M/s.Sujana Universal Industries Ltd. v. The Deputy Commercial Tax Officer,Valluvarkottam Assessment Circle,Chennai

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 26-6-2008CORAM:THE HONOURABLE MR.JUSTICE N.PAUL VASANTHAKUMARW.P.No.2392 of 2008 & M.P.No.1 of 2008 W.P.No.2393 of 2008 & M.P.No.1 of 2008W.P.No.13457 of 2008 & M.P.No.1 of 2008M/s.Sujana Universal Industries Ltd.,rep.by its Accounts Manager Mr.R.Sakthi Kumar,No.4, 8th Floor, Jhaver Plaza,1-A, Nungambakkam High Road,Chennai - 600 034....Petitioner in all writ petitionsVs.The Deputy Commercial Tax Officer,Valluvarkottam Assessment Circle,Chennai....Respondent in all writ petitionsPRAYER: Petition filed under Article 226 of the Constitution ofIndia, to issue a Writ of Certiorari calling for the records onthe file of the respondent in TNGST/1502597/04-05, dated7.12.2007; TNGST/1502597/05-06, dated 24.12.2007; andTNGST/1502597/06-07, dated 29.4.2008 respectively and to quash thesame insofar as the claim of 2nd sale exemption is concerned asillegal and contrary to law.For Petitioner:Mr.A.L.Somayaji,(in all WPs)Senior Counselfor Ms.R.HemalathaFor Respondent:Mr.R.Mahadevan, (in all WPs)Addl.Government Pleader (Tax) https://hcservices.ecourts.gov.in/hcservices/ COMMON ORDERBy consent of the learned Senior counsel appearing for thepetitioner as well as the learned Additional Government Pleader(Tax) appearing for the respondent, the writ petitions are takenup for final disposal even at the admission stage.2.In W.P.No.2392 of 2008, the assessment order dated7.12.2007 passed by the respondent to the tune ofRs.14,09,13,503/- including penalty is challenged. In W.P.No.2393of 2008, the assessment order dated 24.12.2007 passed to the tuneof Rs.27,74,19,671/- including penalty is under challenge. Theassessment order dated 29.4.2008 to the tune of Rs.12,04,10,462/-including penalty is challenged in W.P.No.13457 of 2008.3.In all the impugned orders, it is specifically statedthat appeal against the said order can be filed before theAppellate Assistant Commissioner of Commercial Taxes-III, Chennai,within thirty days of receipt of the order. But the petitionerchallenged the said assessment orders without availing thealternative remedy as stated in the impugned order on the groundthat principles of natural justice is violated by the respondentwhile passing the impugned orders of assessment.4.The case of the petitioner in all these petitions isthat the petitioner is a Public Limited Company, incorporatedunder the Companies Act, 1956, registered on the file of therespondent both under the TNGST Act, 1959 and CST Act, 1956. Thepetitioner is having the registered office inside the state ofTamil Nadu at No.4, 8th Floor, Jhaver Plaza, 1A Nungambakkam HighRoad, Chennai-34, and head office at No.18, Nagarjuna Hills,Panjagutta, Hyderabad-82. According to the petitioner, it isengaged in the trading activity of iron and steels and alsoPadmini brand fans. It is claimed that during the course of thebusiness, the petitioner company purchased iron and steels fromthe local registered dealers and claimed exemption on their secondsales, within the state of Tamil Nadu. Insofar as the Padminibrand fans are concerned, petitioner received the same from itshead office on stock transfer basis for further sales inside thestate of Tamil Nadu and by paying tax at 12.5%. For theassessment year 2004-2005, petitioner reported total and taxableturnover of Rs.2,32,78,27,388/- and Rs.9,50,028/-; for theassessment year 2005-2006 Rs.4,45,32,01,369/- and Rs.75,97,766/-;and for the assessment year 2006-2007 Rs.1,75,44,33,672/- andRs.92,65,65,269/- respectively. According to the petitioner, forthe first sales effected during the assessment years to the tuneof Rs.9,50,028/-, Rs.75,97,766/- and Rs.92,86,108/, petitionerpaid 12% tax and for the remaining amount, petitioner claimed https://hcservices.ecourts.gov.in/hcservices/ exemption on the basis that second sale attracts exemption. Thesaid exemption sought for was not accepted by the respondentcontending certain irregularities in furnishing A9 returns and anotice was issued seeking objection. Again another notice dated5.6.2006 was issued by the respondent stating that registrationnumbers of certain sellers were not furnished and the purchasevalue with regard to other sellers are to be furnished. Therespondent also disallowed the stock transfer on the ground thatthe petitioner failed to furnish declaration on Form-F ortransport document or agreement or copy of the list proposing levyof tax at 8% subject to the petitioner filing objections.5.It is also stated in the affidavit that the petitioner'sbusiness premises was inspected by the officials of theEnforcement Wing on 3.11.2006 and 4.11.2006 and on inspection itwas noticed that the petitioner has no godown facility at all andall purchases were effected from three dealers placed atChengalpet. The subsequent sales made by the petitioner were alsoeffected at Chengalpet. The Enforcement Wing also pointed outthat the three dealers placed at Chengalpet from whom thepetitioner effected purchases, did not have their telephonenumbers in their respective invoices and the necessity and motiveof the petitioner to buy goods at Chengalpet and subsequent salesat Chengalpet. Based on the inspection, a final notice dated27.9.2007 was issued by stating that all purchases were made frombogus dealers, who never in fact existed and therefore the entireturnover pertaining to the claim of second sales exemption to theeffect of Rs.2,32,00,51,305/- was proposed to be disallowed andthe petitioner is liable to pay tax at 4%. Another revised noticewas also issued on 26.11.2007 and the petitioner was called uponto file its objection. According to the petitioner, for the abovesaid notices, objections were filed and it is further stated thatthe newly appointed consultant could not reply properly andtherefore the respondent confirmed the proposal, by order dated7.12.2007 demanding Rs.14,09,13,503/-; order dated 24.12.2007demanding Rs.27,74,19,671/-; and order dated 29.4.2008 demandingRs.12,04,10,462/- respectively, towards tax as well as penalty.According to the petitioner, the three dealers, who sold the ironand steels to the petitioner are having their registration and thefinding given by the respondent that they are non-existententities cannot be sustained. It is also stated in the affidavitthat even assuming that the tax is not paid on first sale, thesame cannot be the reason to demand tax from the petitioner, whois doing second sale.6.The respondent has filed counter affidavit by statingthat as against the assessment orders, which are impugned in thesewrit petitions, the dealer has got substantive remedy to prefer astatutory appeal, which is a creature of statute with legalsanctity. It is also pointed out in the counter affidavit that https://hcservices.ecourts.gov.in/hcservices/ when the facts are in dispute requiring enquiry on the basis ofvoluminous records, which are intricate in nature, it is open tothe petitioner to challenge the orders of assessment before theAppellate Assistant Commissioner as stated in the impugned orders.It is further stated in the counter affidavit that for all pre-assessment notices, petitioner submitted reply and the saidreplies were duly considered before passing the impugned orders ofassessment. The petitioner Company had not filed any concreteevidence for movement of goods such as lorry receipts and proof ofpayment. Even the suppliers transaction, their source ofpurchase, proof of payment were not made available forverification. The registration certificate of 'Future TechIndustries Limited, Chengalpet', was found bogus and therefore afinding was given that the petitioner company received iron andsteel from undisclosed source or from their company's factory atAndhra Pradesh and fabricated the records to show as if they weresecond sales. Petitioner Company having claimed exemption fromtax as second sales of a huge turnover of Rs.232.64 crores for theyear 2004-2005; Rs.444.56 crores for the year 2005-2006; andRs.174.51 crores for the year 2006-2007, the onus is upon thepetitioner to prove that those transactions had already sufferedtax. A finding is also given to the effect that the three sellercompanies did not pay any tax and therefore section 10(2) of theTNGST Act, 1959, mandates the petitioner, who is claimingexemption, to prove that the iron and steels sold by thepetitioner was already subjected to tax.7.Heard the learned Senior Counsel appearing for thepetitioner Company as well as the learned Additional GovernmentPleader appearing for the respondent.8.The learned Senior Counsel appearing for the petitionerCompany submitted that even though appeal remedy before theAppellate Assistant Commissioner, is provided under the Act, theimpugned orders of assessment having been passed in violation ofprinciples of natural justice, petitioner is entitled to challengethe assessment orders in these writ petitions. The learned SeniorCounsel cited some of the judgments of the Supreme Court and ofthis Court to sustain his contention that even without resortingto appeal remedy, the writ petition filed is maintainable.9.The learned Additional Government Pleader submitted thatadequate opportunity was given to the petitioner and if thepetitioner has got any document to prove its case the same can beproduced before the appellate authority, who will be in a positionto render a finding.10.There is no controversy with regard to themaintainability of the writ petition though alternative remedy isavailable, and it depends upon the facts of each case and it is a https://hcservices.ecourts.gov.in/hcservices/ rule of discretion/convenience. In this case, the facts aredisputed by the respondent in the counter affidavit and recordsare to be perused to find out as to whether the three companies,who allegedly supplied iron and steels to the petitioner Companyas second sale were in existence; any sale transaction waseffected by the said three companies; whether the petitionerCompany received the iron and steel materials from undisclosedsources or from their company's factory at Andhra Pradesh; andwhether the petitioner company fabricated the records, etc. Asagainst the petitioner, the Enforcement Wing also initiatedproceedings and the same are also pending. Further, under section10(2) of the Tamil Nadu General Sales Tax Act, 1959, the burden ison the part of the person, who claims the benefit. Here in thiscase, petitioner Company claims exemption on the basis that theiron and steels sold by the petitioner has already suffered tax onthe first sale. For proper appreciation, section 10(2) of the Actis extracted hereunder,"Section.10(2) Notwithstandinganything contained in this Act or in anyother law for the time being in force, adealer in any of the goods liable to tax inrespect of the first sale or first purchasein the State shall be deemed to be thefirst seller or first purchaser as the casemay be of such goods and shall be liable topay tax accordingly on his turnover of saleor purchase relating to such goods, unlesshe proves that the sale or purchase, as thecase may be, of such goods had already beensubjected to tax under this Act."11.The case of the petitioner Company is that for the pre-assessment notices, reply was given, however effective reply couldnot be submitted as the newly appointed consultant was not awareof all the facts. Thus, it is clear case of the petitioner thatall facts which according to the petitioner could have been placedbefore the respondent, were not placed before the respondent andtherefore the impugned order was passed.12.The learned Additional Government Pleader for therespondent contended that effective and adequate opportunity wasgiven to the petitioner before passing the final assessment ordersand principles of natural justice is not violated and thereforethe petitioner can very well challenge the assessment orders ofthe respondent before the Appellate Assistant Commissioner undersection 31 of the TNGST Act, 1959. Section 31(3) mandates theAppellate Assistant Commissioner to dispose of the appeal in thefollowing manner: https://hcservices.ecourts.gov.in/hcservices/ "Section 31(3) In disposing of anappeal, the Appellate Assistant Commissionermay, after giving the appellant a reasonableopportunity of being heard, and for thesufficient reasons to be recorded inwriting-(a)in the case of an order ofassessment-(i)confirm, reduce, enhance or annulthe assessment or the penalty or both;(ii)set aside the assessment anddirect the assessing authority to make afresh assessment after such further inquiryas may be directed; or(iii) pass such other orders as he maythink fit; or(b)in the case of any other order,confirm, cancel or vary such order:Provided that at the hearing of anyappeal, the appropriate authority shall havethe right to be heard either in person or bya representative."From the perusal of the above provision it is evident that theAppellate Assistant Commissioner is empowered to confirm, reduce,enhance or annul the assessment or the penalty or both; set asidethe assessment and direct the assessing authority to make a freshassessment after such further inquiry as may be directed; or passany order as he may think fit. It is also stated that theappellant is entitled to be heard either by person or by arepresentative. In view of the said power available to theAppellate Assistant Commissioner, petitioner can re-argue thematter including raising of factual aspects, which can be verifiedby the appellate authority. It is well settled in law that thedisputed facts cannot be decided in a writ petition as held in thedecisions reported in (2006) 9 SCC 256 (Himmat Singh v. State ofHaryana). In yet another decision reported in (2007) 7 MLJ 687(Food Corporation of India v. Harmesh Chand), the Supreme Courtheld as follows:"Since the facts were seriouslydisputed by the appellant and no factualfinding could be recorded withoutconsideration of evidence adduced by theparties, it was not an appropriate case inwhich the High Court ought to have exercisedits writ jurisdiction. The parties couldhave approached a civil court of competentjurisdiction to adjudicate the matter." https://hcservices.ecourts.gov.in/hcservices/

13.When appealable order is passed, particularly when thefacts are in dispute, writ petition filed under Article 226 of theConstitution of India without availing the alternate remedy is notmaintainable is the consistent view taken by the Supreme Court andby this Court.(a)In the decision reported in 2008 AIR SCW 1815(C.C.T.Orissa v. Indian Explosives Ltd.) the Supreme Court setaside the order passed in a tax matter and in paragraph 7 heldthus,"7.The High Court seems to havecompletely lost sight of the parametershighlighted by this Court in a large numberof Cases relating to exhaustion ofalternative remedy. Additionally the HighCourt did not even refer to the judgment ofanother Division Bench for the assessmentyears, 1997-98 and assessment years 1998-99in respect of ICI India Ltd. In any eventthe High Court ought to have referred tothe ratio of the decision in the said case.That judicial discipline has not beenadhered to. Looked at from any angle, theHigh Court's judgment is indefensible andis set aside."(b)A Division Bench of this Court in the decision reportedin 2006 (205) ELT 9 (Mad) (Nivaram Pharma Pvt. Ltd. v. CEGAT,Madras) considered similar issue of by-passing alternate remedy intax matters. In paragraphs 5 to 14 the Division Bench held asfollows:"5.It is well settled by a series ofdecisions of the Supreme Court thatparticularly in tax matters there should beno short circuiting of the statutoryremedies, vide Titaghur Paper Mills Co.Ltd. v. State of Orissa - AIR 1983 SC 603,Assistant Collector of Central Excise,Chandan Nagar v. Dunlop India Limited, 1985(19) E.L.T. 22 (SC) = AIR 1985 SC 330, etc.6.It is well settled that whenthere is an alternative remedy ordinarilywrit jurisdiction of this Court underArticle 226 of the Constitution should notbe invoked. This principle applies withgreater force regarding tax proceedings.As observed by the Supreme Court inTitaghur Paper Mills Co. Ltd. v. State ofOrissa - AIR 1983 SC 603:"Where a right or liability is createdby a statute which gives a special https://hcservices.ecourts.gov.in/hcservices/ remedy for enforcing it, the remedyprovided by that statute only must beavailed of."7.A Constitution Bench of theSupreme Court in G.Veerappa Pillai v. Ramanand Raman Ltd., AIR 1952 SC 192 held thatas the Motor Vehicles Act is a selfcontained code and itself provides for aforum for appeal/revision, the writjurisdiction should not be invoked inmatters relating to its provisions. Asimilar view was taken in AssistantCollector of Central Excise, Chandan Nagarv. Dunlop India Limited, 1985 (19) E.L.T.22 (SC) = AIR 1985 SC 330.8.In Assistant Collector of CentralExcise, Chandan Nagar v. Dunlop IndiaLimited (supra) the Supreme Court observed:"In Titaghur Paper Mills Co. Ltd. v.State of Orissa - AIR 1983 SC 603A.P.Sen, E.S.Venkataramiah andR.B.Misra, JJ. held that where thestatute itself provided thepetitioners with an efficaciousalternative remedy by way of an appealto the Prescribed Authority, a secondappeal to the Tribunal and thereafterto have the case stated to the HighCourt, it was not for the High Courtto exercise its extraordinaryjurisdiction under Article 226 of theConstitution ignoring as it were, thecomplete statutory machinery. That ithas become necessary, even now, for usto repeat this admonition is indeed amatter of tragic concern to us.Article 226 is not meant to shortcircuit or circumvent statutoryprocedures. It is only wherestatutory remedies are entirely illsuited to meet the demands ofextraordinary situations, as forinstance where the very vires of thestatute is in question or whereprivate or public wrongs are soinextricably mixed up and theprevention of public injury and thevindication of public justice requireit that recourse may be had to Art.226of the Constitution. But, then the https://hcservices.ecourts.gov.in/hcservices/ Court must have good and sufficientreason to by pass the alternativeremedy provided by statute. Surely,matters involving the revenue wherestatutory remedies are available arenot such matters. We can also takejudicial notice of the fact that thevast majority of the petitions underArt.226 of the Constitution are filedsolely for the purpose of obtaininginterim orders and thereafter prolongthe proceedings by one device or theother. The practice certainly needsto be strongly discouraged."9.In C.A.Ibrahim v. ITO, AIR 1961SC 609, H.B.Gandhi v. M/s.Gopinath & Sons,1992 (Suppl) 2 SCC 312 and in KarnatakaChemical Industries v. Union of India,1999, (113) E.L.T. 17 (SC) = 2000 (10) SCC13 the Supreme Court held that where thereis a hierarchy of appeals provided by thestatute the party must exhaust thestatutory remedies before resorting to writjurisdiction. All these decisions arerelated to taxing statutes, and are henceapposite to the present context.10.In Sheela Devi v. Jaspal Singh,AIR 1999 SC 2859 and Punjab National Bankv. D.C.Krishna, 2001 (6) SCC 569 theSupreme Court held that if the statuteprovides for remedy of revision or appeal,writ jurisdiction should not be invoked.11.In Union of India v. T.R. Verma,AIR 1957 SC 882 the Supreme Court held thatit is well settled that when an alternativeand equally efficacious remedy is open to alitigant, he should be required to pursuethat remedy and not invoke the specialjurisdiction of the High Court to issue aprerogative writ. It will be a soundexercise of discretion to refuse tointerfere in a petition under Article 226of the Constitution unless there are goodgrounds to do otherwise.12.In A. Venkatasubbiah Naidu v.S.Chellappan, (2000) 7 SCC 695 (vide para22) the Supreme Court deprecated thepractice of exercising the writjurisdiction when an efficaciousalternative remedy is available. https://hcservices.ecourts.gov.in/hcservices/

13.In W.P.No.981 of 2003 (Tax)(M/s.Khandelwal Soya Industries Ltd. v.State of U.P. and others) decided on27.8.2003 a Division Bench of the AllahabadHigh Court dismissed a writ petitionchallenging the provisional assessmentorders under the U.P.Trade Tax Act on theground of alternative remedy under Section9 of that Act. Against the aforesaidjudgment, Special Leave Petition was filedbefore the Supreme Court which has beendismissed. We respectfully agree with theview taken by the Allahabad High Court inthe aforesaid decision.14.We are therefore surprised thatthe writ petition was entertained at all bythis Court." (c)Same is the view taken by different Division Benches ofthis Court in W.A.No.1555 to 1557 of 2007 dated 10.12.2007;W.A.Nos.749 & 750 of 2006 dated 22.6.2006 and W.A.Nos.590 & 591 of2008 dated 11.6.2008. In W.A.No.590 & 591 of 2008 the FirstBench of this Court by order dated 11.6.2008 held as follows:"2.These writ appeals have been filedchallenging an order passed by the learnedsingle Judge, dated 17.9.2007. Subjectmatter of the challenge was an order passedby the Assessing Authority under the TamilNadu General Sales Tax Act. We need toconsider the merits of the case, as in viewof the admitted position against the orderof the Assessment Officer, statutory appealis provided. We just remind ourselves ofthe repeated directions given by the ApexCourt that in the Revenue matters, theTaxing Statute itself is a complete Code andthe writ court should not ordinarilyinterfere unless the assessee had exhaustedall his statutory remedies.3.In view of this well settledprinciple, we direct the appellant to filean appeal within a period of three weeksfrom today before the AppellateAuthority. ......."(d)In the decision reported in 2008 (14) VST 276 (Mad)(Sharda Industries v. Commercial Tax Officer, Chennai) similarview was taken by a learned single Judge (M.Jaichandren, J.). Thelearned Additional Government Pleader submitted that the said viewof the learned single Judge was confirmed by a Division Bench.14.In view of the settled legal position i.e., disputedfacts cannot be gone into in a writ petition and in tax matters https://hcservices.ecourts.gov.in/hcservices/ wherever alternate remedy is provided, writ petition shall not beentertained, I am of the view that these writ petitionschallenging the orders of assessment made by the respondent, arenot maintainable and the petitioner is bound to file appealsagainst the said orders of assessment as per section 31 of theAct.15.Petitioner is given two weeks time to file appealsagainst the orders of the assessment and if such appeals are filedwithin two weeks, the appellate authority is directed to considerthe same on merits and in accordance with law, without referringto the period of limitation. Since I am deciding the writpetitions solely on the ground of availability of alternateremedy, merits of the cases canvassed by the learned SeniorCounsel for the petitioner Company and by the learned AdditionalGovernment Pleader are not considered and decided in this order,in any manner.16.All these writ petitions are dismissed with the aboveobservations. No costs. Connected miscellaneous petitions arealso dismissed.VrSd/Asst.Registrar/true copy/Sub Asst.RegistrarToThe Deputy Commercial Tax Officer,Valluvarkottam Assessment Circle, Chennai.•2 ccs to the Special Government Pleader, SR Nos.32532, 32531•1 cc to Mrs. R. Hemalatha, Advocate SR No. 32673Order in W.P.Nos.2392, 2393 & 13457/2008SS(CO)SR/7.7.2008