The State of Tamil Nadu v. Tvl. Sri Alaggar Traders no.9, Municipal Corporation BuildingsSathy Road

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 17.4.2009CORAMTHE HONOURABLE MR. JUSTICE K. RAVIRAJA PANDIANANDTHE HONOURABLE MR. JUSTICE M.M.SUNDRESHTAX CASE (REVISION) NO.1859 OF 2008The State of Tamil Nadurep. by the Deputy Commissioner(Commercial Taxes)Coimbatore Division,Coimbatore – 18.... PetitionerVs.Tvl. Sri Alaggar Traders no.9, Municipal Corporation BuildingsSathy RoadCoimbatore – 641 012.... RespondentTax Case Revision filed against the order of the Sales TaxAppellate Tribunal (Additional Bench), Coimbatore, dated 3.10.2001and passed in the Coimbatore Tribunal State Appeal No.115/1999against the order of the Appellate Assistant Commissioner (CT)Coimbatore dated 27.1.99 and made in A.P.No.352/98 and made in TNGSTNo.2160250/95-96 order of the Commercial Tax Officer, P.N.PalayamCircle, Coimbatore dated 10.7.98.For Petitioner : Mr. Haza Nazirudeen Special Government Pleader (T)O R D E R(Order of the Court was made by K. Raviraja Pandian, J.)The Revenue is on revision against the order of the Tribunal madein Tribunal State Appeal No.115/1999 in respect of Sri AlaggarTraders, dated 3.10.2001 by formulating the following SubstantialQuestion of Law." Whether the facts and circumstances of the case, theTribunal is legally right in affirming the order of theFirst Appellate Authority in respect of allowance of theclaim of second sale exemption even when the registrationnumber of the socalled seller belonged to some otherdealer ? https://hcservices.ecourts.gov.in/hcservices/

2. The material facts for disposal of this revision are thatthe assessee is the dealer in Iron and Steel and assessee on the fileof the Commercial Tax Officer, P.N.Palayam Circle, Coimbatore for theassessment year 1995-96. The assessee was originally assessed on atotal and taxable turnover of Rs.50,82,359/- and Rs.Nil. Theassessment was over on 26.2.1997. It appears that on 20.2.1997, theEnforcement Wing Officers of the Commercial Tax Department caused aninspection on the business premises of the assessee and found thatduring the relevant year, there was a purchase on C.I.Scraps forRs.7,44,381/- from one Tvl.Sri Karpaga Vinayaga Traders, 38-A,Mahalakshmi Nagar, Kuniamuthur, Coimbatore. On subsequentverification, it was found that no such dealer is available in thesaid address. It was also found that the Registration Number of thesaid dealer relates to one Tvl. Kallazhagar Traders. On that basis,the Enforcement Wing Officers formed an opinion that the assesseeproduced the sale bills of non-existing dealer and obtained secondsales exemption in respect of the entire turnover. The AssessingOfficer on receipt of B3 Proposal from the Enforcement Wing Officers,called upon the assessee to file an objection, and issued a notice tothe assessee for the purpose of revision of assessment on the abovesaid ground. The Assessing Officer rejecting all the objectionsraised by the assessee, framed an assessment in levying of tax at 4%in a sum of Rs.71,771/- and imposed a penalty at 150% under Section16(2) of the Tamil Nadu General Sales Tax Act (in short "the Act")in a sum of Rs.1,07,657/-. That revision order was set aside by theAppellate Assistant Commissioner on appeal at the instance of theassessee on the ground that the selling dealer had been registeredwith the Department with effect from 1994-95 and had renewed theRegistration Certificate for the subsequent assessement years 1995-96 and 1996-97. Though the said dealer had not filed A1 monthlyreturns for these years, the Assessing Officer has not taken anysteps to trace out this seller but treated them as a bill trader andassessed the appellant, which is contrary to various decisions ofthis Court. The Revenue's further appeal to the Tribunal was alsodismissed on the ground that the Department has issued Form-XXDelivery Note to the selling dealer and the Registration Certificatewas valid for the relevant assessement years. In that circumstancesof the case, the burden of proof cast upon the assessee has beendischarged and it is for the Revenue to proceed further in accordancewith the statutory provision against those dealers, who have sold thegoods. The correctness of the same is put in issue in this revisionby formulating the question of law as aforesaid.3. Heard the learned Special Government Pleader (Taxes) for thepetitioner and perused the materials on record.4. On a perusal of the records, it is clear that the AssessingOfficer sought to revise the original assessement order in whichexemption has been granted for the entire turnover on the premisethat Tvl.Sri Karpaga Vinayaga Traders, the selling was not available https://hcservices.ecourts.gov.in/hcservices/ in the given address. The Registration Number pertaining to the SriKarpaga Vinayaga Traders relates to one Tvl.Kallazhagar Traders. Forthat reasoning, the assessee had filed his objection on 2.7.1998stating that Kallazhagar Traders and Karpaga Vinayaga Traders areone and the same and that the purchase bill produced in support oftheir second sales were genuine. The assessee's objection though wasrejected on the ground that the assessee has not discharged theironus of proving the first sale of the goods so as to enable them toclaim the second sales exemption, the Appellate Authority, theAppellate Assistant Commissioner, has reversed the finding of theAssessing Officer by giving reason that the assessement of theassesee has been revised and the second sales has been exempted inthe original assessement order and disallowed the claim for thereason that the seller Karpaga Vinayaga Trader had left the placewithout submitting the accounts for the year 1994-95, 1995-96 and1996-97. Despite the fact that the Registration Certificate ofKarpaga Vinayaga Traders has been renewed for the above said years,the said dealer did not file any monthly returns and had notsubmitted the accounts for the final check. The conclusion so arrivedat by the Assessing Officer was totally incorrect that the sellingdealer had been registered with the Department with effect from1994-95 and further, the dealer had renewed the RegistrationCertificate for the year 1995-96 and 1996-97. Though the dealer didnot file any A1 monthly returns for these years, the AssessingOfficer has not taken any steps to trace out this seller, but treatedthem as a bill trader and consequently assessed the appellant, whichis contrary to the decision in NATIONAL IRON TRADERS VS. STATE OFTAMIL NADU reported in (1997) 106 STC 42. 5. The Appellate Authority, on appeal has also recorded afinding to the effect that the selling dealer was issued with Form-XXDelivery Note by the Department. The issuance of such Delivery Noteitself is evident that the selling dealer carried on the business andwhose identity was also known to the department. It is also quiteclear that the said selling dealer who happened to be the firstseller was a registered dealer, whose Registration Certificate wasfound to be valid for the assessement year 1996-97. By giving thesereasonings, the Appellate Authority affirmed the order of the FirstAppellate Authority and set aside the order of the originalauthority. The Assessing Officer, who has branded the selling dealeras a bill trader and fictitious person was rejected.6. In the given set of facts, we are of the view that theassessee has discharged the burden of proof by showing that theearlier sale was a taxable sale and the tax is really payable by theseller. 7. In similar circumstances, this Court in the case of GOVINDAN& CO., V. STATE OF TAMIL NADU reported in (1975) 35 STC 50, has held https://hcservices.ecourts.gov.in/hcservices/ that to claim the benefit of tax on the ground that the saleseffected by the assessees are second sales, the assessee need notshow that their sellers have infact paid tax. It is enough for themto show that the earlier sales are taxable sales and that the tax isreally payable by their sellers. 8. Likewise, in the case of STATE OF TAMIL NADU VS.CHAMUNDESWARI ENTERPRISES reported in (1983) 52 STC 124, the DivisionBench of this Court has held that if a sale effected by an assesseeis not a first sale, which is only taxable under the Tamil NaduGeneral Sales Tax Act,1959 then under the provisions of the Act, thatsale cannot be brought within the net of taxation and it is for theRevenue to search out the first seller and levy tax on the firstsale. It is not for the assessee, who is the subsequent seller, toshow that the first sale has been taxed. The onus on the subsequentseller is only to point out that there has been a first sale and theonus is not on him to show that the first sale has, infact sufferedtax. 9. In the case of STATE OF TAMIL NADU VS. C.K. GAJAPATHY ANDCO., reported in (1984) 57 STC 137, also it was held that if theassessee was able to show that there had been merely a taxable saleand its sale was only second sale, it was entitled to claim exemptionof its sale as second sales. Govindan's case referred to suprareported in (1975) 35 STC 50 has been carried on to the SupremeCourt. The Supreme Court, while confirming the decision in Govindan'scase, held that no duty is cast upon the assessee to show that hissellers have paid tax at first point. In addition to that, the goodsinvolved in the present case are declared goods, that is Iron andSteel, which are taxable at a specified point, such as the firstpoint and the State exempts that sale from payment of tax either by agenreal provision or a special provision applicable to a class ofseller, a particular seller and the goods sold may not be subjectedto tax either at that point of sale or at any subsequent sale in theState, is the law laid down by the Apex Court in respect of thedeclared goods in SHANMUGA TRADERS ETC., VS. STATE OF TAMIL NADU ANDOTHERS reported in 114 STC 1.10. From the totality of the facts and circumstances as statedabove and the judgments referred to above, we are of the view thatthe Tribunal has come to the correct conclusion, which leaves no roomfor interference from this Court. Hence, the tax case revision isdismissed as devoid of merits.Sd/Asst.Registrar/true copy/Sub Asst.Registrar https://hcservices.ecourts.gov.in/hcservices/ kbTo1. The Tamilnadu Sales Tax Appellate Tribunal Additional Bench, Chennai -104.2. The Appellate Assistant Commissioner(CT) Coimbatore.3. The Commercial Tax Officer, P.N.Palayam Circle, Coimabteore.4. The Deputy Commissioner, Commercial Taxes, Coimbatore Division, Coimbatore.+ 1 CC to the Spl. Government Pleader(Taxes) SR NO15290 T.C. (R) No.1859 of 2008SR(CO)SRA(30/4/2009)