Allowed

The State of Tamilnadu v. Jain Marketing

Madras HC22 Sept 2025TC(MD)/151/2012

Case brief

AI extract

What is this about?

In a tax case revision, the Madurai Bench allowed the Revenue's appeal, restoring an assessment order for sales suppression of Rs.31,63,725 and a penalty. The court rejected the Tribunal's finding that subsequent accounts legitimized the transaction dates.

What did the court decide?

The Tax Case Revision allowed; Tribunal and Appellate Authority orders set aside; Assessing Officer's order restored.

The State of Tamilnadu Vs Jain Marketing — Cheque Dishonour | Madras HC (2025)

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T.C.(MD)No.151 of 2012

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BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT

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DATED : 22/09/2025

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CORAM

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THE HONOURABLE MR.JUSTICE P.VELMURUGAN AND THE HONOURABLE MR.JUSTICE K.K.RAMAKRISHNAN

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T.C.(MD)No.151 of 2012

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The State of Tamil Nadu represented by the Deputy Commissioner (CT), Madurai Division, Madurai.

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... Petitioner vs.

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Tvl.Jain Marketing, Madurai. ... Respondent

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Prayer: Tax Case Revision filed under Section 38 of the TNGST Act, 1959 praying to revise the order of the Sales Tax Appellate Tribunal (Additional Bench), Madurai in M.T.S.A.No.350 of 2002, dated 16.07.2003.

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For Petitioner : Mr.J.K.Jeyaseelan Government Advocate For Respondent : Mr.P.Radhakrishnan

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https://www.mhc.tn.gov.in/judis

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T.C.(MD)No.151 of 2012

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O R D E R

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P.VELMURUGAN, J.

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This tax case has been filed by the Revenue against the order of the Sales Tax Appellate Tribunal (Additional Bench), Madurai, in M.T.S.A.No.350 of 2002, dated 16.07.2003.

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2. The brief facts of the case are as follows:

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The respondent, a dealer, was assessed on a total and taxable turnover of Rs.3,31,97,425 and Rs.34,67,925, respectively, as against the reported total and taxable turnover of Rs.2,97,29,300 and Nil, respectively, for the year 1999-2000. This assessment was based on the results of an inspection conducted by Enforcement Wing officers on 05.10.1999, which revealed the recovery of certain incriminating records. These records led to the determination of sales suppression of Paan Parrag amounting to Rs. 31,63,725. Additionally, the Assessing Officer found sales suppression of Paan Parrag at Rs.3,04,000 based on the verification of stock details, which revealed extra pouches in the pockets to the tune of Rs.1,00,000/-. A penalty under Section 12(3)(b) of the Act was also imposed. Aggrieved by the order of the Assessing Officer, the respondent filed an appeal before the Appellate Assistant Commissioner (CT), who allowed the appeal. The Revenue then filed

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https://www.mhc.tn.gov.in/judis

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T.C.(MD)No.151 of 2012

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an appeal before the Tribunal, which confirmed the findings of the Assistant - Commissioner with the following observations:

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"9. We have examined the findings of the Appellate Assistant Commissioner (CT). In this case, the Appellate Assistant Commissioner (CT) after verifying the entries in slip No.4, with reference to the accounts of the respondent/dealer had come to the conclusion that all the entries found in slip No.4 had been properly accounted for in the accounts of the respondent/dealer. As rightly pointed out by the Appellate Assistant Commissioner (CT), the sales and purchases were reflected in the stock book of the appellants which were also verified by the Inspecting Officers. One of the points raised by the appellant/revenue in the grounds of appeal is that as there was date difference in certain cases in accounting the transactions found in the slips, the Appellate Assistant Commissioner (CT)'s view that the transactions had been accounted for subsequent to inspection cannot be accepted. We have given careful consideration to these points and also found that even though in some cases, there may be difference in the date of accounting, the fact that subsequent accounting of the transactions found in the slips had not been disproved. Hence, the Appellate Assistant Commissioner (CT) has rightly deleted in the estimation made on the basis of entries in the slip No.4. This finding of the Appellate Assistant Commissioner (CT) has not been rebutted by the learned Additional State Representative with any recorded evidence. Hence, we uphold the order of the Appellate Assistant Commissioner (CT) in this regard. Regarding the assessment made on extra pouches, the Appellate Assistant Commissioner (CT) also deleted the assessment made to the tune of Rs.3,04,400/- holding that the respondent/dealer sold panparrag to the retailers in boxes only and did not sell as pouches to his purchasers. Further, the dealers are sending certain extra pouches to encourage sale by dealers without out any sale consideration. Hence, the assessment based on the extra pouches has been rightly deleted by the Appellate Assistant Commissioner (CT) since there is no suppression established. Though the appellant/Revenue has accepted the finding given by the Appellate Assistant Commissioner (CT) in respect of the

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T.C.(MD)No.151 of 2012

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omitted turnover relating to pouches, they disputed that turnover also. On verification of the facts and examination of the orders of the Appellate Assistant Commissioner (CT) we found that the respondent being a wholesale dealer the entire quantity were available in boxes. There is no proof established that the dealer/respondent had sold extra pouches separately. Thus, the appellant/State has not let in any material evidence that it represents any suppression. Accordingly, penalty has also been rightly deleted by the Appellate Assistant Commissioner (CT). In view of the above the facts and circumstances of the case, we sustain the order of the Appellate Assistant Commissioner (CT) and the appeal filed by the stands dismissed."

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Challenging the same, the Revenue has filed this appeal before this court.

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3. The learned Government Advocate appearing for the petitioner submits that the Tribunal erred in deleting the turnover on the ground that the entries found in the incriminating slips were subsequently accounted for. This is not acceptable because, but for the inspection, the suppression would not have come to light. He further submits that the Tribunal failed to consider that the dealers had admitted to the suppression during the inspection and cannot now retract their own statements. The learned counsel also contends that the Tribunal overlooked the fact that the dealers had not produced any accounts before the Enforcement Wing officers to substantiate the genuineness of the entries found in the slips. Furthermore, the assessment order itself mentions that there was a variation between the invoice dates and

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T.C.(MD)No.151 of 2012

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the entries found in the slips. Therefore, the reconciliation of the accounted invoices with the entries in the slips is neither reliable nor acceptable. There is every possibility of unaccounted purchases, and thus, the assessment and estimation made by the Assessing Officer are reasonable and justified.

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4. The learned counsel appearing for the respondent/dealer contends that, although the Assessing Officer, based on the inspection conducted by the Enforcement Wing Officer on 05.10.1999, found certain incriminating records and determined sales suppression of Paan Parrag amounting to Rs. 31,63,725/- along with additional suppression due to extra pouches found and imposed penalty, the Appellate Assistant Commissioner, on proper appreciation of the facts and evidence, rightly deleted the turnover on the basis of subsequent accounting of the entries. The Tribunal, after careful consideration, upheld this decision, which, according to the learned counsel, requires no interference. Hence, he prays for the dismissal of the tax case.

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5. Heard the learned counsel on either side and perused the materials available on record.

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6. The tax case was admitted on the following substantial questions of

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law:-

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T.C.(MD)No.151 of 2012

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"(i) Whether the Tribunal is correct in upholding the order of the Appellant Assistant Commissioner, which deleted the assessment made on suppression of Rs.34,67,925/- unearthed at inspection?

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(ii) Whether the Tribunal is correct in deleting the penalty levied under Section 12(3)(b) of the TNGST Act 1959?"

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7. On a careful consideration of the rival submissions and the materials

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on record, this Court finds that the core dispute relates to the entries contained in certain slips recovered during the inspection conducted by the Enforcement Wing Officers on 05.10.1999. It is not in dispute that, at the time of inspection, the dealer had not produced sufficient materials such as books of accounts or stock registers to show that the transactions noted in the slips had been properly recorded. The assessment order also notes that there was a clear difference between the dates of the invoices and the dates

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of the entries in the slips, which indicates that such transactions were not recorded in the regular accounts at the time they actually took place.

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8. The explanation offered by the dealer that those entries had later been recorded in the books was accepted by the Appellate Assistant Commissioner and the Tribunal. However, this reasoning overlooks the fact that the reconciliation relied upon was prepared only after the inspection and

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T.C.(MD)No.151 of 2012

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was not supported by any records made at the time of the transactions. When suppression of sales is detected during an inspection and incriminating slips are recovered, the burden lies squarely on the dealer to prove, by clear and convincing evidence, that the transactions were already recorded. In the absence of such records made at the time, a mere explanation given afterwards cannot remove the incriminating nature of the slips recovered.

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9. It is also important to note that the dealer had voluntarily admitted the suppression at the time of the inspection. Such an admission made at the same time has strong evidential value. There is nothing on record to show that the admission was obtained by force or that it was later withdrawn by producing any reliable material to the contrary. It is a well-settled principle that a voluntary admission cannot be disregarded lightly, and a dealer who has admitted the suppression cannot be allowed to deny that admission without any independent documentary evidence.

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10. As regards the finding of the Appellate Authorities that the alleged “extra pouches” were merely complimentary pouches given free of cost, the same also does not stand to reason. The inspection report specifically records that each box contained more pouches than the declared quantity. The dealer did not produce any material to prove that such pouches were intended only

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T.C.(MD)No.151 of 2012

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as free samples and were not sold. On the contrary, the presence of excess stock over and above what was recorded in the books supports the inference drawn by the Assessing Officer that there was suppression of sales. The Appellate Authorities have treated the excess pouches as complimentary purely on conjecture and without any evidentiary basis.

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11. The concurrent orders of the Appellate Assistant Commissioner and the Tribunal also do not deal with the clear finding of the Assessing Officer that there was a mismatch between the dates of the invoices and the entries in the slips, which is a key issue in this case. When there is no evidence to show that the transactions were recorded when they actually happened, and when excess stock is found, the conclusion of suppression drawn by the Assessing Officer is fully justified. The reasoning adopted by the Appellate Assistant Commissioner and the Tribunal that the transactions were recorded later, despite the admitted discrepancies, is contrary to the materials on record and is clearly unsound.

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12. In these circumstances, this Court finds that the Assessing Officer had rightly concluded, on the basis of the slips recovered during the inspection and the excess stock found, that there was suppression of sales to the extent of Rs.31,63,725/-, and had accordingly brought the turnover to

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T.C.(MD)No.151 of 2012

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tax, besides levying penalty under Section 12(3)(b) of the TNGST Act. The findings of the Appellate Assistant Commissioner (CT) and the Tribunal in setting aside the said assessment are wholly unsustainable, as they overlook the absence of records made at the time of the transactions, the voluntary admission of suppression made by the dealer during the inspection, and the presence of excess stock which directly supports the conclusion of suppression drawn by the Assessing Officer.

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13. For all the above reasons, the substantial questions of law are answered in favour of the Revenue. The order of the dated 16.07.2003 in M.T.S.A.No.350 of 2002 and that of the Appellate Assistant Commissioner (CT) are set aside, and the assessment order passed by the Assessing Officer is restored. The tax case stands allowed. No costs.

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(P.V., J.) (K.K.R.K., J.) 22/09/2025

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NCC:Yes/No Index:Yes/No Speaking/Non-speaking order

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r n s

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T.C.(MD)No.151 of 2012

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1. The Deputy Commercial Tax Officer, Tamil Sangam Road Circle, Madurai.

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2. The Appellate Assistant Commissioner (CT), Madurai (North)

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3. The Sales Tax Appellate Tribunal (Additional Bench), Madurai.

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Page 10 of 11

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https://www.mhc.tn.gov.in/judis

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T.C.(MD)No.151 of 2012

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P.VELMURUGAN, J. and K.K.RAMAKRISHNAN, J.

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r n s

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T.C.(MD)No.151 of 2012

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22 / 09 /2025

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https://www.mhc.tn.gov.in/judis

The State of Tamilnadu v. Jain Marketing

Case brief

What is this about?

What did the court decide?

The State of Tamilnadu v. Jain Marketing

Case brief

What is this about?

What did the court decide?

What the court decided

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Issues for consideration

Statutes considered

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