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Judgment
K. Mohan Ram, J.—In these batch of writ petitions the assessment orders/revised assessment orders passed by the respective assessment
officers have been challenged on the following grounds:
a) The order of the first respondent is arbitrary, irrational and violative of Articles 14, 19(1)(g) and 265 of the Constitution of India;
b) The impugned assessment is a mala fide exercise of power lacking in banafides for the collateral purpose of raising an arbitrary and
disproportionate liability to hurt the petitioners;
c) The condition precedent for the exercise of power u/s 12(2) is incorrectness and incompleteness of the return submitted by the assessee and for
this purpose no objective facts have been examined and evidence established. There is no finding of even a single proved purchase or sales
omission. The records maintained in the course of business of the petitioners have not been shown to the unworthy of acceptance.
d) The flat rate assessment by arbitrarily adopting an alleged consumption of 5 units for sago and 6 units for starch as the energy consumption has
no independent or authentic support, nor established by any proven methodology adopted in the trade.
e) The first respondent cannot adopt a flat rate method for best judgment assessment ignoring the special features of each assessee, like the power
consumption, the load connected, the horse power employed, the machine driven operation as against manual operation, the age of the machinery
including the diverse sequence of operations submitted before the first respondent.
f) The electricity consumption by itself cannot be the basis for the best of judgment assessment and on the authority of the ruling of this Court in
Kalyani Oil Mills Vs. The State of Madras, and that of the other High Courts, the impugned demand is arbitrary and the resultant figures are
equally perverse.
There is no dispute that the petitioners in all these writ petitions are running small scale units for the manufacture of sago and starch, and are
registered dealers under the Tamil Nadu General Sales Tax Act, 1959 and Central Sales Tax Act, 1956 with the first respondent/assessing officer.
For the manufacture of sago, the principal raw material is tuber of sago. These are purchased from agriculturists in and around Salem and
Dharmapuri Districts. The petitioners have been selling their goods to Salem Starch and Sago Manufacturers Service Industrial Co-operative
Society Limited (hereinafter referred to as the ""Sago Serve"").
It is the contention of the petitioners that it was alleged in the meeting held on 22.07.2004 the manufacturers were supplying sago to traders and
not to the Sago Serve, resulting in loss of revenue and that demands will be raised based on electricity consumption and on the basis of octroi
details in Maharashtra. It is the contention of the petitioners that there is no evidence to show that the petitioners had effected sales within or
outside the State without payment of tax. According to the petitioners, in the above said background, the Commercial Tax Department have been
required to issue the best of judgment demands on a flat rate basis of electricity consumption. It is the allegation of the petitioners that demands are
being raised at the instance of the Sago Serve for promoting its affairs and brow beat the innocent small scale units and not for any bonafide
purpose. The further allegation of the petitioners is that the Sales Tax Department is employed to create monopoly of procurement for the sago
serve as self-evident from the circulars of the Sago Serve.
It is the case of the petitioners that they maintain regular books of accounts and all purchases are supported by vouchers. All the sales are
supported by invoices and deliveries are under statutory way bill and the petitioners effected local sales to buyers with invoices and charge sales
tax. Further the petitioners effect sales through agents, who are registered dealers. According to the petitioners, the sales are faithfully reported and
tax paid. Transport of the goods is under the cover of documents prescribed u/s 44 of the Act. No sales or purchase is outside the record of the
assessee and no adverse remarks or record have been established against the petitioners either during the inspection or from the check-post data.
While so, it is the further case of the petitioners that suddenly the petitioners were served with a show cause notice purporting to revise the
earlier notice. In the said show cause notice it was alleged that the books were rejected, because the electricity consumption showed excess
consumption. The first respondent alleged that one bag of sago would consume 6 units of electricity, and one bag of starch consume 5 units, and
accordingly electricity consumption was taken and huge proposal was issued. Similarly, notices were issued to various dealers like the petitioners
herein in the months of August/ September 2004 by the Commercial Tax Authorities in Salem, Athur, Namakkal, Rasipuram and Aroor Divisions.
The petitioners herein brought to the notice of the Principal Commissioner through their Association ( TASMA) on 16.09.2004 and reminders
dated 07.10.2004 were also sent, but there was no response. It is the case of the petitioners that they filed their objections to the show cause
notice and was served with the notice of impugned assessment. By the impugned assessment, the flat rate of electricity consumption has been
adopted and it has been arbitrarily stated (without calling for the books of account) that the petitioners and similarly placed assessees had not
furnished documentary evidence or qualitative details with gate pass copies. The best of judgment based on electricity consumption on generalised
basis, according to the petitioners, is not a honest guess work.
The learned Counsel for the petitioners submitted that the impugned assessment orders are contrary to the law laid down by the Division Bench
of this Honourable Court in the case of Kalyani Oil Mills v. The State of Madras reported in 32 S.T.C. 542 and in the case of Madurai Soft
Drinks (Private) Limited v. The State of Tamil Nadu reported in 60 S.T.C. 94. The learned Counsel for the petitioners submitted that in the above
said two decisions the following principles have been laid down:-
i) The assessing authority should have material to doubt the correctness or genuineness of the entries in the account books before proceeding to
make the best judgment assessment, taking the electricity consumption as the basis for making an estimate.
ii) Actual test check should be done in the assessee''s own factory.
iii) The assessing authority should gather comparable data from other similar oil mills.
iv) In the absence of actual test check, adopting a particular rate of consumption for estimation would be an arbitrary basis and therefore a best
judgment assessment based on such arbitrary figure cannot legally be upheld.
On the above said submissions, the learned Counsel for the petitioners submitted that the best judgment assessments/revised assesments made
on the basis of the survey report prepared in the year 1994 based on the consumption of electricity alone without looking into the account books
are nothing but arbitrary and submitted that the impugned assessment orders/revised assessment orders are liable to be set-aside.
Mr. S.Manohar Sundaram, learned Government Advocate (Taxes), on written instructions from the respondents, submitted that though no
counter affidavit has been filed, the above writ petitions may have to be allowed with suitable directions to safeguard the interests of the Revenue.
In fact, Mr. S.Manohar Sundaram produced a letter from the Commissioner of Commercial (Taxes) Chepauk, Chennai - 5 addressed to the
Special Government Pleader (Taxes) High Court, wherein the Commissioner has given instructions to the Special Government Pleader ( Taxes). A
perusal of the said communication shows that the respondents are not in a position to sustain the assessment orders/revised assessment orders
passed by the respective assessment officers.
Mr. S.Manohar Sundaram, learned Government Advocate (Taxes) submitted that in view of the above said law laid down in the two cases by
two different Division Benches of this Court, the impugned proceedings cannot be sustained. But, further submitted that the assessees without
resorting to the alternative remedy available under the Act have straightaway filed the writ petitions and hence the writ petitions may not be
entertained. But I am unable to accept the said contention of the Government Advocate (Taxes), as the impugned proceedings are grossly
erroneous and directly against the law laid down by the above said decisions of this Court. Therefore, when the impugned proceedings are directly
against the law laid down by this Court, it is not just and equitable to direct the assessees to take recourse to the alternative remedy available under
the Act. The learned Government Advocate alternatively submits that if this Court is inclined to setaside the impugned proceedings, liberty may be
given to the assessing officers to pass fresh assessment orders in accordance with law. The learned Counsel for the petitioners has no objection for
the same and in fact he cannot have any objection for the same.
Accordingly, applying the law laid down by the two Honourable Division Benches of this Court in the above said decisions, viz., Kalyani Oil
Mills v. The State of Madras reported in 32 S.T.C. 542 and in the case of Madurai Soft Drinks (Private) Limited v. The State of Tamil Nadu
reported in 60 S.T.C. 94, the impugned proceedings are set-aside. But however, the respective assessing officers are at liberty to pass fresh
assessment orders/revised assessment orders in accordance with the law, more particularly applying the law laid down by this Court in the cases
mentioned supra.
For the foregoing reasons, the above writ petitions are allowed. No costs. Consequently, the connected pending WPMPs are closed.