State Of Tamil Nadu vs Tvl

Dr.Vineet Kothari, J

The State has filed this revision against the order dated 10.05.2002, dismissing the appeal of the State and holding that the penalty under Section 12(5)(iii) of the T.N.G.S.T. Act was not leviable on the respondent assessee for the Assessment Year 1992-93 on the sale of REP licences by the assessee during the assessment period.

The reasons assigned by the learned Tribunal in the impugned order for setting aside the said penalty are quoted below for ready reference.

"14. It is further argued by the counsel for the respondent that, as the assessability of the transaction was in doubt and the assessees bonafide believed that, the transactions were liable for sales tax on the sales turnover of REP licence and therefore not reported in the returns and therefore penalty levied under Section 12(5)(iii) is not at all correct. It is also further argued by the counsel for the respondent that, it is not as if for the year 1992/93 penalty under Section 12(5)(iii) for not reporting the turnover relating to REP license and non-payment of tax is automatic. In this connection, the counsel for the respondent relied upon the decision in 117 STC 457, wherein, the Hon'ble Supreme Court has clearly held that from 1.5.96, penalty is attracted. It is further argued on the side of the respondent that, when there was no intention to suppress the turnover, penalty is not attracted, and even after 1.5.96, if tax amount is not paid then only penalty is attracted. But in the case on hand, only under bonafide impression, even though the turn over with regard to REP licence and non-filing of return and non-payment of tax before 1.5.96, when it has not been intentionally done, penalty under Section 12(5)(iii) is not attracted. It is further argued on the side of the respondent that the levy of tax REP licence was under dispute during the assessment year 1992/93. With regard to the issue of levy of tax on REP licence, the matter was pending during the year 1992/93 and both the Department and assessees were not sure about the liability to tax on REP licence. Only on 04.04.1994, in the case of P.S.Apparels reported in 94 STC 139, the Hon'ble High Court, Chennai in the batch of cases passed an order, affirming the levy of tax on REP licence and the same was taken up by way of Special Leave Petition and the Supreme Court of India on 01.05.1996 affirmed the order of the Madras High Court in the case of M/s.Vikas Sales Corporation reported in 102 STC 106. In this connection, it is also argued by the counsel for the respondent that, it is not the case that the assessing authority that the returns filed by the respondent are incorrect and incomplete because during that period of time that there was some confusion prevailing as to the nature of goods and the eligible of sales tax on the same. It is further argued by the counsel for the respondent that, when the turnover relating to REP scrips is available in the books of accounts and the respondent are under a bonafide impression that the same were not taxable and so they did not report the same in the returns and pay the taxes. But, however, after the decision of the Supreme Court, when the respondent paid the taxes on the sales of REP licence penalty imposed paid the taxes on the sales of REP licence penalty imposed under Section 12(5)(iii) is not at all correct. In this connection, counsel for the respondent relied upon the decision of our Hon'ble High Court reported in 94 STC 139 wherein there is no direction given by our Hon'ble High Court to the authorities concerned to impose penalty for the year 1992/93 onwards. From the decision of our Hon'ble High Court, Chennai, the High Court has only given liberty to the assessing authorities to consider the issue relating to the actual levy of penalty in individual cases depending upon the facts and circumstances of the cases and to decide whether penalty can be imposed. The decision of our Hon'ble High Court available on 4.4.94. During the assessment year 1992/93 the tax liability on REP is a confused state of affair and it was indeed considered as a period of doubt on the issue of tax liability on REP licence. In these circumstances alone, according to the respondent penalty under Section 12(5)(iii) is not at all proper. The above argument on the side of the respondent is quite acceptable and convincing. The first appellate authority also clearly observed that, the question of liability or otherwise to tax on similar transactions was decided by the High Court of Chennai on 4.4.94 and was confirmed by the Supreme Court of India on 1.5.96. It is also stated by the first appellate authority in his order that denial of exemption leading to the assessment of a particular turnover cannot entail the assessee to any penalty especially whether the goods are assessable (involved in the turnover) is doubtful and thereby, the first appellate authority, as already stated, had set aside the penalty imposed under Section 12(5)(iii), which in our opinion is in order. Viewed this from any angle, we are of the unanimous opinion that, the stand taken by the first appellate authority in setting aside the levy of penalty portion under Section 12(5)(iii) is in order and therefore, we see no grounds to interfere with this findings in that regard. The point is accordingly answered."

Learned counsel for the State Mr.Shafiq submitted that the controversy with regard to the leviability of sales tax on the sales of REP licence was in the state of confusion and by the decision of the Karnataka High Court rendered in the case of [1992] 86 STC 175 (Bharat Fritz Werner Ltd. v. Commissioner of Commercial Taxes), it was held that the REP licences are exim scrips falling within the definition of 'goods' and therefore the sale shall attract the provisions of the Sales Tax law, and the Madras High Court dealt with the said controversy for the first time in the case of "P.S. Apparels vs Deputy Commercial Tax Officer" and by its judgment dated 04.04.1994 reported in [1994] 94 STC 139, reiterated the same position and gave the following conclusions:-

"18. We summarise our conclusions as hereunder :

(a) REP licences/exim scrips are "goods" in etymological sense and in common parlance as also within the meaning of section 2(1) of the TNGST Act, 1959 and Section 2(d) of the CST Act, 1956;

(b) The transfer, sale or assignment of those licences for value or consideration shall be liable to levy of sales tax under the sales tax laws in force in the State. The sales to and purchase by designated banks are also subject to levy of tax;

(c) The respective assessing authorities shall be at liberty to proceed in the matter further after giving a further opportunity to make representations by the assessees and in accordance with law, in cases where the proceedings have not been already finalised;

(d) Wherever the proceedings have culminated in an order of assessments made already by the competent assessing authorities, the petitioners/assessees shall be at liberty to pursue their statutory remedies of appeal/revision and the computation and counting of the statutory period of limitation prescribed therefor shall commence from this date and the appellate/revisional authorities shall entertain such appeals, if any filed, in accordance with law and deal with them on merits of the contentions raised;

(e) The levy of penalty under Section 12 or 16 of the TNGST Act, 1959, shall be available to the assessing authorities in these categories of cases on and from assessment years 1992-93 onwards, and the authorities shall be at liberty to do so having regard to the facts and circumstances of each case on its own merits;

(f) Subject to the declaration of law as above and directions contained herein, these writ petitions shall dismissed; and

(g) There shall be no order as to costs."

Learned counsel for the State Mr.Shafiq therefore argued that vide clause

(e) of Para 18 of the said judgment, the Madras High Court had held that the provisions for levy of penalty under Section 12 or 16 of the T.N.G.S.T. Act shall be available to the assessing authorities in case of sale of REP licences from Assessment Year 1992-93 onwards. He submitted that the assessment year involved in the present case is 1992-93 itself and therefore, since the assessee did not disclose separately the sale of REP licences in its taxable turnover in the returns filed by it, the penalty under Section 12(5)(iii) was attracted. He also submitted that the question of bonafides did not arise and therefore, the learned Tribunal could not have set aside the penalty on the said ground.

We have heard the learned counsel for the State at some length. We are of the clear opinion that the imposition of penalty or deletion thereof is essentially a question of discretion and therefore the final fact finding body i.e., the Tribunal constituted under the provisions of the TNGST Act, and unless the findings for setting aside or imposition of penalty are found to be perverse, in our opinion, no question of law arises for consideration for this Court in its revisional jurisdiction.

Admittedly, in the present case, the taxability of the sale of REP licences was in the state of confusion during that period. The Madras High Court on the basis of the fact that a precedent from Karnataka High Court in this regard was available in the year 1992 itself held that authorities could invoke penal provisions under Section 12 or 16 only from Assessment Year 1992-93 onwards. Learned counsel for the State submits that the order of the learned Single Judge of the Karnataka High Court was dated 08.10.1991 and the order of the Division Bench was dated 16.04.1992. He therefore submitted that the learned assessing authority cannot be faulted with in invoking the provisions of Section 12(5)(iii) for Assessment Year 1992-93.

Having considered the submissions made by the counsel for Revenue, we are however not inclined to accept his submissions. The leeway given in paragraph 18 of the judgment of the Madras High Court, making it possible for the assessing authority to apply the penal provisions of Section 12(5)(iii) of the Act for the assessment year 1992-93 does not in any manner mean that the levy of penalty for assessment year 1992-93 is automatic and penalty in such cases has to be imposed necessarily. Unless the ingredients for invoking the penal provisions are satisfied and there are clear findings by the assessing authority about mens rea or lack of bonafides on the part of the assessee in applying such provisions, in our opinion, the discretion employed by the Tribunal to delete the penalty cannot be held to be perverse. Prior to Assessment Year 1992-93, the judgment of this Court did not permit imposition of penalty in such cases, but from Assessment Year 1992-93 onwards, the judgment did not make it compulsory to impose penalty. Therefore, the argument of Revenue to that effect is misconceived.

We have already said above that unless the findings of the Tribunal are held to be perverse, in our opinion, no question of law arises for our consideration. Since admittedly in the period of assessment of Assessment Year 1992-93 itself, the High Courts were seized of the controversy about the REP licences itself being treated as 'goods or not', the non disclosure of the sale transactions in the returns, even though such transactions were part of the Books of Accounts maintained in the regular course of business by the Assessee, it cannot be said that the penal provisions of Section 12(5)(iii) of the Act stood automatically attracted.

Therefore, the reasons assigned by the learned Tribunal for setting aside the said penalty, in our opinion, do not give rise to any question of law. We do not find any merit in the present petition filed by the Revenue and the same is accordingly dismissed. No costs.