A cashew dealer's claim of second sales exemption rested on three sellers found to be fictitious. The court held the burden of proving the first sale lies on the dealer under Section 10 of the TNGST Act, distinguished Govindan and Co., upheld the assessment and the Section 16(2) penalty for wilful non-disclosure, and dismissed the writ petition.
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.
2024:MHC:3612
W.P.No.34665 of 2007
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 07.08.2024
CORAM :
THE HONOURABLE DR.JUSTICE ANITA SUMANTH and THE HONOURABLE MR.JUSTICE G. ARUL MURUGAN
W.P.No.34665 of 2007 and M.P.No.1 of 2007
M/s.MKR Cashew Exports, Rep. By its Proprietor R.Kandeepan, No.70, Amman Koil Street, Pathirakottai.
.. Petitioner
vs
Tamilnadu Sales Tax Appellate Tribunal (MB), City Civil Court Buildings, IInd Floor,
Chennai – 600 014.
Prayer : Petition filed under Article 226 of the Constitution of India praying to issue a writ of certiorarified mandamus to call for the records of the first respondent in T.A.No.64/2004, quash the impugned proceedings dated 10.10.2007 and further direct the second respondent to accept returns filed by the petitioner for the assessment year TNGST 2000-01.
For Petitioner : Mr.V.Sundareswaran For Respondents : Mr.V.Prashanth Kiran Government Advocate for R2 R1 - Tribunal
1/11
W.P.No.34665 of 2007
ORDER (Order of the Court was made by Dr.ANITA SUMANTH.,J)
The petitioner is a dealer in cashew kernels. For the period 2000 – 2001, returns of turnover were submitted in terms of the Tamil Nadu General Sales Tax Act, 1959 (in short, 'Act'), and an order of assessment was passed on self-assessment basis, accepting the returns filed. Finding some discrepancies therein, the assessment came to be revised under Section 16 (1) of the by way of a revision order dated 31.03.2003.
2/11
W.P.No.34665 of 2007
“ A verification of records revealed that the Assessing Officer has answered all the points raised by the appellant in the assessment proceedings dated 31.3.2003. At the time of arguments, the appellant has stated that the details of first purchase made in 2000-2001 kept in stock, subsequent years, sales were effected. In the return argument filed by the Departmental Representative has stated that this reply was already considered by the Assessing Officer in his assessment order. Moreover, the appellant did not file any quantitative details along with profit and loss account at the time of check of accounts. The plea of appellant that the goods were kept as closing stock and that they were sold in 2001-02 is not acceptable. The arguments advanced by the ld.Authorised Representative as well as the Departmental Representative were
3/11
W.P.No.34665 of 2007
considered and perused the connected records. I am of the opinion that the ld.Assessing Officer has justified in levying tax on the disputed turnover of Rs.26,88,585.00. Hence there is no case for interference. Accordingly, I confirm the levy of tax at 8% on the turnover of Rs.26,88,585.00.”
4/11
W.P.No.34665 of 2007
registered as dealers, the petitioner could still have claimed second sales exemption. However, the issue that arises is as to whether at all there was any first sale in this case.
Section 10. Burden of proof: – (1) For the purpose of assessment of tax under this Act the burden of proving that any transaction or any turnover of a dealer is not liable to tax shall lie on such dealer.
5/11
W.P.No.34665 of 2007
goods had already been subjected to tax under this Act.’ The argument of the petitioner that the burden of establishing that the sales in question are not second sales and that the claim of exemption is incorrect falls on the revenue, is thus devoid of merit and contrary to statute.
6/11
W.P.No.34665 of 2007
in their favour instead. The appeal was allowed in the following terms:
“ 3. Though the order of the Tribunal is one upholding the remit order passed by the Appellate Assistant Commissioner, the learned counsel for the petitioners contends that the direction of the Tribunal that the petitioners are to prove that the twelve dealers from whom they purchased the goods were real persons and that they had in fact paid the tax on the iron and steel is not correct and that it is not the duty of the petitioners to prove that their sellers have in fact paid the tax on their sales. The learned counsel appears to be right in his submission that the petitioners who claimed exemption from tax on the ground that their sales are second sales are bound to show that there has been an anterior taxable sale and that they need not prove that tax had in fact been paid on those anterior sales. To claim the benefit of tax on the ground that their sales are second sales, the petitioners need not show that their sellers have in fact paid tax and it is enough for them to show that the earlier sales are taxable sales and that the tax is really payable by their sellers. Therefore, the direction given by the Tribunal that the petitioners are to show that the tax has been paid by their sellers on the iron and steel goods sold by them to the petitioners does not appear to be correct.”
7/11
W.P.No.34665 of 2007
would suffice that the factum of first sale was established. In other words, non-payment of tax at the point of first sale by the seller would not stand in the way of a claim of second sale, provided that the first sale had been proved.
“ In the previous year also the dealers have effected such purchases from bogus dealers and from the dealers whose total turnover are less than Rs.3/lakhs of rupees and claimed exemption and subsequently a revision of assessment was made and they have accepted the assessment and paid / paying taxes. Further their sales during the year 2001-02 has been verified and found that they have sold to a tune of Rs.72,009.00 only towards interstate sales during the months of August 2001 and October 2001 for which they have paid the taxes only on 7.8.2002 i.e. after a total delay of more than one year.”
8/11
W.P.No.34665 of 2007
of the demand against the amounts already paid. This issue thus involves the factual question of whether at all there is double taxation which cannot be considered at this stage.
9/11
W.P.No.34665 of 2007
matter falls within the four contours of the phrase 'wilful non-disclosure of assessable turnover'. Hence we uphold the levy of penalty as well.
writ petition. No costs. Connected miscellaneous petition is closed.
Index:Yes Neutral Citation:Yes ssm
To
10/11
W.P.No.34665 of 2007
DR. ANITA SUMANTH,J. and G. ARUL MURUGAN.,J
ssm
W.P.No.34665 of 2007
07.08.2024
11/11
2 issues framed by the court
Whether the dealer discharged its statutory burden under Section 10 TNGST Act to prove first sales supporting a second-sales exemption claim.
Whether penalty under Section 16(2) for wilful non-disclosure was justified where the exemption claim relied on fictitious dealers.
Colour shows how this judgement treated each authority
Govindan and Co. v The State of Tamil NaduDistinguished¶20
Govindan and Co., v The State of Tamil Nadu [(1975) 3 STC 50 (Mad)]
Kathiresan Yarn Stores v The State of Tamil NaduReferred
Kathiresan Yarn Stores v The State of Tamil Nadu [(1978) 42 STC 121]
7 provisions across 2 enactments
M/s.MKR Cashew Exports, rep. by its Proprietor R.Kandeepan
The Secretary, Tamilnadu Sales Tax Appellate Tribunal (MB)
The Deputy Commercial Tax Officer, Panruti (Rural)
Anita Sumanth
G. Arul Murugan
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
