1. In this case the Sales Tax Appellate Tribunal found definitely that the assessee did maintain a separate anamath chittai and the major portion of the purchases of yarn as noted in the chittai was not proved to have been entered in the regularly maintained books. They estimated the turnover suppressed by this method at about Rs. 30,000. Nevertheless the Tribunal took the view that there was no justification for the action of the Deputy Commercial Tax Officer in depriving the assessee of the benefits of the licence. In their own opinion there was no breach of the conditions of the licence. In their view so far as the regularly maintained accounts were concerned, the assessees should have been granted the benefits of the licence. In the result they held that the turnover as disclosed in the regularly maintained books should be exempted from taxation but as regards the estimated turnover as per the anamath chittai the assessees were not entitled to the benefit and they were taxable. It is to revise this order of the Appellate Tribunal that the State has filed the above revision case.
2. In our opinion the Tribunal was clearly wrong. The assessees had been granted a licence under Form III contained in the Appendix to the Madras General Sales Tax Rules, 1939. That licence is expressly granted subject to the provisions of the Madras General Sales Tax Act, 1939, and the rules made thereunder and to the following among other conditions, namely :-
3. 'In the case of cotton yarn other than hand-spun yarn and cloth woven on handlooms wholly or partly with mill yarn, the licensees shall keep accounts showing the names and addresses of the persons from whom they bought and to whom they sold the yarn or the cloth, as the case may be.
4. The finding of the Appellate Tribunal is that the accounts regularly maintained, on the basis of which the assessee claimed exemption of tax, were not full and proper accounts because there were material omissions of entries of transactions which admittedly should have been included in the regular books of account. In effect, therefore, the assessees have failed to keep an account of the transactions as required by the rules and the licence. It is therefore a clear contravention of a condition of the licence. Now Section 6-A says that if any of the conditions of a licence are contravened or are not observed, the sales of the dealer with effect from the commencement of the year in which such contravention or non-observance takes place may be assessed to tax or taxed under Section 3 as if the provisions of Section 5 or the notification under Section 6, as the case may be, did not apply to such sales and notwithstanding that a licence, if any, taken out or renewed by the dealer continued or continues to be in force during the year. Undoubtedly from the contravention of the condition of the licence it would follow that the assessee would lose the benefit of the licence because the provisions as to exemption contained in Sections 5 and 6 would automatically cease to apply to the sales of such a dealer who has contravened the condition with effect from the commencement of the year in which the contravention has taken place.
5. It was contended on behalf of the assessee that even if the ostensibly kept account was not accurate and there were material omissions of relevant entries from such accounts, all that the assessing authority can do is to grant the assessees exemption in respect of the transactions disclosed in the regularly kept books of account and tax only the total turnover on the aggregate of the entries which have been discovered to have been omitted from the regularly kept account. We are unable to see any basis to sustain such an argument. Section 6-A is quite clear that all sales with effect from the commencement of the year in which such contravention takes place will lose the benefit of the exemption under Sections 5 and 6 of the Act and not merely sales in respect of which there has been a contravention of the rules or the conditions of the licence. With great respect we are in entire agreement with the view taken by a Division Bench of this Court in State of Madras v. Karuppan Chettiar : (1956)2MLJ601 . The revision is accepted and the order of the Appellate Tribunal in so far as it allowed the appeal of the assessee on the ground above-mentioned is set aside. The result would be that the appellant would not be entitled to exemption on Rs. 2,24,520-4-9. The Deputy Commercial Tax Officer shall make a re-assessment in the light of our decision. No order as to costs.