Roshan Trading Corporation v. The State of Tamil Nadu

In the High Court of Judicature at MadrasDated: 28.09.2012CoramThe Honourable Mrs.JUSTICE CHITRA VENKATARAMANandThe Honourable Mr.JUSTICE K.RAVICHANDRABAABUTax Case (Revision) No.1757 of 2008Roshan Trading CorporationNo. 7, Jaffar Sarang StreetChennai.... PetitionerVs.The State of Tamil Nadurep. by the Deputy Commissioner (CT)Chennai (North) Division .... RespondentPETITION filed before the Tamil Nadu Taxation Special Tribunal torevise the order dated 29.1.2002 made in S.T.A.No. 220/99 on the fileof the Sales Tax Appellate Tribunal (Addl. Bench) Chennai for theassessment year 1989-90. After the abolition of the Tribunal, thematter has been transferred to this Court and renumbered. Against theorder of the Appellate Assistant Commissioner(CT) VII, IV Floor,Kuralagam Annexe, Chennai - 108 dated 29.10.1998 and made in AppealNo. and year 55/98 and against the order of the Commercial TaxOfficer, Harbour I Assessment Circle - Kuralagam Annexe, Madras - 108dated 6.2.92 and made in TNGST.No.000264189-90.For Petitioner : Mr.N.Inbarajan For Respondent: Mr.J.Aaditya Reddy, Government Advocate (Taxes)-------O R D E R(Order of the Court was made by CHITRA VENKATARAMAN,J.)The assessee is on revision as against the orders of the SalesTax Appellate Tribunal for the assessment year 1989-90 by raising thefollowing questions of law:-"1. Whether the Appellate Tribunal is right inallowing the Enhancement Petition filed by the State,when the first appellate authority has allowed therespective portion after giving a detailed discussion?2. Whether the Appellate Tribunal is right inconfirming the levy of tax on second sales exemption on https://hcservices.ecourts.gov.in/hcservices/ sale of declared goods on a mere ground that theregistration certificate of the seller is cancelled withretrospective effect?3. Whether the Appellate Tribunal is correct indeying second sales exemption by negating the law laiddown by the Apex Court in 109 STC 439, where it has beenheld that "whatever might be the effect of aretrospective cancellation upon the selling dealer, itcould have no effect upon the person who had act upon thestrength of a registration certificate when theregistration was current?4. Whether the Appellate Tribunal is right inconfirming the levy of tax on second sales of declaredgoods at the hands of the petitioner on the ground thatthough the sellers are registered dealers and theirstatement has been obtained by the department but stillthe tax liability is rightly fastened on the petitioner?5. Whether the Appellate Tribunal is correct indenying the opportunity of cross-examination of thesellers whose statement has been relied on against thepetitioner by holding that it is the responsibility ofthe petitioner to bring their seller for cross-examination?6. Whether the Appellate Tribunal is correct inconfirming the levy of tax on second sales of declaredgoods, when the commodity is taxable at single point taxand duly confirmed by the Apex Court in 114 STC 1,wherein it has been categorically held that the point oflevy cannot be shifted in so far as declared goods areconcerned?2. The assessee is a dealer in iron and steel. At the timeinspection conducted on 30.8.90, the Enforcement Wing Officials foundthat no inventory details were maintained and produced for the stockheld on 1.4.90 and no day today stock account was maintained forinterstate purchases. At the time of inspection, the Officials alsoobtained regular accounts for the year 1989-90 and 1990-91 forverification. It was found that the assessee had effected localpurchases from Sri Sakthi Steel Corporation and Southern SteelEnterprises. Holding that these sellers were bill traders, the claimof exemption was rejected by the Assessing Officer. It was pointedout that bill traders had opened the accounts in the same bank wherethe assessee had its operation and the cheque issued were encashed onthe same day. In the circumstances, the claim for exemptionoriginally granted was sought to be withdrawn by taking recourse toreassessment proceedings. The assessee objected to the assessment on https://hcservices.ecourts.gov.in/hcservices/ the ground that the purchases were from the registered dealers whowere granted registration by the Commercial Tax Officer, Park Town IIafter observing the due procedure laid down under the Act. In thecircumstances, the assessee pleaded that the second sale exemptionoriginally granted be accepted. The Assessing Officer pointed outthat one of the dealers, who signed in the registration applicationviz., Kamakshi Steel House, No. 38, Venkata Chetty Street, Madrasadmitted in the statement on 27.12.1990 before the Enforcement WingOfficials that proprietor of Sri Sakthi Steel Corporation was only abroker in iron and steel and had not done any business thoughregistered under the Act. Thus, the Officer viewed that the said SriSakthi Steel Corporation had not handled any goods and being apurchase from the bill trader, the assessee was liable to tax andthus, the assessment was confirmed. Aggrieved by the assessment, theassessee went on appeal before the Appellate Assistant Commissioner,who pointed out that the registration of Sri Sakthi Steel Corporationwas cancelled by the Commercial Tax Officer, Park Town – IIassessment circle with effect from 1.4.90. The assessment of theassessee was also completed by the Assessing Officer on 30.5.1990after checking the accounts and affixing the seal of the AssessingAuthority. It was further pointed out that the said Sri Sakthi SteelCorporation had renewed the registration certificate for assessmentyear 1990-91 on 9.4.1990. Thus, the registration granted to the saiddealer on 25.8.1999 continued with renewal made on 9.4.1990. In thebackground of above said facts, the first Appellate Authority appliedthe decision reported in 57 STC 137- STATE OF TAMIL NADU v.C.K.GAJAPATHY & CO., wherein it was held that retrospectivecancellation cannot be ground to disallow the exemption. The firstAppellate Authority also applied the law laid down in 52 STC 124 –STATE OF TAMILNADU v. CHAMUNDESWARI ENTERPRISES and finally heldthat the assessee being a subsequent seller, it was not for him toshow that the anterior sale was in fact taxed. The fact is that thedealer who sold the goods to the assessee was in existence at thetime when the sale was effected. The Appellate Assistant Commissionerallowed the assessee's appeal, thereby cancelled the assessment.Aggrieved by the same, the Revenue went on appeal before the SalesTax Appellate Tribunal, who allowed the Revenue's appeal thereby,restored the assessment. The Tribunal pointed out that in cancellingthe second sale exemption, the Assessing Officer had not reliedentirely on the retrospective cancellation of the Registrationcertificate and that all measures taken by the Department to identifythe dealer proved futile. All summons issued to the above dealerswere returned by the postal authorities with the endorsement as 'notfound' 'always door locked' and 'left'. Pointing out to the statementmade by one of the dealers, who had signed the application, theTribunal held that the vendors were only brokers in iron and steelbusiness. Further it pointed out that the assessee had not producedany materials regarding the payment of lorry charges or freighthandling charges towards taking delivery of the goods. In thecircumstances, the Tribunal confirmed the order of assessment. https://hcservices.ecourts.gov.in/hcservices/ Aggrieved by the same, the assessee is on revision before this Court. 3. As already seen, the assessment year under consideration is1989-90. The Revenue had issued the registration certificate to SriSakthi Steel Corporation and Southern Steel Enterprises with effectfrom 25.5.89 and 21.6.90 respectively. The said companies wereproprietary concerns belonging to son and father. It is a matter ofrecord that the business premises of these dealers were found locked.The Revenue wanted to identify their existence. Basing on thestatement made by one of the dealers stating that these dealers hadnot done any business of purchasing and selling any goods at any timeand that they were only brokers in iron and steel business, theRevenue held that purchases effected from the bill traders would notbe recognised as a taxable sale for the purpose of granting exemptionto the assessee. However, the fact is that the Revenue itself hadaccepted that the said dealers were assessed and the registrationalso was renewed even subsequent to the assessment on 9.4.1990. Thus,the fact is that during the material assessment year now underconsideration viz., 1989-90, the assessee's vendors were alreadyassessed by the Revenue. The orders of assessment were passed onlyafter scrutiny of accounts. The mere fact that the department hadcancelled the registration certificate of the vendors retrospectivelyper se would not be of any assistance to the Revenue to deny thesecond sale exemption. The cancellation of registration took effectfrom 1.4.90 and not prior to that period, which is relevant to theassessment under consideration viz., 1989-90. There is hardly anymaterial to show when the vendors started doing business as billtraders. On the mere fact that the third party, who happened to be adealer had stated that the assessee's vendor had not doing billtrader business per se would not be a ground for cancellation ofexemption originally granted. In the circumstances, when suchstatement recorded was not subjected to any further examination, andin the absence of any material to substantiate that during therelevant assessment year, the vendors were doing just bill tradingalone, we do not find any justifiable reason to deny the assessee'sexemption granted originally. 4. As far as the observation of the Appellate Authority on theproduction of documents were concerned, after verifying the details,the Appellate Assistant Commissioner had allowed the assessee'sappeal. The assessment order merely pointed out to the assessee notmaintaining separate stock account regarding interstate purchase andsales as a ground for denying the second sale exemption. In theabsence of any specific case made out to doubt the claim of theassessee as regards the details on freight charges for takingdelivery, we find no justification in upholding the order of theTribunal. https://hcservices.ecourts.gov.in/hcservices/

5. Consequently, the order of the Tribunal is set aside, thereby,the above Tax Case (Revision) is allowed. No costs. Sd/Asst.Registrar/true copy/Sub Asst.RegistrarbgTo1. The Deputy Commissioner (CT) Chennai (North) Division 2. The Sales Tax Appellate Tribunal (Addl. Bench) Chennai 3. The Commercial Tax Officer, Harbour I Assessment circle, Kuralagam Annexe, Madra s- 108.4. The Appellate Assistant Commissioner (CT) VII, IV Floor, Kuralagam Annexe, Chennai - 108.1 CC to the Special Government Pleader(Taxes) SR NO 616031 cc To Mr.N.Inbarajan, Advocate, SR.60914T.C.(R) No.1757 of 2008UG (CO)SRA(09/11/2012)