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East India Corporation Vs. State of Tamil Nadu - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtChennai High Court
Decided On
Case NumberT.C. No. 312 of 1975 (Revision No. 43 of 1975)
Judge
Reported in[1979]43STC129(Mad)
AppellantEast India Corporation
RespondentState of Tamil Nadu
Appellant Advocate S. Swaminathan, Adv.
Respondent Advocate The Additional Government Pleader
DispositionPetition dismissed
Cases ReferredNew Delhi v. Pooran Mall
Excerpt:
- .....assessees' accounts and found that the gross turnover was rs. 3,56,49,360.05 and that there were inter-state sales of cotton to the extent of rs. 12,77,734.80 in the period from 1st july, 1957, to 31st march, 1958. therefore, the taxing officer issued notice to the assessees and considered and overruled their objections that the inclusion of sales tax collection in the turnover is improper and unwarranted and that the sales tax collected should be deducted from the taxable turnover and held that the assessees are eligible for deduction towards central sales tax only from 16th november, 1957, as per the formula given in rule 11(2) of the central sales tax rules, 1957, and he determined, by an order dated 25th august, 1960, the net taxable turnover liable to central sales tax at one per.....
Judgment:

Varadarajan, J.

1. This tax revision case is filed by the assessees under Section 38 of the Tamil Nadu General Sales Tax Act for revising the order of the Sales Tax Appellate Tribunal (Additional Bench), Madurai.

2. The assessees are dealers in cotton, cotton seeds, etc., and they are registered dealers under the Central Sales Tax Act, 1956, for the assessment year 1957-58. They returned a net turnover of Rs. 12,64,309.86 for the assessment year 1957-58. The assessing officer examined the assessees' accounts and found that the gross turnover was Rs. 3,56,49,360.05 and that there were inter-State sales of cotton to the extent of Rs. 12,77,734.80 in the period from 1st July, 1957, to 31st March, 1958. Therefore, the taxing officer issued notice to the assessees and considered and overruled their objections that the inclusion of sales tax collection in the turnover is improper and unwarranted and that the sales tax collected should be deducted from the taxable turnover and held that the assessees are eligible for deduction towards Central sales tax only from 16th November, 1957, as per the formula given in Rule 11(2) of the Central Sales Tax Rules, 1957, and he determined, by an order dated 25th August, 1960, the net taxable turnover liable to Central sales tax at one per cent as Rs. 12,76,440.27 and the balance of the tax payable as Rs. 122.33 after deducting the tax of Rs. 12,642.07, which had already been paid. This order was confirmed by the Appellate Assistant Commissioner in the assessees' appeal by an order dated 5th December, 1960. In the Board of Revenue's suo motu revision made under Section 34 of the Tamil Nadu General Sales Tax Act it was found that the turnover assessed represented only the sale value of cotton despatched by the assessees from this State to the mills in other States, and that, apart from such transactions, the assessees had sold cotton to mills inside the State as also to mills outside the State while the goods were moving from one State to another. The Board of Revenue considered the objections and fixed the total turnover taxable at one per cent under the Central Sales Tax Act by an order dated 22nd August, 1964, at Rs. 1,53,07,997.75, after allowing deductions on the turnover of Rs. 1,32,27,712.22. In the assessees' appeal to this Court against that order of the Board of Revenue it was held by this court, following the decision of the Supreme Court in State of Mysore v. Yaddalam Lakshminarasimhiah Setty and Sons [1965] 16 S.T.C. 231, that the inter-State transactions of the assessees in cotton are not taxable under the Central Sales Tax Act because under the Tamil Nadu General Sales Tax Act, 1959, sale of cotton was taxable at the stage of last purchase. The revenue took the matter in appeal to the Supreme Court in Civil Appeal No. 565 of 1967. After the disposal of the appeal filed against the order of the Board of Revenue by this Court, the Central Sales Tax Act,. 1956, was amended by the Central Sales Tax (Amendment) Ordinance of 1969, which was later substituted by Act 28 of 1969, whereby in Section 2(j) of the Central Sales Tax Act, for the words 'and determined in the prescribed manner', the words 'and determined in accordance with the provisions of this Act and the Rules made thereunder' had been substituted and should be deemed always to have been substituted. The Supreme Court had considered the effect of the Ordinance in the decision in State of Kerala v. P. P. Joseph & Co. and Joseph [1970] 25 S.T.C. 483, and observed that the Ordinance superseded the Supreme Court's decision in the said Yaddalam's case [1965] 16 S.T.C. 231 on the ground that it is made clear by the Ordinance that even if no sales tax was leviable under the General Sales Tax Act in respect of inter-State transactions of sale, tax will be leviable on the sale of goods effected by a dealer in the course of inter-State trade according to the sales tax law of the appropriate State, and that by Section 9(2) of the Central Sales Tax Act, as amended by the Ordinance, the procedural law prescribed by the general sales tax law of the State applied in the matter of assessment, reassessment, collection and enforcement of payment under the Central Sales Tax 'Act and that the Ordinance was retrospective in operation from the date on which the principal Act came into force. The Ordinance, which was replaced by the Central Act 28 of 1969, amended even Section 9 of the Act. Section 9(1) of the amended Act lays down that:

The tax payable by any dealer under this Act on sales of goods effected by him in the course of inter-State trade or commerce, whether such sales fall within Clause (a) or Clause (b) of Section 3, shall be levied by the Government of India and the tax so levied shall be collected by that Government in accordance with the provisions of Sub-section (2), in the State from which the movement of the goods commenced.

3. Sub-section (2) of the amended Section 9 lays down that:

Subject to the other provisions of this Act and the rules made thereunder, the authorities for the time being empowered to assess, reassess, collect and enforce payment of any tax under the general sales tax law of the appropriate State shall, on behalf of the Government of India, assess, reassess, collect and enforce payment of tax, including any penalty, payable by a dealer under this Act as if the tax or penalty payable by such a dealer under this Act is a tax or penalty payable under the general sales tax law of the State.

4. The amended Section 9 says that that section shall be deemed always to have been substituted in the original Act. In view of these amendments of the Central Sales Tax Act, the Supreme Court allowed C. A. No. 565 of 1967, preferred by the revenue, and set aside the judgment of this Court and the orders of the departmental authorities and directed that the transactions of sale shall be assessed to tax by the taxing officer in the light of the Central Sales Tax Act, as amended by the amending Act 28 of 1969.

5. Subsequently, the taxing officer took up the matter, and it was contended before him that the proposed assessment was time-barred and, in most cases, the goods were sent directly by up-country dealers to buyers and that the assessees had no hand in those transactions. The assessees further contended that they were unable to produce the records called for by the assessing officer on the ground that they relate to the assessment year 1957-58. The taxing officer overruled the objections and revised the assessment and determined the turnover of inter-State sales at Rs. 1,53,07,997.00 as proposed in the notice issued to the assessees and the balance of the tax as Rs. 1,40,315.58 after adjusting the tax of Rs. 12,764.40 already paid.

6. The assessees appealed to the Appellate Assistant Commissioner, and it was contended that the proposed reassessment was barred by limitation. This was rejected by the Appellate Assistant Commissioner on the ground that the reassessment had been made only as per the directions of the Supreme Court given on 7th January, 1971, while disposing of C. A. No. ,565 of 1967 and that when once the assessment is made, there is no time-limit for making the reassessment in view of the decisions of the appellate and revisional authorities and that the contention regarding limitation was not tenable. The Appellate Assistant Commissioner found that there were some corrections and wrong items in the figures adopted by the assessing officer. In other respects, he agreed with the assessing officer regarding the inter-State nature of the impugned sales and refixed the inter-State turnover at Rs. 1,50,71,448.83 taxable at one per cent, deleting a sum of Rs. 2,36,548.92 and he dismissed the appeal with this modification.

7. In the assessees' further appeal to the Tribunal, it was found that there was no dispute that the assessees purchased cotton from the dealers in other States and instructed those dealers to despatch the goods to the ultimate buyers in this State with whom the assessees had entered into contracts for the supply of goods. But it was contended that the assessees were only brokers who brought the up-country sellers and the ultimate buyers together. The goods were found to have been sent by road, rail and sea. The assessees did not produce the railway receipts, bills of lading and any of the contracts. The Tribunal found that there were two sets of contracts in the impugned sales held by the Appellate Assistant Commissioner to be inter-State sales, that there was specific movement of the goods with reference to the contracts of sale with the up-country sellers falling under Section 3(a) of the Central Sales Tax Act and the up-country sellers looked only to the assessees for payment of the invoice value of the goods, and that there were transfers of documents of title to the goods from the assessees to the ultimate buyers falling under Clause (b) of Section 3 of the Central Sales Tax Act in respect of the goods despatched by the up-country sellers for and on behalf of the assessees, leading to the inference that the assessees had retained the right of disposal of the goods before their transfer to the ultimate buyers and that the purchase price and the sale price differed in several cases leading to the conclusion that there were two sets of transactions of sales. The Tribunal accordingly held that the impugned transactions of sales fell under Section 3(b) of the Central Sales Tax Act and are liable to tax at one per cent. The Tribunal rejected the plea of limitation, observing 'The Supreme Court is the highest Court of the land and its directions must be given effect to. The assessment in question and the further proceedings in appeal or revision should undoubtedly run the full course. The appellant (assessees) kept alive the matter and must subject to the laws at all material times.... The plea of limitation raised by the appellant is untenable.

8. In this revision under Section 38 of the Tamil Nadu General Sales Tax Act, this Court can interfere only if the Appellate Tribunal has either decided erroneously or failed to decide any question of law. The Tribunal has found, on sufficient material on the question of fact, that the impugned sales were inter-State sales. The learned counsel for the assessees did not place any material before us to hold that the Tribunal had committed any error of law in coming to the conclusion that the impugned transactions of sales were inter-State sales. Therefore, it is not possible for this Court to go into the question whether those sales were not inter-State sales.

9. The only question of law urged on behalf of the assessees is that the reassessment made more than five years after the expiry of the year to which the tax relates is barred by limitation under Section 16(1) of the Tamil Nadu General Sale's Tax Act, 1959. The learned counsel for the assessees invited our attention in this connection to the decision of a Bench of this Court in Yercaud Coffee Curing Works Ltd. v. State of Tamil Nadu [1977] 40 S.T.C. 531, where it has been stated that under Section 16 of the Tamil Nadu General Sales Tax Act it is competent for the assessing authority in a reassessment proceeding to assess an item of turnover which had been omitted for any reason and that the authority has power to reassess the turnover, even though in the return that turnover is included and the officer then thought that it was exempt. The learned counsel for the assessees relied also upon the decisions in Mathai v. State of Kerala [1964] 15 S.T.C. 710 and Deputy Commissioner of Agricultural Income-tax and Sales Tax, Central Zone, Ernakulam v. Mathai [1966] 18 S.T.C. 443. These cases relate to reassessment of escaped turnover. Even the other decision of the Supreme Court in Deputy Commissioner of Agricultural Income-tax and Sales Tax, Quilon v. Dhanalakshmi Vilas Cashew Co. [1969] 24 S.T.C. 491 , relied upon for the assessees, relates to escaped turnover. There it has been observed that the power under Rule 33, which confers power to assess escaped turnover, is normally to be exercised in matters de hors the record of assessment proceedings. We are not concerned in this case with any escaped turnover, for, the assessing officer, while examining the assessees' accounts, found, in the present case, that there were inter-State sales in cotton to the extent of Rs. 12,77,734.80 from 1st July, 1957, to 31st March, 1958, as stated above, and the further proceedings culminating with the remand of the matter to the assessing officer by the Supreme Court in the judgment dated 7th January, 1971, in C. A. No. 565 of 1967 continued. The learned counsel for the revenue invited our attention to the decision of the Supreme Court in Jaipuria Brothers Ltd. v. State of Uttar Pradesh [1965] 16 S.T.C. 494, which does not, however, help the revenue having regard to the fact that in that case Section 21 of the relevant Act was amended during the pendency of the proceedings in the High Court with retrospective effect from the date when the principal Act came into operation and that the proviso in the amended section stated that nothing contained in the section limiting the time within which any assessment or reassessment may be made shall apply to an assessment or reassessment made in consequence of or to give effect to any finding or direction contained in an order under Section 9, 10 or 11 of that Act. There is no such provision in the Acts with which we are concerned in this case. The learned counsel for the revenue invited our attention to another decision of the Supreme Court in Director of Inspection of Income-tax {Investigation), New Delhi v. Pooran Mall & Sons : [1974]96ITR390(SC) , where it has been held that the period of limitation prescribed by Section 132(5) of the Income-tax Act, 1961, was intended for the benefit of aggrieved persons and it was competent for them to agree for a fresh disposal of the case by the Income-tax Officer and thereby waive it and that the order of the High Court quashing the earlier order of the Income-tax Officer and permitting the department to pass a fresh order was in consequence of such waiver and the officer had jurisdiction to pass a fresh order and the order made in pursuance of a direction given under Section 132(12) or by a court in writ proceedings was not subject to the limitations prescribed under Section 132(5). The principle laid down in this decision rendered under the Income-tax Act would apply to the facts of the present case where the reassessment has been made as per the directions of the Supreme Court given on 7th January, 1971, in C. A. No. 565 of 1967, having regard to the fact that Sections 2 and 9 of the Central Sales Tax Act have been amended with retrospective effect from the date of commencement of the principal Act and the liability for Central sales tax has been made in respect of inter-State sales, even though under the general sales tax law relating to this State, the sale of cotton was taxable only at the stage of last purchase. We are, therefore, of the opinion that the plea of limitation raised on behalf of the assessees is untenable.

10. In the result, we dismiss the tax revision case with the costs of the revenue. Advocate's fee Rs. 500. Petition dismissed.


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