been declared as sick, pendency of the proceedings cannot have any bearing on
the right of the petitioner to pursue its statutory remedy by way of an appeal u/s 31 of the Tamilnadu General Sales Tax Act, 1959 and merely
because, the petitioner is unable to fulfil the pre-condition of payment of 25% of the disputed tax, recourse to writ remedy is not permissible. The
respondent has further submitted that as the revision of assessment does not suffer any lack of fundamental jurisdiction or procedural violation of
natural justice and as the matter involves question of fact, the subject matter can very well be agitated before the appellate authority. The
respondents have further contended that the petitioner had not sufficiently disclosed the status of the pending proceedings before the BIFR with
supporting evidence. For all these reasons, the respondents have prayed for dismissal of the writ petition.
Mr. N.R. Chandran, learned Counsel for the petitioner submitted that the original assessment was made on 31.3.2006 after inspection on
9.12.2003 and the total turn over was assessed at Rs. 32,38,493/- and the tax due on the turn over of Rs. 1,12,88.00 was also paid. He further
submitted that as the show cause notice dated 4.9.2006 did not contain any fresh material, the revision of assessment u/s 16 of the Act is not
permissible and as the revenue has failed to produce the materials on the basis of which, steps were taken to revise the assessment, the authority
has patently erred in exercising his revisional jurisdiction for arriving at its conclusion on the same set of facts that were available at the time of
original assessment.
Learned senior counsel for the petitioner further submitted that the allegation of the department that the oil purchased from other states has not
been utilised for the purpose of running the industry and its alleged diversion has not been established by the department. The conclusion of the
department that SKF oil purchased by the petitioner has not been properly accounted for is not based on any records and it is purely on
hypothetical consideration. He further submitted that the assessment of the 2nd respondent that inasmuch as the petitioner has failed to account for
the oil purchased on 19.11.2003 and therefore the dealer would have sold all the SKO oil without being utilised is fallacious.
Placing reliance on the decisions in Tata Davy Ltd. Vs. State of Orissa and Others, ; in Deputy Commercial Tax Officer and Others Vs.
Corromandal Pharmaceuticals and Others, ; in Sri Vadivambigai Textiles Mills Ltd., Sakkanthi, Sivaganga Pasumpon Muthuramalinga Thevar
District, Tamil Nadu-623 560 v. The State of Tamil Nadu rep. by the Secretary Revenue Department Fort St. George Chennai and Anr. reported
in 2002 (1) CTC 288 , learned Senior counsel submitted that as arrears of tax is not recoverable from a sick industry, recourse to alternative
remedy is not efficacious and as there is lack of jurisdiction and violation of natural justice attracting wednesbury principles, the writ petition is
maintainable in law. He also relied on a decision of the Division Bench of the Bombay High Court in Yeshwant Gajanan Joshi and Others Vs. The
Hindustan Petroleum Corpn. Ltd. and Another, for the proposition that alternative remedy provided in the Statute is not a bar for invoking writ
jurisdiction.
On the other hand Mr. Mahadevan, learned Additional Government Pleader reiterated the counter affidavit and submitted that the original
assessment dated 31.3.2006 was made without reference to the records recovered by the Enforcement Wing. Upon receipt of the materials and
statements recorded on 9.12.2003, a revised show cause notice was issued. He submitted that when all the records were unearthed from the
business premises of the petitioner, it is not open to the petitioner to contend that the materials were not disclosed. Learned Counsel for the
respondents further submitted that once incriminating materials are recovered during inspection, it is always open to the assessing officer to revise
the assessment u/s 16 of the TNGST Act and in the absence of correlation of quantity of production, with the purchase of SKO oil, the authority
can always come to the conclusion that the SKO oil purchased had been sold locally by the petitioner. Learned Counsel for the State further
submitted that whenever the assessing officer records his findings on the basis of fresh materials, the same cannot be termed as change of opinion.
On the issue of proceedings pending before the BIFR, learned Counsel submitted that the same is not a bar for invoking the appellate jurisdiction
and inasmuch as the authority is competent to take action under the Statute, there is lack of jurisdictional error and therefore, the petitioner cannot
bypass the alternative remedy provided under the Act. As the issue of jurisdiction can also decided by the appellate authority, recourse to writ
petition is not permissible and hence prayed for dismissal of the petition.
Heard, Mr. N.R. Chandran, learned Senior Counsel for Mr. P. Sathish for the petitioner and Mr. Mahadevan, the learned Additional
Government Pleader for State and perused the materials available on records.
The original assessment order is not enclosed in the typed set of papers. It is evident from the pre-revision notice dated 4.9.2006 that the place
of business of the dealer was inspected on 9.12.2003 and the following were noticed:
They purchases polyester waste from local market and manufacture them as polyester yarn in their own mill and made local sales only. No inter-
state or consignment sales. No. E.B. connection for the past 3 years. They having 3 generators for production of electricity power by using
S.K.O.. They purchases S.K.O. from inter-state Dealers by the issue of ''C'' Form. They have temporarily stopped production w.e.f. 5.12.2003.
The following defects were noticed during inspection:
1) Day Book, Ledger, ''C'' Forms, Form-F, etc. for the current year not produced for inspection.
2) Previous year account books were also not produced.
3) The following 2nd sales of Textile Machinery were made in July 2003. But no RST was paid along with the return.
In so far as interstate purchase, which were improperly accounted, the dealer had accepted the omission and promised to pay the tax within a
week before the inspection officer and summons were issued on four different dates. The dealer did not produce any regular accounts. The
assessing officer on comparison of the production details with that of SKO oil purchase, prima-facie found that the entire quantity of oil was not
utilised only for the purpose of generating electricity and running the mill. Apart from the above, the petitioner has not paid the resale tax on the
sales of textile machinery i.e. the tax amount of Rs. 4000/-. The check post bill No. 018820 dated 19.11.2003 as reflected in the impugned order
would go to show that the dealers have purchased SKO Oil, but omitted to account for and the same had been accepted at the time of inspection.
Therefore the contention of the petitioner that there was no material for revision of assessement is factually incorrect. The power to initiate revision
of assessment for determination of escaped turnover on the basis of fresh materials is conferred on the assessing authority under the Statute and
therefore the notice proposing the revise the assessment does not suffer from lack of jurisdiction. It is evident from the impugned order that the
petitioner has failed to pay resale tax on the sales of textile machinery and the purchase of SKO oil on 19.11.2003 was also not accounted for.
The assessing officer has also recorded the fact that the quantity of oil purchased does not correlate with the production of yarn.
Whether the transaction effected on 19.11.2003 and earlier, are liable to tax or not has to be proved by the dealer before the authority with
sufficient evidence and documents and this Court cannot convert itself as an appellate authority to re-appreciate the evidence. The finding that there
is an escaped turn over on the basis of fresh materials cannot be termed as totally perverse warranting interference.
The judgements relied on by the learned Senior Counsel in 1) Tata Davy Ltd. Vs. State of Orissa and Others, ; 2) Deputy Commercial Tax
Officer and Others Vs. Corromandal Pharmaceuticals and Others, ; and 3) in 2002 (1) CTC 288 , relate to recovery of tax and the same are not
applicable to the facts of the case where the authority had revised the assessment on the basis of fresh materials.
As rightly pointed out by the learned Government Pleader the stage of the pending proceedings before BIFR is not clear in the affidavit filed in
support of the writ petition. Even assuming that proceedings are pending before BIFR, pendency of the proceedings does not preclude the assesee
from filing an appeal u/s 31 of the Tamilnadu General Tax Act, 1959. It could be noticed that though the dealer claims to have been declared as
Sick by BIFR, on the basis of their application dated 29.7.2001, the dealer had paid tax of Rs. 1,22,788/- and this order dated 31.3.2006, the
taxable turnover was assessed at Rs. 32,38,493 for the assessment year 2003-2004, which clearly demonstrate that there was substantial
business. The decision relied on by the learned Senior counsel for the proposition that alternative remedy is not a bar and the principle as evolved
by the Division Bench of the Bombay High Court in Yeshwant Gajanan Joshi and Ors. v. The Hindustan Petroleum Corporation Ltd. and Anr.
reported in AIR 1988 Bom 88 is as follows:
Mr. Pai thereafter canvassed the view that alternative remedy is provided by the Act itself and this court, in exercise of its jurisdiction under
Article 226 of the Constitution of India, should not set aside the award of compensation which could have been got modified by the Corporation
by approaching the District Court. Though the existence of an alternative remedy is sometimes held as a bar to the invocation of the jurisdiction of
this Court under Article 226 of the Constitution, it is not an absolute bar. On the other hand, it is subject to certain well established exceptions. If,
for example, an order passed or an award made is a nullity, it can be challenged on that ground directly under Article 226 of the Constitution. As
early as in Baburam Prakash Chandra Maheshwari Vs. Antarim Zila Parishad now Zila Parishad, Muzaffarnagar, , the Supreme Court pointed out
as follows:
There are at least two well-recognised exceptions to the doctrine with regard to the exhaustion of statutory remedies. In the first place, it is well
settled that where proceedings are taken before a Tribunal under a provision of law, which is ultra vires it is open to a party aggrieved thereby to
move the High Court under Article 226 for issuing appropriate writ for quashing them on the ground that they are incompetent, without his being
obliged to wait until those proceedings run their full course.... In the second place, the doctrine has no application in a case where the impugned
order has been made in violation of the principles of natural justice.
An order which is nonest on account of the violation of the basic principle of natural justice, namely, audi alteram partem need not be even
appealed from. See Husein Miya Dosumiya Vs. Chandubhai Jethabhai and Another, . It can be challenged at any time even by way of defence as
has been done in the present case. Even if one regards the application to the District Court as an appeal, the existence of the provision of appeal
does not wash away the original sin of the infraction of the rule of natural justice. Even in the administrative field it has now been held that if natural
justice is violated at the first stage, the right of appeal is not so much a true right of appeal as a corrected remedy. In such a case right of appeal is
not a right of appeal at all. The Supreme Court in the case of Institute of Chartered Accountants of India Vs. L.K. Ratna and Others, , has referred
to certain passages in Wade''s Administrative Law and the observations of Megarry, J. In Leary v. National Union of Vehicle Builders (1971) 1
Ch 34, in this regard. The following from the observations of Megarry, J. May profitably extracted again here:
If the rules and the law combine to give the member the right to a fair trial and the right of appeal, why should he be told that he ought to be
satisfied with an unjust trial and a fair appeal.
In a recent Judgment the Supreme Courtin Star paper Mills Ltd. v. State of U.P. and Ors. reported in (2006) 148 STC 0144 considered the
issue relating to entertaining the writ petition where alternative remedy is available under the statute and held as follows:
The rule relating to the existence of an alternative remedy is a self imposed limitation adopted by High Courts. It is essentially a rule of policy,
convenience and discretion as is not a rule of law. Despite the existence of an alternative remedy it is within the jurisdiction of the High Court to
grant relief under Article 226 of the Constitution of India. At the same time, though the matter relating to an alternative remedy has nothing to do
with the jurisdiction of the court, normally the High Court should not interfere if there is an adequate efficacious alternative remedy. The court, in
extraordinary circumstances, may exercise the power if it comes to the conclusion that there has been a breach of principles of natural justice of the
procedure required for decision has not been adopted.
As regards the contention of violation of principle of natural justice, it is evident from the material on record that pursuant to the inspection
conducted on 9.12.2003, summons were issued on four occasions to the dealer to produce accounts, but they have failed to appear to show their
bonafide. The objection of the petitioner dated 29.12.2006 and the statement of the representative of the dealer dated 31.1.2007 were considered
by the second respondent, the assessing officer, before arriving at conclusion that there was an escaped turnover warranting imposition of
additional tax liability and penalty.
In the light of above said Supreme Court Judgment and considering the facts with the material on record, I do not find that the petitioner has
made out the case of total lack of jurisdiction or violation of the principles of natural justice. The revision assessment is based on certain facts which
were noticed during inspection, for which explanation was obtained and considered by the authority. It is settled law that High Court does not
entertain Writ petitions, where the petitioner has an alternative remedy under the Statute and the court does not act as court of appeal against order
of the competent authority to correct errors on facts, if any. The machinery created by the statue is for the purpose of adjudicating both facts as
well as law and the High Court has to decide purely on the question of law and infringement of statutory rights. Recourse to writ petition without
availing alternative remedy would be amounting to bypassing the statutory remedy to adjudicate the factual question as to whether there was
proper utilisation of SKO Oil purchased by the dealer is nothing but re-appreciation of evidence. The question of law raised in the decision
reported in CDJ 2006 Madras High Court 910 was whether, the Sales Tax Appellate Tribunal was right in approving the re-appreciation of the
evidence made by the first appellate authority, dislodging the cogent and convincing reasons given by the assessing officer. The facts relate to an
estimation of sales on the basis of turnover of one day sale and the same was held to be not a scientific method. The said decision is altogether on a
different set of facts, where this Court held that the method adopted by the authority to estimate the sales turnover was on hypothetical
consideration. On the contrary in the present case on hand, the 2nd respondent on the basis of the materials recovered from the business premises,
statements recorded, check-post bill dated 19.11.2003 found that purchase of oil did not correlate with the production quantity of yarn and
arrived at the conclusion of escaped turnover. It is not a case of hypothetical consideration and therefore in my considered view, the Judgment is
not applicable to this case.
In the result, I do not find that the impugned order suffers from any lack of jurisdiction, perversity in finding and there is no violation of natural
justice. Hence the writ petition is dismissed. No costs.