M/s.Pioneer Agro IndustryNo.54 v. The Commercial Tax OfficerAvinashi

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 01.08.2007CORAMTHE HONOURABLE .MR.JUSTICE S.MANIKUMARW.P.No.25769 of 2007 andM.P.No.1 of 2007M/s.Pioneer Agro IndustryNo.54, Stanes road, 4th StreetTirupur 641 602... Petitionervs. The Commercial Tax OfficerAvinashi... RespondentWrit petition is filed under Article 226 of the Constitution of India praying for a writ of Certiorarified mandamus to call for therecords on the files of the respondent herein in CST No.670723/2005-06dated 21.6.2007 and quash the same, while directing the respondentsherein to accept the returns as provided under Section 12-C(1) of the Tamil nadu General Sales Tax (Fourth Amendment) Act, 2006 (Tamil NaduAct No.37 of 2006) read with Section 9(2) of the Central Sales Tax, 1956.For Petitioner : Mr.V.S.ManojFor Respondent: Mr.R.Mahadevan, AGPO R D E RThe petitioner-Industry is engaged in manufacture and sales of Coconut Shell Powder and registered as a Dealer under the provisions ofthe Tamil nadu General Sales Tax Act, 1959 and Central Sales Tax, 1956.

The petitioner has further submitted that the products of thepetitioner, namely, Coconut Shell Powder was classified in Entry No.70of Part B of Schedule 1 of the Tamil nadu General Sales Tax Act, 1959from 1.4.1994 to 16.7.1996 and Coconut Shell Powder is nothing but acrushed form of coconut shell chips and the said Entry talks aboutCoconut shell and its chips. Subsequently, the Coconut shell and itschips were included under Entry No.75 of Part B of Schedule III witheffect from 5.3.1997. With effect from 27.3.2003 the Coconut shell andits chips were brought under Entry No.45(ii) of Schedule III and theyare taxable. In the clarifications issued by the Commissioner of Commercial Taxes, Coconut Shell and its chips were exempted and thatthey may not be assessed to tax. Later on, the Commissioner of Commercial Taxes in his further clarification No.118/2004 ActsCell/63301/2003 dated 22.4.2004 clarified that Coconut Shell Powder is https://hcservices.ecourts.gov.in/hcservices/ taxable at 12% under the residuary entry No. 40 of Part D of Schedule 1to the TNGST Act, which was again reiterated by his orders dated6.12.2004, 12.1.2005 and 29.9.2006. The petitioner has submitted themonthly returns for the Assessment Years 2004-2005 and 2005-2006. Tamilnadu General Sales Tax Act, 1959 was amended by Tamil Nadu Act No.37 of2006 by inserting 12-C of the Act and a rule 15(5)(E) was alsoinserted in the Tamil nadu General Sales Tax Rules, 1959 byG.O.Ms.No.172, CT&R (81) dated 23.12.2006.

While that be the position, on 21.6.2007 the respondent hasissued a pre-assessment notice, proposing to reject the returns andaccounts as incorrect and incomplete and it was also proposed to fix thetotal and taxable turnover for the years 2005-2006 to the best ofjudgement as stated in the notice. As per the said notice, it was alsoproposed to levy a penalty for the short fall in payment between taxassessed and tax paid at the appropriate rate. The notice dated21.6.2007 issued under the CST Act, 1956 for the assessment year 2005-2006 is impugned in this Writ Petition.

Learned counsel for the petitioner submitted that since themonthly returns have already been submitted within the prescribe date, the authority lacks jurisdiction for issuing the impugned Show CauseNotice and the returns submitted on or before 31.3.2006 have to besimply accepted without verification, as per Section 12-C of the amendedAct.

Learned counsel for the petitioner further submitted that thepetitioner has not attempted to conceal or suppress the tax liabilityand the petitioner has disclosed the entire turnover for the aboveassessment period.

Learned counsel for the petitioner further submitted that a showcause notice can be issued only in cases falling under 15(5)(E) of the Tamil nadu General Sales Tax Rules, 1959 and therefore, the impugnednotice is liable to be set aside.

Considering the limited scope of the writ petition, Mr.R.Mahadevan, learned Additional Government Pleader was put on notice. He submitted that the writ petition is filed only against the Show CauseNotice and therefore, the petitioner can always submit their objectionsto the show cause notice. Learned Additional Government Pleader furthersubmitted that insertion of the amended Section i.e. Sec.12-C does nottake away the right of the Assessing officer to examine as to whetherthere has been any concealment or suppression of tax liability for theyear 2004-2005.Heard the counsel appearing for the parties and perused thematerials available on record.

Section 12-C of the Tamil nadu General Sales Tax Act, 1959 hasbeen introduced on 20th December 2006, which reads as follow: https://hcservices.ecourts.gov.in/hcservices/ "12-C Assessment of sales in certain cases:- 1) Notwithstanding anything contained in this Act subject to the provisions of Section 16, the assessmentof a dealer in respect of the assessment for the period priorto the first day of April 2006, shall be on the basis ofreturn relating to his turnover and on the basis of thedeclaration or certificate as may be prescribed, furnished onor before 31st March 2007 and such return shall be acceptedwithout requiring the presence of the dealer or production ofbooks of account by the dealer subject to such conditions asmay be prescribed. "

In the instant case, the Assessing Officer has proposed to rejectthe returns and accounts, as they are incorrect and incomplete, based onthe clarifications issued by the Commissioner of Commercial Taxes that Coconut Shell Powder is taxable at 12% under the residuary entry No.40of Part D of Schedule I to the TNGST Act.10. What is dispensed in the amended Section i.e. Section 12(C) isonly the presence of the dealer or production of books of accounts andit does not take away the power of the Assessing officer to issue anotice for verification of the returns. The conditions to be satisfiedby a dealer for the purpose of Section 12-C(1) of the Tamil Nadu GeneralSales Tax Act, 1959 are set out in Rule 15(5-E) of the Tamil NaduGeneral Sales Tax Rules, 1959, which reads as follows: "(5-E) The conditions to be satisfied by a dealerfor the purpose of Section (1) of Section 12-C are, namely:-(1) The dealer should have submitted prescribedreturn for the year before 20th December, 2006.(2) The dealer should submit the declarationreferred to in sub-Section (1) of Section 12-C in FormXVII or other certificates already prescribed in the Act. (3) During the relevant assessment year, the dealershould not have attempted to conceal or suppress taxliability of more than twenty-five thousand rupees. (4) The dealer should not be in arrear of tax as perthe monthly and annual returns filed for the assessmentyears concerned. (5) The dealer should not also be in arrear of taxas per the monthly and annual returns filed for theassessment years concerned. (6) The dealer's assessment does not relate to thefirst or last year of business. (7) In case where the total turnover under the Actexceeds fifty lakhs of rupees, the dealer shall file hisannual return only after it is duly audited and certifiedby a Chartered Accountant or a Cost Accountant. "

In the case of incorrect or incomplete returns submitted bythe dealer, it is always open to the Assessing Authority to call forproduction of supportive documents. https://hcservices.ecourts.gov.in/hcservices/ Acceptance of returns would be permissible only if the returns aresubmitted along with necessary documents in respect of petitioner'sclaim relating to the total and taxable turnover. In a case where thedealer claims some exemption from payment of tax or rebate or reductionin rate of tax consequent to inter-state or intrastate sales, returnssubmitted by the dealer has to be necessarily verified as to whether, heis entitled for exemption, rebate or reduction in payment of rate oftax. If the assessing authority is of the opinion that the dealer isnot entitled for any exemption, rebate, etc., he can always call uponsuch dealer to produce necessary documents or reject the claim. Ifthere is any dispute as to the rate of tax applicable to the goods, forwhich, the returns are submitted, based on any clarification issued orentries in the Taxation Act, under such circumstances, the dealer can becalled upon to produce necessary documents and on that basis, appropriate action can be taken by the assessing officer in accordancewith law. Therefore, the acceptance of returns is permissible only ifit is in order. If all the returns submitted by the dealer are simplyto be accepted on mere submission without verification, then it wouldlead to chaos, as there is every possibility of dealer submittingreturns claiming exemption, rebate or reduction in rate of tax, as thecase may be.

Since the Amended Section and Rules stated above do not takeaway the right of the Assessing Officer to examine the returns, thecontention of the petitioner that the returns have to be acceptedautomatically cannot be countenanced.

As against the show cause notice, it is always open to thepetitioner to submit, whatever points which are raised in this writpetition, in the form of their objections, within a period of two weeksfrom the date of receipt of a copy of this order. On receipt of suchobjections, the Assessing Officer shall pass appropriate orders, takinginto consideration Section 12-C of the Tamil nadu General Sales TaxAct, 1959 read with Rule 15(5)(E) of the Tamil nadu General Sales TaxRules, 1959.