State of Tamil Nadu vs Ravishankar Films (P) Ltd.

Chitra Venkataraman, J.—The revision is as against the order of the Sales Tax Appellate Tribunal (Additional Bench), Chennai, rejecting the appeal filed by the Revenue in S.T.A. No, 1344 of 2001 dated February 17, 2004, thereby confirming the order of the Appellate Assistant Commissioner (CT) III, Chennai. The assessee herein is a dealer in cine films. It is seen from the records that the assessee did not file monthly returns and had not paid tax for the assessment year 1993-94. The place of business was inspected by the officials of the enforcement wing on January 7, 1994 and certain documents were seized as D7 records. On scrutiny of the same, it was found that they opened letter of credit in the banks and effected purchases of raw film from the dealers. The sellers raised the sales invoices and discounted them in the respective banks against the letter of credit opened by the assessee. However, the purchases were recorded as loan transactions. The raw films purchased were sold to the film producers of Tamil Nadu. They were also shown as loan of money transaction. On investigation, it was found that the dealers from whom the assessee had purchased raw materials were bogus and benami in nature. Hence, the sales effected by the assessee were treated as first sales or raw films and therefore, they were liable to pay tax u/s 3 of the Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as, "the Act"). The assessing officer pointed out in the order of assessment that the assessee had not filed any objection inspite of an opportunity granted. Hence the assessing officer determined suppressed turnover at Rs. 3,50,00,000 assessable at five per cent. The assessing officer held that the sales in favour of the assessee were never backed with the goods and there was no transfer of goods for consideration. Aggrieved by the same, the assessee filed an appeal before the Appellate Assistant Commissioner (CT), Chennai. On going through the materials, the appellate authority came to the conclusion that the assessment made treating the sales as "suppressed sales" was unsustainable; that the assessee produced the records to show that the transactions were "loan" transactions. There were no positive materials to hold that a sale and turnover arrived at by the enforcement wing officials were based on mere conjunctures and surmises. He pointed out that all the material records and books of accounts and other corroborative materials like the affidavits were produced to substantiate the claim of the assessee that the transactions were loan transactions. Consequently, the transaction was not a real purchase or sales and hence, the assessment was set aside.

On appeal before the Sales Tax Appellate Tribunal, it was pointed out that the contention of the assessee that the entire transactions were loan transactions was supported by documentary evidence. It is seen from paragraph 12 of the Tribunal''s order that the reference to the securities and Frand Cell, Bangalore, had filed a case against the Indian Bank authorities in RC 1(E)/98 CBI/as & PC/ELR. The Tribunal held that there was no genuine transaction between M/s. Ravishankar Films (P) Ltd., and M/s. Asian Films (P) Ltd., and no goods as per letter of credit documents were actually produced for sale. The letter of credit opened was accommodative in nature and the letter of credit documents like invoices, delivery challans and lorry receipts and valuable securities were all false and forged documents. Thus there was no real sale transaction. Consequently, the Tribunal held that the entire best judgment was not correct. Therefore, as there was no sales, the Tribunal set aside the order as regards the transactions between the assessee and Asian Films (P) Ltd., and confirmed the findings of the Appellate Assistant Commissioner. Apart from these transactions, the Tribunal found that there were transactions between the assessee and other entities which related to hire charges. The Tribunal pointed out the findings of the Appellate Assistant Commissioner that the entire turnover was not taxable, since effective control over the property had not passed over the hands of the assessee. In these circumstances, in order to find out the assessability of hire charges on the entire turnover of Rs. 7,22,76,417, the assessment was set aside and the matter was remanded back to the assessing officer for necessary verification as regards the source of purchase of the goods involved and the contract of agreement entered into between the lessor and lessees. The Tribunal held that after going through the records, it was open to the assessing officer to pass an order of assessment. Thus holding, the Tribunal also held that no penalty could be levied at this stage. Aggrieved by the same, the Revenue has filed the present revision by raising the following substantial questions of law.

(1) In the face of several sale invoices due by the assessee, which were recovered from the possession of M/s. Prasad Properties and Investments Pvt. Ltd., and their group of companies, is there not legal burden on the assessee to show that despite those sale invoices, yet no sale at all took place by producing legally accepted material ?

(2) Would the final report filed by the CBI against the purchaser-company and their group that those invoices have been utilised for raising loans from the bank and thereby defrauding the bank, would amount to a legal material to be made use of by the assessee to escape the provisions of sales tax law to contend that those invoices do not reflect any sale transactions?

Heard the counsel on both sides. It is a matter of record that the transactions between the assessee and one Asian Films (P) Ltd., were found to be bogus transactions and using the forged documents, certain benefits were sought to be obtained through the Indian Bank, which resulted in the Central Bureau of Investigation charge-sheeting the bank officials. These facts are not, in any manner, disputed by the Revenue. Based on the charge sheet thus filed, on the findings of the Central Bureau of Investigation, the Tribunal came to the conclusion that the Appellate Assistant Commissioner was correct in allowing the appeal holding that the transactions were not well within the definition of "sale". The Tribunal further observed that on going through the records available therein, the assessment could not be best judgment assessment.

Even though the learned Special Government Pleader submitted that mere filing of charge sheet could not result in setting aside the assessment, yet, no materials were placed before the Tribunal to substantiate that the Revenue had materials to treat the transactions between the assessee and Asian Films (P) Ltd. as sales assessable under the provisions of the Act. Thus, on the facts found by the Tribunal, which are supported by the proceedings of the Central Bureau of Investigation before the court of law as against the Indian Bank, we do not find any ground to interfere with the order of the Tribunal. As regards the lease transaction, the Tribunal has correctly remitted the matter back to the authority to go through the necessary records and make an assessment thereon. It is no doubt true that the assessment order speaks about the conduct of the assessee in not filing the objection before the assessing authority. Whatever be the conduct adopted by the assessee before assessment, in the appeal filed by the Revenue, the assessee had established its case on the loan transaction as well as on other turnover pertaining to lease. The Appellate Assistant Commissioner and the Tribunal considered the materials produced by the assessee. On satisfaction of the explanation offered by the assessee, the Tribunal remanded the matter for de novo consideration. Going by the reasoning of the Tribunal, we do not find any merits in the revision to set aside the order passed by the Tribunal. In these circumstances, we find no ground to accept the plea of the Revenue and accordingly, the tax case revision is dismissed.