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Judgment
Thanikkachalam, J.—The State is the petitioner herein. These revisions were filed against various assessees. These revisions were filed
against the order passed by the Sales Tax Appellate Tribunal, in the case of each assessee.
The relevant assessments were originally made by the Deputy Commercial Tax Officer, Karur, after examining relevant invoices, vouchers,
accounts and records and accepting the claim of exemption in respect of the purchases of groundnut effected by the assessees within the State
from various dealers and on satisfaction of tax suffered at the relevant single point tax in respect of such groundnut purchases. Later no, the Deputy
Commercial Tax Officer sought to revise the assessment u/s 16(1) of the Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as ""the
TNGST Act""), on the ground that some of the purchases on which exemption was allowed originally were based on forged bills obtained from
non-existent dealers, which was said to have been revealed on certain enquiries. The Deputy Commercial Tax Officer also levied penalty u/s 16(2)
of the TNGST Act, 1959, for the alleged wilful non-disclosure of assessment turnover at 1 1/2 times the tax sought to be assessed.
The assessee contended that they had discharged the onus of proof for exemption u/s 10 of the TNGST Act, 1959, by producing purchase bills
containing the registration certificate numbers of the respective selling dealers and their declaration of sufferance of tax at the relevant single point.
They have also produced the cess free permit issued by the Madurai Marketing Committee at Dindigul for transporting groundnut kernel from
Dindigul to Karur to the respective sellers on their application and verification thereof that the registration certificates granted to the sellers by the
department have not been shown to have been cancelled at the material time. It was further submitted that even if the registration certificate had
been cancelled with retrospective effect that would not make the purchases by the assessees as purchases from non-registered dealers. Therefore
it would not nullify the sales effected by the sellers before such cancellation. Since the assessees had shown that the sales are second sales, the
earlier purchase being made from a registered dealer, the assessees are entitled to claim exemption from tax. The assessing officer has rightly
allowed the exemption claimed by the assessees originally. It was also pointed out that the Revenue has not discharged the onus placed upon it.
For invoking section 16 read with section 10 of the TNGST Act, the department must prove that there is escapement of turnover. The reliance
placed upon the statement recorded from certain persons behind the back of the assessee for supporting the reassessment are violative of the
principles of natural justice. The assessee made a request for cross-examination of these persons from whom statements were recorded. The
assessees also submitted that the proposal to levy penalty is illegal, void and without jurisdiction since there was no wilful non-disclosure of any
assessable turnover, on the part of the assessees.
However, the Deputy Commercial Tax Officer rejected the objections by the assessees on the ground that the validity of the bills for the
purchases of groundnut was doubtful and tax sufferance had not been proved. According to the department the sellers were not in the trade during
the relevant period. Notices were issued to the mill owners whose statements were recorded, but they did not appear. Therefore, the department
came to the conclusion that they suffered tax at the previous stage was not known.
On appeal, the assessee submitted that statements showing the impugned sellers'' names and addresses, their registration certificate numbers,
G.L. numbers, cess permit numbers, bill numbers with dates, lorry freight paid and the relevant day book pages were also filed. However, the
Appellate Assistant Commissioner in his common order upheld the Deputy Commercial Tax Officer''s order. He further held that there was no
evidence of movement of goods from Dindigul to Karur. The Appellate Assistant Commissioner also held that there was no positive evidence that
the goods had suffered tax already in the hands of the sellers. He further held that the right of the cross-examination demanded by the appellants
has lost it significance in the light of their evidence. However, the Appellate Assistant Commissioner considered that the quantum of the penalty
levied is excessive. Accordingly, he fixed the penalty levied u/s 16(2) at 50 per cent of the tax. Aggrieved, the assessee filed appeals before the
Sales Tax Appellate Tribunal and the department filed enhancement petitions. After having heard learned counsel appearing on both the sides the
Tribunal held as under :
We are of the view that there is no concealment or non-disclosure or suppression on the part of the appellants. They have bona fidely claimed for
exemption, but the same, has not been accepted by the Revenue. Simply because, the appellant''s claim for exemption was negatived by the
Revenue, that does not mean that the appellants have suppressed anything. In these circumstances, we are of the view that no penalty can be levied
against the appellants. Already, we have taken the view that the appellants are entitled for exemption for their purchases made from the respective
sellers. We have also taken the view that the sellers were real sellers and the bills issued by them were genuine. In these circumstances, no penalty
is leviable against the appellants. Under these circumstances the penalty of 50 per cent of the tax due sustained by the Appellate Assistant
Commissioner (CT) is also deleted. We are of the view that there is no substance in the enhancement petitions filed by the Revenue and so we are
forced to negative the claim made by the Revenue in the enhancement petitions. In the result all the appeals are allowed and the enhancement
petitions in all the appeals filed by the Revenue are dismissed.
The question that arises for consideration in these revisions is whether the petitioners have purchased groundnut from real dealers and the bills
issued by them are genuine.
The learned Additional Government Pleader (Taxes) submitted as under :
Since the alleged sellers of the petitioners were not in existence, the certificate issued to the sellers are fictitious. Even if the registration certificates
were cancelled with retrospective effect, the transactions effected prior to the date of actual cancellation would attract liability to tax only in respect
of sellers'' hands. The assessees have not proved the movement of goods from Dindigul to Karur. There is contra evidence on the side of the
Revenue to discredit the cess free permits issued by the Marketing Committee at Dindigul. It is not correct to state that the Revenue without
examining the sellers of the assessees have examined the mill owners, who have no connection whatsoever with the purchases made by the sellers.
The selling dealers at Dindigul were not doing business at the registered place at the relevant time. The bills in possession of the assessees are said
to be different from the one normally issued by the selling dealers at Dindigul and have not been signed by the selling dealers themselves.
The Tribunal has not stated what is the evidence before it to come to the conclusion that the sales effected by the assessees are genuine. Since
sellers to the assessees are not in existence, the department cannot examine them. When the certificate of registration is cancelled for the non-
existence of the seller, the assessees cannot support their contention that their purchases are genuine. On the other hand, when the certificate of
registration is cancelled for any technical reasons then the assessees can contend that their purchases are genuine. In order to support the
contentions put forward by the department the learned Additional Government Pleader (Taxes) relied upon the following decisions of the court
reported in Lakshmi Steel Traders Vs. Board of Revenue (Commercial Taxes), , Emerald Paints and Colour Products (P.) Ltd. Vs. Commissioner
of Income Tax, and [1994] 93 STC 185 (SC) (State of Tamil Nadu v. Raman & Co.).
On the other hand, learned counsel appearing for the assessees, submitted as under :
The assessing officer had examined the relevant invoices, vouchers, cess free permits, accounts and other relevant records relevant to the claim of
exemption in respect of groundnut purchased by the assessees and on being satisfied about the sufferance of tax at the relevant single point tax on
such purchases had rightly allowed the exemption. For revising the assessment the Revenue has to establish by positive evidence and acceptable
proof that the exemption was in fact wrongly allowed originally. In the present case, there is no valid material brought on record by the Revenue to
withdraw the exemption. Mere change of opinion would not constitute jurisdiction to revise the assessment. The assessees have discharged their
burden of proof regarding the claim of exemption u/s 10 at the time of original assessment to the satisfaction of the assessing authority by producing
relevant documents. But the Revenue has totally failed to discharge the onus placed upon it for showing the exemption originally granted was
wrongly allowed. The assessees'' claim is supported by positive documentary evidence in the shape of bills issued by the respective sellers who
were on the books of the Revenue at the relevant time as revealed by the registration numbers, old and new, given to them by the department.
Free cess permit issued by the Marketing Committee was filed in proof of sellers transporting the goods from Dindigul to Karur. The department
has not shown that the registration certificate granted to the respective sellers were not in force during the material time and in the absence of such
proof the sellers whose registration certificates were in force cannot be said to be non-existent dealers. The registration certificates remained
uncancelled. The transactions effected by the respective sellers would attract sales tax on the sellers. Even if the registration certificates were
cancelled with retrospective effect the transaction effected prior to the actual date of cancellation would attract liability to tax in the respective
sellers'' hands only. When the department says that the bills issued by these respective sellers were bogus therefore it is essential to examine them,
the Revenue has not examined the sellers who hold the registration certificates at the relevant time. The authorities below relied upon certain
statements taken behind the back of the assessees from millers, who are not the sellers to discredit the bills issued by the sellers and which were
accepted originally. The persons said to have been examined are not even shown to be the owners of the respective mills. The assessees requested
the assessing officer to produce the said persons for examination, but the assessing officer stated that they did not appear in response to the notice
issued to them. No further steps were taken by the Revenue to secure their presence for cross-examination. The authorities below have erred in
relying upon the ex parte, unilaterally interested and unattested statements from those persons. The Deputy Commercial Tax Officer in the
assessment order stated that the millers did not appear on September 13, 1985, for which date notices were issued to them. But the original
deposition recorded ex parte on May 22, 1985, would hold good. The authorities below brushed aside the legal requirement of the assessees to
cross-examine the millers from whom statements were obtained. Therefore, it was submitted that there is no case for levy of penalty u/s 16(2) of
the TNGST Act. The revised assessments made were stated to be void, illegal and without jurisdiction.
We have heard the rival submissions.
The fact remains that he original assessments were made by the Deputy Commercial Tax Officer, Karur, in the case of each of the assessees
accepting the claim of exemption in respect of the purchase of groundnut effected by the assessee. The assessing officer revised the assessment u/s
16(1) of the TNGST Act, 1959, on the plea that some of the purchases on which exemption was allowed originally were based on forged bills
obtained from non-existent dealers. The assessing officer also levied penalties u/s 16(2) of the TNGST Act for the wilful non-disclosure of the
assessable turnover at 1 1/2 times tax due against all the assessees. Against the assessment of the disputed turnover and penalty, appeals were filed
by the assessees before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner confirmed the assessments made against
the appellants. But with regard to penalty he has taken a lenient view by holding that penalty towards 50 per cent of the tax due is justifiable.
Aggrieved the assessee preferred appeals before the Appellate Tribunal. So also the Revenue preferred enhancement petitions in case of all the
assessees. On considering the facts arising in these cases, the Appellate Tribunal held that no penalty is leviable against the assessees. The penalty
of 50 per cent of the tax due sustained by the Appellate Assistant Commissioner was deleted. Accordingly, the appeals filed by the assessees were
allowed and the enhancement petitions filed by the department were dismissed. While making the original assessment, the assessing authority has
examined the relevant invoices, the cess permits and accounts and other relevant records relating to the claim of exemption in respect of groundnut
purchased by the assessees and on being satisfied about the sufferance of the relevant single point tax on such purchases, rightly allowed the
exemption. According to the assessees in the matter of revising the original assessment, the Revenue has to establish by positive and acceptable
proof that the exemption was in fact wrongly allowed originally. According to the assessees there is no valid material brought forward by the
Revenue to revoke the exemption. A mere change of opinion will not confer jurisdiction to revise the assessment. No valid and acceptable
evidence was produced by the Revenue to show that the exemption originally granted was wrongly allowed. The claim of the assessees were fully
supported by positive documentary evidence in the shape of bills issued by the respective sellers, who were on the books of the department at the
relevant time, as shown by the registration numbers, old and new given to them by the department which were mentioned in the bills. The free cess
permits issued by the Marketing Committee at Dindigul would be the proof to show that the assessees were in fact transporting the goods from
Dindigul to Karur. The department has not shown that registration certificate granted to the respective sellers were not in force during the material
time. When the registration certificates of the sellers were in force it cannot be said that they are the non-existent dealers. The registration
certificates issued in favour of the sellers remained uncancelled. The transactions effected by the respective sellers would attract sales tax on the
sellers. Further if the transactions were effected prior to the date of actual cancellation it would attract liability of tax in the respective sellers'' hands
only.
According to the Revenue the bills issued by the alleged sellers were bogus and they were not in existence. The assessees contended that if the
bills issued by the sellers are bogus, it is essential to examine the sellers. Admittedly, the Revenue has not examined the sellers who hold the RC
numbers at the relevant time. The Revenue has relied upon certain statements obtained from the mill owners. According to the assessees these
statements were obtained by the department from the mill owners behind their back. According to the assessees these mill owners are not
connected with the transaction in question. The assessees pointed out that the persons who are said to have been examined are not even shown as
the owners of the respective mills. The assessees demanded the assessing officer to produce the persons from whom statements were obtained,
but those persons were not produced by the assessing authority. The assessing officer explained that notice was issued to those persons to appear
before him, but they are not appearing. No further steps were taken to ascertain the truth of the bills issued by the sellers. No steps were also
taken to secure their presence for cross-examination. The testimony given by the alleged mill owners, which are not subjected to cross-examination
cannot be relied upon. Hence no credence can be given to the statements recorded by the Revenue from the alleged mill owners behind the back
of the assessees.
According to the Revenue, the assessees have not proved that movement of goods from Dindigul to Karur. The assessees explained that they
have proved by clear evidence that the goods have really moved from Dindigul to Karur. It was shown that the sellers who were admittedly in
Dindigul have applied for cess free permits to the Marketing Committee, who is controlling authority for movement of goods. The cess free permits
have been issued by the Marketing Committee to the sellers. The Tribunal pointed out that their attention was drawn to the accounts of the
assessees wherein it was shown that lorry freight, etc., were paid. On the basis of the documents produced by the assessee, the Tribunal came to
the conclusion that the assessees have really moved the goods from Dindigul to Karur in furtherance of the purchases effected by them.
Admittedly, the registration certificates were in force with regard to the alleged sellers of the assessees. At the time of purchase by the
assessees, the registration certificates belonging to the sellers were not cancelled. There is no explanation on the side of the Revenue for not
examining the alleged sellers. It is significant to note that the Revenue without examining the sellers of the assessees have examined the mill owners
who have no connection whatsoever with the purchases made by the assessee. The statements obtained from the mill owners have no relevance at
all and the same cannot be relied upon against the assessees. The statements which were not tested by cross-examination were relied upon by the
authorities below for revising the assessment. In the absence of evidence on the side of the Revenue, the Tribunal relied upon the bills issued by the
sellers of the assessees who were in existence. There is no contrary evidence to show that the sellers are not in existence. According to the
Revenue, the bills were bogus and prepared by the assessees themselves. In the bills the registration numbers and the names of the sellers were
given; but the department failed to identity the sellers and make them available for cross-examination. The groundnuts which were have been
purchased had already suffered tax on the hands of the sellers. Therefore, the assessees are not liable to pay tax on the second purchases. The
facts on record would go to show that the Revenue had revised the assessment without any legal basis, and materials. The documentary evidence
produced by the assessees would go to show that the original assessments made in the case of each of the assessee grating exemption is in order.
Accordingly the Tribunal was correct in setting aside the revised assessments made by the assessing officer on the disputed turnover.
The assessing authority also 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. The assessees have filed counters for enhancement petitions filed by the department. According to the assessees the Appellate Assistant
Commissioner ought to have deleted the entire penalty instead of sustaining 50 per cent of the penalty levied by the assessing authority. 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 come 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.
Revenue relied upon a decision rendered by this Court in T.C. Nos. 995 to 998 of 1991 dated October 28, 1991 (Janatha Paint Industries v.
State of Tamil Nadu, represented by Deputy Commercial Tax Officer, Moore Market, South Circle, Madras) in order to support their contention
in the appeal that the revised assessment made by the assessing officer were correct and the penalty levied u/s 16(2) of the Act is sustainable.
According to the facts arising in the abovesaid decision, it was established that the traders were only doing bill trading and the assessees failed to
establish that the earlier sales have been taxed. On facts in that case it was held that reopening of the assessment u/s 16(2) of the Act was in order
and penalty levied u/s 16(2) of the Act is exigible. This decision was rendered on the facts arising in that case. But, on facts in the present case, the
assessees have established that the groundnuts purchased by them from the sellers are genuine and the department has no evidence to show that
the sellers are not in existence and the bills issued by them are bogus. Therefore the abovesaid decision will not be applicable to the facts of this
case. Therefore, the order passed by the Tribunal in deleting the penalty levied against all the assessees is sustainable. Accordingly, the Tribunal
was correct in holding that all the appeals are allowable and the enhancement petitions in all the appeals filed by the Revenue are dismissed. In the
result, the revisions filed by the State are dismissed. No costs.
Petitions dismissed.