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Khetty Traders and anr. Vs. Deputy Commercial Tax Officer Ii, Inspection Wing, Zone V - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtChennai High Court
Decided On
Case NumberWrit Petition Nos. 1626 and 1627 of 1971
Judge
Reported in[1973]32STC484(Mad)
AppellantKhetty Traders and anr.
RespondentDeputy Commercial Tax Officer Ii, Inspection Wing, Zone V
Appellant AdvocateP. Veeraraghavan, Adv.
Respondent AdvocateK. Venkataswami, First Assistant Government Pleader
Excerpt:
.....power, however, is conditioned upon the prescribed authority being satisfied that any person has committed an offence or is reasonably suspected of having committed an offence under the act. one is to bring to book such an offender in a criminal court and the other is to act under section 46 if he is satisfied that he has committed the offence or in the alternative if he entertains a reasonable suspicion that the person has committed an offence. ordinarily, if an accountant or a salesman in a trading house is unable to specifically state whether any books of account like stock-book or the production account are maintained or not, that may not by itself lead to a reasonable inference that there has been a violation of the prescriptions under the act. it is unusual to expect a person who..........information about certain laches on the part of the dealer in the matter of the maintenance of the prescribed account books, he has two options before him. the first one is to treat him as an offender within the meaning of section 45 of the act and bring such an offence to the notice of the presidency magistrate or a magistrate of the first class and bring home the offence to the person concerned. in the instant case, obviously the offence with which the petitioners could be charged is one under section 45(2)(d) which is, no doubt, a general section dealing with wilful acts of contravention of any of the provisions of the act. it is not in dispute that under rule 26(9) of the rules a stock-book should be maintained by a dealer and under rule 26(14) a production account should also be.....
Judgment:
ORDER

Ramaprasada Rao, J.

1. The petitioners are aggrieved by a notice issued by the Deputy Commercial Tax Officer II, Inspection Wing, Madras-2, in and by which they were called upon to pay a compounding fee of Rs. 50 or face a prosecution if they are not inclined to suffer the compounding fee, for having violated Rules 26(9) and 26(14) of the Tamil Nadu General Sales Tax Rules, 1959. It appears that the inspection wing of the commercial taxes department inspected the business premises of the petitioners on 20th April, 1971, at about 7 p. m. The salesman in one case and the accountant in another were the persons who were in-charge of the business premises. When they were asked to produce the stock account and the production account, which every dealer has to maintain under the provisions of the Act and the Rules made thereunder, the persons in-charge of the firm categorically stated that there were no such books kept by them in regular course. The persons in custody of the place gave statements to the inspecting officer to that effect and expressed their inability to satisfy immediately whether the stock was in accordance with the purchases and sales effected by them. In those circumstances, the Deputy Commercial Tax Officer of the Inspection Wing gave the challenged notice to each of the writ petitioners, one of which runs as follows :

For the breach of Rules 26(9) and 26(14) you are liable to be prosecuted under Rule 56 before the Fifth Presidency Magistrate, Egmore, Madras-8. In lieu of prosecution, you are given an option to compound the offences departmentally in a sum of Rs. 50 (Fifty only). You are required to state within a week from the date of receipt of this notice whether you are agreeable to this offer of composition. If no reply is received within the stipulated time, it will be presumed that you are not agreeable to the offer of composition and a charge-sheet will be filed before the Magistrate without further notice.

2. The petitioners' main grievance is that no partner of the firm was given any effective opportunity to prove to the contrary and the assumption made by the Deputy Commercial Tax Officer that an offence has been committed or reasonably suspected to have been committed within the meaning of Section 46 of the Act is not based on satisfactory material. Their further contention is that the Deputy Commercial Tax Officer II, not being the assessing authority, is not the person who is authorised to issue the notice under challenge.

3. It is no doubt true that under Section 46, the prescribed authority has the power to issue a compounding notice. The exercise of such power, however, is conditioned upon the prescribed authority being satisfied that any person has committed an offence or is reasonably suspected of having committed an offence under the Act. In a case where the inspection wing of the commercial taxes department secures first-hand information about certain laches on the part of the dealer in the matter of the maintenance of the prescribed account books, he has two options before him. The first one is to treat him as an offender within the meaning of Section 45 of the Act and bring such an offence to the notice of the Presidency Magistrate or a Magistrate of the First Class and bring home the offence to the person concerned. In the instant case, obviously the offence with which the petitioners could be charged is one under Section 45(2)(d) which is, no doubt, a general Section dealing with wilful acts of contravention of any of the provisions of the Act. It is not in dispute that under Rule 26(9) of the Rules a stock-book should be maintained by a dealer and under Rule 26(14) a production account should also be equally maintained. When the persons in-charge of the dealers' firm expressly stated that they had no such accounts and that the firms did not maintain any such accounts, then it is not improper for the inspecting officer or the prescribed authority to reasonably suspect that the petitioners have wilfully contravened one of the mandates prescribed in the Act and the Rules made thereunder. I have referred to two options which are open to the statutory authority under the Act in such circumstances. One is to bring to book such an offender in a criminal court and the other is to act under Section 46 if he is satisfied that he has committed the offence or in the alternative if he entertains a reasonable suspicion that the person has committed an offence. In the instant case, the Deputy Commercial Tax Officer, Inspection Wing, chose to adopt the second alternative referred to.

4. Having adopted such a procedure, it is for consideration whether the prescribed authority in the circumstances could have reasonably suspected the petitioners of having committed an offence. Ordinarily, if an accountant or a salesman in a trading house is unable to specifically state whether any books of account like stock-book or the production account are maintained or not, that may not by itself lead to a reasonable inference that there has been a violation of the prescriptions under the Act. But in the instant cases, the notices under challenge were served on the very persons who gave the statement admitting that such prescribed account books were not maintained by the firm. It is unusual to expect a person who is a salesman or an accountant to receive notices from the sales tax department as well and on the top of it claim that he is signing the notice for the petitioner-company. If, therefore, the petitioner-company or its partners authorised such salesman or accountant to represent the firm and impliedly allowed them to commit themselves for the firm, then they cannot escape the consequences that naturally flow from such a situation. It is this peculiar aspect in the case that has prompted the officer to reasonably suspect that the petitioners have committed an offence. He having availed himself of the second alternative which he could adopt in such situations I am of the view that this is a case where he gave the option to the petitioners to compound because he was reasonably satisfied of the commission of the offence within the meaning of Section 45(2)(d). I do not think that in the facts and circumstances of this case, there has been any excessive exercise of jurisdiction or erroneous exercise of jurisdiction or lack of jurisdiction for me to issue a writ of prohibition prohibiting the respondent from proceeding with the further action under the challenged notices. The learned counsel for the petitioners now says that the petitioners are willing to compound the offence by paying the sum demanded in the impugned notices. Though the time given by the officer has lapsed, in the interests of justice and as the petitioners were canvassing the position of law, I allow them to compound the offences by paying the amount demanded in the impugned notices within a week from this day. If the amount is not paid, the respondent would be in order to chargesheet the petitioners before a Magistrate in accordance with law.


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