The High Court Set aside the Tribunal's order upholding a sales tax penalty imposed under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act for the year 1993-94, holding that the statutory explanation was not applicable.
Writ petition allowed, Tribural order set aside, matter remanded to Sta for imposition of penalty if applicable.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 10.03.2020
CORAM
THE HON'BLE DR.JUSTICE VINEET KOTHARI AND
THE HON'BLE MR.JUSTICE R.SURESH KUMAR
W.P.No.4554 of 2008
Audco India Limited represented by its Company Secretary R.Naveenan, 9/10, Club House Road Chennai. ...Petitioner Vs. 1.Commercial Tax Officer (Anna Salai II) Assessment Circle, 621, Anna Salai Chennai – 600 006. 2.The Appellate Assistant Commissioner (CT) IV, Kuralagam Annexe, Sixth Floor Chennai – 600 108. 3.The Sales Tax Appellate Tribunal Additional Bench, City Civil Court Building, High Court Complex Chennai-600 104. 4.State of Tamil Nadu, represented by the Deputy Commissioner (CT) Chennai (East) Division, Chennai. ...Respondents
Prayer: Writ Petition filed under Article 226 of the Constitution of India praying for the issuance of a Writ of Certiorari calling for the records of the third respondent herein in S.T.A.No.274/02 dated 12.11.2007.
For Petitioner : Mr.K.A.Parthasarathi for M/s.N.Inbarajan For Respondent : Mr.Mohammed Shaffiq Special Govt.Pleader (Taxes) O R D E R
(Order of the Court was made by DR.VINEET KOTHARI,J.)
The Assessee has filed this writ petition aggrieved by the order dated 12.11.2007, whereby the learned Tribunal sustained and upheld the penalty imposed on the Assessee under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959
(hereinafter referred to as 'TNGST Act'), with the following observations.
“12) It is admitted in this case that the assessment related to 1993-94 prior to the insertion of an Explanation u/s 12(3)(b) of the Tamil Nadu General Sales Tax Act. The assessment was made by the assessing authority, not accepting the turnover reported in the dealier's returns. It is seen further that the appellate Assistant Commissioner had directed to reconsider the assessment made on a major portion of the disputed turnover ie., the assessment made on Rs.1,25,08,358/- and also that created on a further Rs.40,05,778/-. The assessment made by the Assessing Officer has thus not reached its finality and the total tax demand of the assessment year was not finally determined as on the date of Appellate Assistant Commissioner's order. 13) It has been rightly claimed by the State, that until the insertion of the 'Explanation' under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act, all the types of 'balances' in tax payable derived in an assessment order would be necessarily attract a penalty, in accordance with the sliding scale, as provided in Section 12(3)(b) of the Tamil Nadu General Sales Tax Act. The legal position that the delaying of the taxes otherwise normally and legally payable to the State along with a dealer's monthly returns would attract penalty is well settled in the case law reported in 125 STC 107 (Chennai Textile Chemicals Private Ltd., -VsState of Tamil Nadu and Others). The Hon'ble High Court of Chennai has observed in the above case as follows.
“..... When the Legislature in its wisdom and as a consequence of past experience has chosen to make the levy of penalty, essentially as an inevitable consequence of an attempted evasion, the Court will not normally sit in judgment over and need or necessity for such a levy. The impugned provision serves not only as an effective deterrent to curb evasion of tax, once and for all, but also prevent any dealer from succeeding in postponing the levy and recovery of the tax legitimately due to the State and thereby have undue advantage and use of the revenue otherwise payable to the State
and to that extent, deprive the State of the legitimate user of the receipts for its ever so many schemes in public interest and hence the levy contemplated under Section 12(3) has to be viewed at any rate as a just and reasonable restriction only on the fundamental rights secured under Article 19(1)(g) of the Constitution of India. From the mere fact that the levy of penalty has been ordained compulsorily with every class or category of evasion, it cannot be claimed to be unreasonable on that account only. The levy of tax and the incidental levy of penalty being always considered to be an independent power of the State to raise revenue, there is no such fundamental right as to claim any immunity from taxation.....” 14) The Court has further observed as under (at Page 136 of 125 STC): “...There is no compelling reason that the levy of penalty as an anti-avoidance measure, has to be only with reference to the turnover sought to have been suppressed. So far as the State is concerned, the loss has to be, and in our view could be, legitimately measured with reference to the tax sought to have been or attempted to have been evaded and the graded scales of penalty fixed with reference to such tax attempted to be evaded is not only permissible for the Legislature to enact as a matter of policy, but the same, in our view, is found to be just and reasonable and we do not really find any hostile discrimination or arbitrariness or unreasonableness in the same as vaguely claimed for the petitioners on mere hypothetical basis....” 15) Since the assessee failed to file returns declaring correct turnover at the correct rate of tax and thus withheld the taxes that ought to have been otherwise paid to the State in the normal course of their business, along with their monthly returns, the penalty is certainly attracted in this case. The ratio of the above decision would affirm the legal position.
Commissioner had remanded the assessment on a major portion of the turnover in dispute. The penalty payable by the assessee was only consequential of the balance of tax payable derived in the assessment order. Given the position, the Appellate Assistant Commissioner ought not to have ordered to delete the penalty.
debatable issues, even if the addition in taxable turnover is made by the Assessing Officer, it does not amount to Best Judgment Assessment, which can be passed, only if the regular books of accounts and the return filed by the Assessee are rejected for given reasons. Therefore, the learned Tribunal has erred in relying upon the insertion of the Explanation in Section 12(3) of the Act at a later date with effect from 01.04.1996 to uphold such penalty in the year 1993-94. In our opinion, the Explanation to Section 12(3) does not get attracted to the facts of the present case at all.
-s/d-
Assistant Registrar
True Copy
Sub-Assistant Registrar
KST
To
1.The Commercial Tax Officer (Anna Salai II)
Assessment Circle, 621, Anna Salai
Chennai – 600 006.
2.The Appellate Assistant Commissioner (CT)
IV, Kuralagam Annexe, Sixth Floor
Chennai – 600 108.
3.The Sales Tax Appellate Tribunal
Additional Bench, City Civil Court
Building, High Court Complex
Chennai-600 104.
4.The Deputy Commissioner (CT)
Chennai (East) Division, Chennai
+1cc to Mr.N.Inbarajan, Advocate, SR.No.21250
+1cc to the Government Pleader, SR.No.21802
CP(CO)
rli(22/05/2020)
W.P.No.4554 of 2008
3 issues framed by the court
Whether penalty under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959 is attracted when additional tax is imposed based on best judgment assessment rather than filing of incorrect or in
Whether the Explanation inserted in Section 12(3) of the Tamil Nadu General Sales Tax Act applies to penalty imposed for the assessment year 1993-94 before the amendment took effect.
Whether the learned Tribunal erred in upholding the impugned penalty considering the parameters of Section 12(3)(b) were not satisfied in the present case.
Colour shows how this judgement treated each authority
Chennai Textile Chemicals Private Ltd vs State of Tamil Nadu and OthersDistinguished¶14
125 STC 107 (Chennai Textile Chemicals Private Ltd., -VsState of Tamil Nadu and Others)
4 provisions across 4 enactments
Audco India Limited
Commercial Tax Officer (Anna Salai II) Assessment Circle
Appellate Assistant Commissioner (CT) IV
Sales Tax Appellate Tribunal Additional Bench
State of Tamil Nadu
VINEET KOTHARI
R.SURESH KUMAR
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
