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Judgment
Elipe Dharma Rao, J.—Challenge is to the order dated July 28, 2000 passed by the Tamil Nadu Sales Tax Appellate Tribunal (Additional
Bench), Chennai, in S.T.A. No. 105 of 1999.
Facts in brief are-the petitioner is a partnership firm carrying on business in iron and steel and assessed to the sales tax and commercial tax
under the provisions of the Tamil Nadu General Sales Tax Act, 1959 (in short, ""the TNGST Act"") and the Central Sales Tax Act, 1956 (in short,
the CST Act""), respectively. For the assessment year 1989-90, the petitioner reported a total turnover of Rs. 5,60,573 and nil taxable turnover
and claimed exemption u/s 6-A of the CST Act on the ground that they have effected consignment transfer of goods to their agents outside the
State.
The assessing authority, first respondent herein, after verification of the books of account and returns filed by the petitioner, passed an
assessment order dated July 13, 1990, accepting the claim of the petitioner and granted exemption. However, by order dated July 10, 1991, the
first respondent revised the earlier assessment order dated July 13,1990 and disallowed the exemption granted earlier. Aggrieved, the petitioner
preferred an appeal, A.P. No. 16 of 1991, before the Appellate Assistant Commissioner. The appellate authority, by his order dated December
29, 1992, remanded the matter back to the assessing authority for fresh consideration and passing of orders, after giving opportunity to the
petitioner. Since the petitioner, despite the summons issued by the assessing authority, did not appear before the assessing authority, the assessing
authority proceeded with the matter ex parte and passed an order dated March 7, 1997 on the basis of the materials available on record and
levied the tax of Rs. 35,887 and also levied the penalty of Rs. 67,269. The petitioner, aggrieved by the order of assessment, preferred an appeal
before the Appellate Assistant Commissioner.
The Appellate Assistant Commissioner, by his order dated December 4, 1997, partly allowed the appeal by confirming the levy of tax and
deleting the order of penalty levied on the petitioner. As against the order of the Appellate Assistant Commissioner, the Revenue as well as the
petitioner filed appeal and cross-objection, respectively, before the Sales Tax Appellate Tribunal (Additional Bench), Chennai.
The Appellate Tribunal, on consideration of the entire materials, by order dated July 28, 2000, dismissed the cross-objection filed by the
petitioner and directed the assessing authority to levy a minimum penalty of 50 per cent and partly allowed the appeal preferred by the department.
Aggrieved, the petitioner has filed this writ petition.
Heard the learned Counsel for the petitioner and the learned Special Government Pleader for the Revenue. Perused the entire materials,
including the impugned order, available on record.
Learned Counsel for the petitioner submitted that the petitioner, in their regular course of business, effected consignment transfer of goods to
their agents situated outside the State and, therefore, claimed exemption from tax u/s 6-A of the CST Act and that their claim was supported by
the statutory declaration in form F, sale pattial, form XX, lorry receipts, consignment note, etc., submitted before the assessing authority. The first
respondent, on verification of the records, though initially accepted the claim of the petitioner and granted exemption by his assessment order dated
July 13, 1990 but later on, on an erroneous ground that the petitioner has received the sale proceeds before the sale of the goods by the agent,
revised the order of assessment and disallowed the petitioner''s claim of consignment transfer and treated it as direct inter-State sale at the hands of
the petitioner. Learned Counsel further submitted that the petitioner made consignment transfer of goods to their agents outside the State as per the
consignment agreement and that there was no outright sale to the agent and that the receipt of money from the agent in advance for the supply of
consignment will not change the nature and character of the agency transaction as a direct inter-State sale. Learned Counsel, therefore, submitted
that the levy of tax on consignment sale effected by the petitioner is illegal.
In so far as the levy of penalty is concerned, learned Counsel for the petitioner submitted that the question of levy of penalty u/s 16(2) of the
TNGST Act would arise only when there is a wilful and deliberate suppression or omission of turnover by the assessee, which escaped assessment
but later on discovered by the assessing authority and brought to assessment u/s 16(1)(a) of the TNGST Act. In the facts and circumstances of the
present case, the question of levy of penalty does not arise at all inasmuch as there was no wilful and deliberate suppression or omission of
turnover by the petitioner which escaped assessment as the petitioner had disclosed the total turnover in their monthly returns submitted before the
assessing authority. Learned Counsel submitted that the Appellate Tribunal erred in holding that the transaction in question falls under the category
of suppression of taxable turnover and, therefore, levy of penalty is warranted. Learned Counsel submitted that merely because the petitioner''s
claim to exemption was rejected by the department, that did not mean that the petitioner had suppressed anything and in support of his contention,
learned Counsel relied on the division Bench judgments of this Court in Tan India Limited v. State of Tamil Nadu [2003] 133 STC 311 and
Deputy Commissioner of Commercial Taxes, Tricky v. V.R. Kuppusamy Gounder and Sons [1995] 98 STC 408.
No counter-affidavit has been filed by the department, but learned Special Government Pleader, supported the order passed by the Appellate
Tribunal by reiterating the reasons stated therein.
The short point for determination is whether the Appellate Tribunal was correct in setting aside the order passed by the Appellate Assistant
Commissioner and directing the assessing authority to levy a minimum penalty of 50 per cent on the petitioner.
The case of the petitioner, in short, is that the transaction in question is a consignment transfer to their agents outside the State, which is
covered by the statutory declaration in form F and other relevant documents prescribed under the TNGST Act and, therefore, exempted from tax
and that receiving of advance amount from the agents will not change the nature and character of agency transaction as a direct inter-State sale. In
so far as the levy of penalty is concerned, the case of the petitioner is that there is no wilful and deliberate suppression or omission of turnover and,
therefore, no penalty u/s 16(2) is leviable.
The contention of the learned Counsel for the petitioner is that the petitioner, for the assessment year 1989-90, has reported a total turnover of
Rs. 5,60,573 and nil taxable turnover and claimed exemption u/s 6-A of the CST Act on the ground that they have effected consignment transfer
of goods to their agents outside the State. Therefore, they need not pay penalty as ordered by the Tribunal, which was accepted by the assessing
authority at the first instance by his order dated July 13, 1990 and granted exemption. Learned Counsel for the petitioner contended that receiving
money in advance prior to transfer of goods is not a ground to disbelieve the version of the petitioner and to order penalty.
This contention of the learned Counsel for the petitioner is supported by the decision of this Court in Tan India Limited v. State of Tamil Nadu
[2003] 133 STC 311. In the said decision, identifiable ultimate buyers in Kerala State placed specific orders at the dealer''s branch office at
Palghat in Kerala. The branch office at Palghat informed the head office at Kumarapalayam in Tamil Nadu about the specific requirements of the
ultimate customers in Kerala. It is only on the information so furnished by the branch office, the head office either effected despatches directly to
the ultimate buyers in some transactions or to its branch office in other transactions and thereafter effected delivery to those ultimate buyers. The
assessing officer treated the transaction as inter-State sale and also imposed penalty at 150 per cent of the tax due upon the dealer. The Appellate
Assistant Commissioner confirmed the same. The Tamil Nadu Sales Tax Appellate Tribunal found some transactions as inter-State sales and other
transactions as stock transfer to the dealer''s branch. It reduced the penalty to fifty per cent of the tax due. In these circumstances, on revision, this
Court held that whether the despatches were effected from the head office to the ultimate buyers directly at Kerala or whether the deliveries were
effected to the ultimate buyers outside the State through the branch make no difference in the eye of law. The goods moved from the State of Tamil
Nadu to the State of Kerala pursuant to or incident of a contract of sale entered into by the dealer with the identifiable ultimate buyers. Further,
from the orders placed at the branch located at a different State and the order subsequently having been communicated to the head office in the
State of Tamil Nadu, no legal consequence was likely to flow for the simple reason that the head office and the branch office were offices of the
same company and they did not possess separate juridical personalities. The movement of goods from the head office was occasioned by the
order placed by the customers and was an incident of the contract and therefore from the very beginning from Kumarapalayam in the State of
Tamil Nadu, all the way until delivery to the customers in Kerala State, it was an inter-State movement. Therefore, the sale transactions were inter-
State sales u/s 3(a) of the CST Act.
In so far as the levy of tax at eight per cent on the turnover of Rs. 5,60,573, treating it as direct inter-State sale, is concerned, from the perusal
of the records it is seen that the petitioner had filed before the assessing authority the statutory declaration in form F, sale partial, form XX, lorry
receipts, consignment notes, etc., in support of their claim that the transaction in question was consignment transfer of goods and the assessing
authority, on verification of the documents filed by the petitioner, passed the order dated July 13, 1990, treating the transaction in question as
consignment transfer and granted exemption. When once the assessing authority, on the basis of the documentary evidence produced by the
assessee, formed an opinion and passed an order granting exemption, the same cannot, without any legal basis or justification, subsequently be
revised for imposing tax, treating the transaction in question as direct sale. The facts on record would go to show that the original order of
assessment dated July 13, 1990 granting exemption to the petitioner is in order. The appellate authority, on remand, was not correct in setting
aside the same and imposing tax on the petitioner, treating the transaction in question as direct sale. In such circumstances, I am of the view that
imposition of tax at the rate of eight per cent on the turnover of Rs. 5,60,572.50 by revision of assessment is not correct and the same is liable to
be set aside.
The next question that arises for consideration is whether the levy of penalty u/s 9(2A) of the CST Act read with Section 16(2) of the TNGST
Act is justifiable. The case of the petitioner is that there is no wilful non-disclosure or deliberate suppression of the turnover and, therefore, no
penalty u/s 16(2) is leviable. According to the learned Counsel, the petitioner had produced before the assessing authority all the necessary
documents such as statutory declaration in form F, sale pattial, form XX, lorry receipts, consignment note, etc., and the assessing authority after
verification of all these documents accepted the claim of the petitioner. Learned Counsel further contended that the claim of exemption was
originally allowed and mere disallowance of exemption in revision would not amount to escapement from the assessment due to wilful non-
disclosure of assessable turnover and, therefore, no penalty is attracted. On perusal of the records available on record, I am of the view that the
revision of assessment was only for the reassessment of the exempted turnover originally granted exemption by order dated July 10, 1991 which
will not tantamount to revision for the escaped turnover and that only reported book turnover has been adopted for the purpose of assessment and
thereby the assessment does not fall u/s 12(2) of the Act.
Deputy Commissioner of Commercial Taxes, Tricky Division, Tricky v. V.R. Kuppusamy Gounder and Sons [1995] 98 STC 408, which was
relied on by the learned Counsel for the petitioner, squarely applies to the facts of the present case. In the said case, the assessing authority levied
penalty u/s 16(2) of the TNGST Act, 1959. According to the assessees the claim of exemption was made bona fide and the same was also
accepted in the original assessments. The assessments were revised on a mere change of opinion. Therefore, the penalty u/s 16(2) of the Act
would not be attracted. According to the Revenue, the original penalty orders of the assessing officer should be restored. It was held by this Court
as under:
... It remains to be seen that the exemption claimed by the assessees was allowed in the original assessment. The non-disclosure of turnover on the
part of the assessees came into existence because of the revised assessments made by the assessing officer. Simply because the assessees'' claim
for exemption was negatived by the department, that does not mean that the assessees have suppressed anything. Under these circumstances, the
Tribunal was correct in holding that no penalty is exigible in the case of all the assessees u/s 16(2) of the Act.
In the present case, admittedly the revision of assessment was only for the reassessment of the exempted turnover originally granted exemption
by order dated July 10, 1991 and the revision of assessment was not for the escaped turnover and only reported turnover was taken into
consideration for the purpose of reassessment and, therefore, the assessment does not fall u/s 12(2) of the Act. If that be so, when the revision of
assessment was not for the escapement of the turnover, the levy of penalty u/s 16(2) is not justified. It is further submitted that after disallowance of
exemption in the revision, the petitioner submitted the returns and paid the tax also. Therefore, the petitioner has not committed wilful or deliberate
suppression or omission of turnover which has escaped from assessment to impose the penalty u/s 16(2) of the Act. Therefore, the levy of penalty
is set aside.
For the reasons stated above, the impugned order dated July 28, 2000 is quashed and the original order of assessment dated July 13, 1990 is
restored. The writ petition is, therefore, allowed. No costs.