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The State of Tamil Nadu Vs. Indian Metal and Metallurgical Corporation - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtChennai High Court
Decided On
Case NumberTax Case No. 469 of 1974
Judge
Reported in[1978]41STC165(Mad)
AppellantThe State of Tamil Nadu
RespondentIndian Metal and Metallurgical Corporation
Appellant Advocate Additional Government Pleader
Respondent AdvocateC.S. Chandrasekara Sastri, ;C. Venkataraman and ;C. Natarajan, Advs.
DispositionPetition dismissed
Cases ReferredPavadai Chettiar Sons v. State of Madras
Excerpt:
.....business of manufacturing brass sheets and circles as well as stainless steel and brassware. the assessing authority levied penalty also, for the failure of the assessee to disclose the said transactions in the returns. 2,178. the assessee disputed this addition as well as the levy of penalty before the appellate assistant commissioner. 4. on the facts, we are satisfied that the filing of the certificates before the appellate assistant commissioner cannot be taken exception to because the assessee was under the bona fide impression that the said sales were not liable to tax at all, but they were filed when the alternative contention was taken. section 12(3) provides for the levy of penalty in cases where the assessment is made under section 12(2). section 12(2) provides that if no..........sister concerns were not supported by usual sale bills. they were not also recorded as sales. the assessing authority, therefore, considered that these transactions were undisclosed sales and he added a sum of rs. 19,367.92 being twice the amount of rs. 9,683.96 on the ground that to the extent of the amount equal to the supplies made to messrs. devi cine projector manufacturing company, there were probable omissions. the assessing authority levied penalty also, for the failure of the assessee to disclose the said transactions in the returns. the penalty so levied came to rs. 2,178. the assessee disputed this addition as well as the levy of penalty before the appellate assistant commissioner. the appellate assistant commissioner retained the addition to the extent of rs. 9,683.96 as.....
Judgment:

Sethuraman, J.

1. The assessee was carrying on business of manufacturing brass sheets and circles as well as stainless steel and brassware. The assessing officer found in the course of the examination of the accounts for the assessment year 1970-71 that the assessee had supplied fabricated materials worth Rs. 9,683.96 to Messrs. Devi Cine Projector Manufacturing Company, which is a sister concern. The supply of these materials to the sister concerns were not supported by usual sale bills. They were not also recorded as sales. The assessing authority, therefore, considered that these transactions were undisclosed sales and he added a sum of Rs. 19,367.92 being twice the amount of Rs. 9,683.96 on the ground that to the extent of the amount equal to the supplies made to Messrs. Devi Cine Projector Manufacturing Company, there were probable omissions. The assessing authority levied penalty also, for the failure of the assessee to disclose the said transactions in the returns. The penalty so levied came to Rs. 2,178. The assessee disputed this addition as well as the levy of penalty before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner retained the addition to the extent of Rs. 9,683.96 as shown by the books and deleted the balance of Rs. 9,683.96 added by the Deputy Commercial Tax Officer. As regards penalty, he considered that the assessee had suppressed the sales in the A-2 returns and had also wilfully omitted the sales in the regular sales accounts and monthly returns. He, therefore, confirmed the levy of penalty and, in doing so, relied on a decision of this court in Pavadai Chettiar Sons v. State of Madras [1968] 21 S.T.C. 67. The assessee appealed to the Sales Tax Appellate Tribunal contesting the addition of Rs. 9,683.96 and also the penalty levied. The contention taken before the Tribunal was that the assessee did not consider them as actual sales. Alternatively, the contention taken was that the transactions were covered by Section 3(3) of the Act. It was pointed out in support of the alternative contention that the relevant declarations have been filed before the Appellate Assistant Commissioner, which should have been accepted. The contention regarding penalty was that it could not be levied on the facts here as the books and vouchers maintained in the usual course of business contained all these transactions. Before the Tribunal, there was a concession that goods to the extent of Rs. 9,683.96 could be the subject of tax liability. The Tribunal, accepting the declaration forms already filed before the Appellate Assistant Commissioner, held that the assessee was eligible for the concessional rate of tax at 2 per cent under Section 3(3) on a sum of Rs. 8,177.90. As regards the penalty, in the view of the Tribunal, the amounts had been duly entered in the regular books and, therefore, the penalty was not liable to be levied. The State has challenged this order of the Sales Tax Appellate Tribunal.

2. We shall first consider the question as to whether the Tribunal was justified in holding that the sum of Rs. 8,177.90 was eligible for the concessional rate of tax at 2 per cent. Section 3(3) provides that notwithstanding anything contained in Sub-section (1) or Sub-section (2), the tax payable by a dealer in respect of any sale of goods mentioned in the First Schedule by such dealer to another for use by the latter as component part of any other goods mentioned in that schedule, which he intends to manufacture inside the State for sale, shall be at the rate of only two per cent on the turnover relating to such sale. There is a proviso thereto to the effect that the provisions of this Sub-section shall not apply to any sale unless the dealer selling the goods furnishes to the assessing authority in the prescribed manner a declaration duly filled in and signed by the dealer to whom the goods are sold containing the prescribed particulars in a prescribed form obtained from the prescribed authority. The assessee had not, in accordance with the provisions of Rule 22(5), filed the relevant certificates along with the monthly return or at any time before the final assessment of the accounts for the relevant year. The assessee had not appended any such certificates to the monthly returns or submitted them before the assessing authority before the final assessment. They were, however, filed before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner did not take them into account.

3. The question is whether the certificates so filed before the Appellate Assistant Commissioner could be taken into account in view of the provisions of Rule 22(5) of the Tamil Nadu General Sales Tax Rules. In Gordon Woodroffe and Company (Madras) Private Ltd. v. State of Madras [1968] 21 S.T.C. 120, this court pointed out that there was nothing in the proviso to Section 3(3) to indicate that the declarations should be filed within a prescribed time and that a time-limit could not be prescribed under the rule-making power of the Government. It would, therefore, follow that the time-limit prescribed under Rule 22(5) will not stand in the way of the receipt of these certificates at any later stage.

4. On the facts, we are satisfied that the filing of the certificates before the Appellate Assistant Commissioner cannot be taken exception to because the assessee was under the bona fide impression that the said sales were not liable to tax at all, but they were filed when the alternative contention was taken. There is nothing wrong in taking them into account. When once the certificates are taken into account, then the benefit of the concessional rate of tax under Section 3(3) could be given to the assessee. Therefore, there is nothing contrary to law in the order of the Tribunal granting the benefit of the concessional rate of tax to the assessee on the facts here.

5. The next question is whether the Tribunal was justified in deleting the penalty levied in this case. In the present case, the assessment was originally made under Section 12(2) of the Act as the Deputy Commercial Tax Officer added an estimated amount to the turnover returned by the assessee. Section 12(3) provides for the levy of penalty in cases where the assessment is made under Section 12(2). Section 12(2) provides that if no return is submitted by the dealer under Sub-section (1) within the prescribed period, or if the return submitted by him appears to the assessing authority to be incomplete or incorrect, the assessing authority shall, after making such enquiry as it may consider necessary, assess the dealer to the best of its judgment. The language of this provision shows that the best judgment assessment would be the consequence only in those cases where the return submitted by the assessee appears to the assessing authority to be incomplete or incorrect.

6. In the decision in State of Madras v. Jayaraj Nadar and Sons [1971] 28 S.T.C. 700, the Supreme Court had occasion to consider the question of the leviability of penalty under Section 12(3) in a case where certain items not included in the turnover were discovered from the dealer's own account books and the . assessing authority included them in the dealer's turnover. The Supreme Court pointed out that penalty could be levied under Section 12(3) on the ground that the dealer has submitted an incomplete or incorrect return only if the assessment had to be made to the best of his judgment by the assessing authority and where certain items which are not included in the turnover are discovered from the dealer's own account books and the assessing authority includes those items in the dealer's turnover, the assessment cannot be regarded as based on best judgment and penalty cannot be levied in respect of such items. It was also pointed out that where account books are accepted along with other records, there can be no grounds for making a best judgment assessment.

7. In the present case, as a result of the order of the Appellate Assistant Commissioner, which has been substantially confirmed by the Tribunal, the only amount that has been added to the turnover is as found in the books. The books in this case have been accepted and there is no best judgment assessment in fact as a result of the appellate order. To such a case, as held by the Supreme Court, Section 12(3) will not apply.

8. The learned Additional Government Pleader drew our attention to the decision in Pavadai Chettiar Sons v. State of Madras [1968] S.T.C. 67. We have already noticed that this decision had also been relied on by the Appellate Assistant Commissioner. In that case, the assessee was found to have actually suppressed in his regular accounts as well as monthly returns submitted under Rule 18 of the Madras General Sales Tax Rules, 1959, the turnover disclosed in an anamath pocket note-book, which was discovered by the authorities during the inspection of the assessee's premises. However, before the final assessment was made, the assessee filed a supplementary return including the turnover disclosed in the pocket note-book. On the question whether penalty could be levied on the assessee under Section 12(3) of the Act, it was held therein that the filing of the supplementary return would not be a ground for condoning the assessee's wilful default and that the assessing authority would be competent to levy a penalty on him. We do not think that this case has any relevance to the point at issue before us. This is not a case where the assessee after suppressing certain transactions and after detection filed a supplementary return and relied on it as a shield against the levy of penalty. We do not, therefore, think it necessary to go further into the decision. We consider that the Sales Tax Appellate Tribunal was right in deleting the penalty also.

9. The tax revision petition is dismissed. The assessee will be entitled to its costs. Counsel's fee Rs. 250.


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