Tvl. Sri Balaji Chemical Company v. State of Tamil Nadu

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 05.08.2009C O R A M:THE HONOURABLE MR.JUSTICE F.M.IBRAHIM KALIFULLAandTHE HONOURABLE MR.JUSTICE B.RAJENDRANTax Case No.2026 of 2006Tvl. Sri Balaji Chemical Company,1/92, Alampalayam,Earipatti (Post),Pollachi. .. Petitioner-Vs.-The State of Tamil Nadu representedby the Deputy Commercial Tax Officer,Pollachi (Rural), Polachi.... RespondentTax Case Revision under Section 38 of the T.N.G.S.T. Act, 1959against the order of the Sales Tax Appellate Tribunal (AB),Coimbatore, dated 25.11.1998 in C.T.A.No.456/95 relating toassessment year 1992-93 against the order of the Appellate AssistantCommissioner (CT) Pollachi dated 7.7.95 and made in Appeal No.110/95against the order of Deputy Commercial Tax Officer Pollachi (Rural)Commercial Taxes Department, dated 26.11.93 in TNGST No.247147 forthe assessment year 1992 -93. For Petitioner :Mr.S.RamanathanFor Respondent:Mr.Haja NazaruddinSpl.G.P. (Taxes)- - - - -O R D E R(Order of the Court was made by F.M.IBRAHIM KALIFULLA, J.)The assessee has come forward with this revision wherein thefollowing substantial question of law has been raised viz.,"Whether the Tribunal was correct in sustainingthe higher rate of tax on the sales of sulphate aluminamade by the petitioner against Form-XVII for themanufacture of Benzoin which is not falling under theFirst Schedule and is liable to tax under Section 3(1)of the Act?"2. The brief facts are that the petitioner is a dealer inchemicals viz., Sulphate of Alumina. The petitioner sold Sulphateof Alumina to the purchasers for the alleged manufacture of Benzion https://hcservices.ecourts.gov.in/hcservices/ (Sambirani) against Form-XVII. The petitioner was originallyassessed to tax on a total taxable turnover of Rs.10,95,130/- by theproceedings of the respondent dated 26.11.1993. The respondentsubsequently revised the turnover and levied the tax at a higherrate viz., at 8% on the sales turnover of Rs.1,03,600/- and alsolevied a penalty of Rs.8,936/- under Section 23 of the TNGST Act.The said revision came to be made on the footing that the petitionerproduced an invalid Form-XVII.3. The petitioner went before the Appellate AssistantCommissioner and the Appellate Assistant Commissioner whileconfirming the revision of tax as ordered by the AssessingAuthority, deleted the penalty of Rs.8,936/-. By the impugnedorder, the Tribunal also upheld the orders of the AssessingAuthority as confirmed by the Appellate Assistant Commissioner. Itis in the above stated background, the petitioner has come forwardwith this revision.4. Assailing the orders of the lower authorities,Mr.S.Ramanathan, learned counsel appearing for the petitioner byrelying upon the decision reported in (1993) 89 STC 438 (State ofTamil Nadu Vs. Madras Petro Chem Ltd.) which was subsequentlyaffirmed by a recent decision of this Court reported in (2006) 148STC 419 (Sree Murugan Engineering Products Vs. Commercial TaxOfficer, Coimbatore) contended that even for the contravention ofconditions of Form-XVII, tax and penalty can be imposed onlyagainst the purchasing dealer and not against the seller as perSection 3(3) of the Act.5. The learned counsel's other contention was that in thecase on hand, the petitioner produced Form-XVII as furnished by thepurchaser, that it was not the responsibility of the petitioner toverify whether the materials supplied by the petitioner was reallyused or usable by the purchaser and in the event of the authoritiesfinding that the materials were not really usable for themanufacture of Benzion, at best the respondent can proceed againstthe petitioner and the revision ought not to have been made.6. On the other hand, Mr.Haja Nazaruddin, learned SpecialGovernment Pleader in his submissions contended that though theposition in law viz., that for any violation of the condition ofForm-XVII, the tax and penalty can be imposed only against thepurchasing dealer and not against the seller. When once it is foundthat the so called Form-XVII produced by the petitioner was not avalid Form-XVII in the sense that it does not satisfy thestatutorily prescribed format for a duly filed in Form-XVII, thesaid settled principle will have no application.7. Having heard the respective counsel, we find force in thesubmission of the learned Special Government Pleader. In thiscontext, we refer to the recent decision of this Court reported in(2006) 148 STC 419 (Sree Murugan Engineering Products Vs. CommercialTax Officer, Coimbatore) wherein all the earlier decisions have beenduly followed. We cull out the principles which are to be followed https://hcservices.ecourts.gov.in/hcservices/ while examining the correctness of the order like the one impugnedin this revision.8. In the said decision, two earlier decisions of this Courtand a decision of the Hon'ble Supreme Court have been referred to.In paragraph No. 6, the Division Bench has relied upon the earlierdecision of this Court reported in (1968) 22 STC 269 (PremierElectro-Mechanical Fabricators Vs. State of Madras). The principleset out in the said decision has been stated as under:"6....The requisites are three fold: (1) Thegoods, which are the subject-matter of sale, should bethose mentioned in the First Schedule, (2) the salemust be to another dealer, and (3) the goods soldshould be for the use by the purchaser as componentparts of any other goods mentioned in the FirstSchedule, which he intends to manufacture inside theState for sale. The manner in which the seller has tosatisfy the third requisite is as provided in theproviso to the sub-section, namely, production ofthe declaration in the prescribed form. Once that isdone, there is no further obligation on the part ofthe selling dealer and he will automatically beentitled to the concessional rate...."Similarly, in another unreported decision rendered in W.P.No.10610of 2000, decided on 04.12.2001, it has been quoted in paragraph 8 asunder:"8. This issue was again considered in Stateof Tamil Nadu Vs. Seema Udyog (Writ Petition No.10610of 2000, decided on December 4, 2001—Madras HighCourt) in the context of the amended provisions ofSection 3(3) of the Act by the Bench, following thedecision of a three-Judge Bench of the Supreme Courtin State of Madras Vs. Radio and Electricals Ltd.(1966) 18 STC 222, held that the duty of the Sellerwho received such a declaration, therefore, isconfined to make sure that the declaration has beenduly filed in and signed by the purchaser/dealer andthat the form given to the seller is the oneprescribed and obtained from the prescribedauthority. The duty of the seller ends there. He isunder no further obligation to enquire into whetherthe buyer is engaged in a process or manufacture andif so, whether the articles purchased from the sellerare to be put to use as the component part of theproduct manufactured by the buyer."In another decision of the Hon'ble Supreme Court in Chunni LalParshadi Lal Vs. Commissioner of Sales Tax, U.P. (1986) 62 STC 112(SC), it was held as under at Page 120 and 121 :".....This court observed that indisputablythe seller could have in these transactions no https://hcservices.ecourts.gov.in/hcservices/ control over the purchaser. He had to rely upon therepresentation made to him. He must satisfy himselfthat the purchaser was a registered dealer, and thegoods purchased were specified in his certificatesbut his duty extended no further. If he wassatisfied on these two matters on a representationwas recorded in the certificate in form-C, theselling dealer was under no further obligation to seeto the application of the goods for the purpose forwhich it was represented that the goods were intendedto be used......"9. In so far as the case on hand is concerned, at therelevant point of time, the requirement of Section 3(3) was that thetax payable by any dealer in respect of sale of any goods other thanconsumer goods to another for use by the later in the manufactureinside the State, for sale by him of any goods mentioned in theFirst Schedule other than those falling under Section 70(c) and 107of the first schedule could be taxed at 3%. The said situation wasprevailing upto the end of 11.03.1993.10. A conspectus consideration of the above provision whichwas existing and the decisions referred to above makes it abundantlyclear that in order to avail the concessional rate of tax prescribedunder Section 3(3) of the Act, the assessee is bound to produceForm-XVII duly filled-in in the prescribed format. Such Form-XVIIshould satisfy the requirements viz., that the goods sold should befor the use by the purchaser as component part of any other goodmentioned in the First Schedule which the purchaser intends tomanufacture inside the State for sale.11. When we perused the required Form-XVII as prescribedunder the Act, we find that there is a specific column in 'column-b'which is required to be filled in and the requirement is"description of the goods to be manufactured with serial number offirst schedule". In so far as the petitioner is concerned,admittedly the said column was not filled-in either by the purchaseror by the assessee at the time when the same was produced foravailing the benefit under Section 3(3) of the Act. It was in thosecircumstances, the Assessing Authority was forced to revise theturnover and make the assessment for a sum of Rs.1,03,600/-. Infact it is also not in dispute that the ultimate productmanufactured by the purchaser who supplied Form-XVII to thepetitioner was Benzion (Sambirani) which is not one of the itemmentioned in the First Schedule.12. When Form-XVII relied upon by the petitioner did notfurnish the details as to whether the products to be manufactured bythe purchaser was not one of the items mentioned in the FirstSchedule, it will have to be held that the said Form-XVII producedby the petitioner cannot be construed as one which will satisfy therequirement as prescribed under Section 3(3) of the Act. In otherwords if Form-XVII produced by the petitioner did not satisfy therequirement prescribed under Section 3(3), as rightly held by the https://hcservices.ecourts.gov.in/hcservices/ Appellate Assistant Commissioner it can only be construed as aninvalid Form-XVII and in such circumstances there is no question ofapplying the ratio decidendi of the decisions relied upon by thelearned counsel for the petitioner. The ratio of the decisionreported in (1993) 89 STC 438 (State of Tamil Nadu Vs. Madras PetroChem Ltd.) as well as in (2006) 148 STC 419 (Sree MuruganEngineering Products Vs. Commercial Tax Officer, Coimbatore) can bevalidly applied, if at all, the petitioner had produced a validForm-XVII and in which event if the purchaser had committed anymisfeasance in either using or not using the materials purchasedfrom the assessee, it would be of no consequence in so far as thepetitioner assessee is concerned.13. In as much as Form-XVII relied upon by the petitionerhaving not satisfied the statutory prescription of fulfilling allthe required particulars to be filled-in in the said format, theassessee cannot be heard to say irrespective of such defects in theproduction of Form-XVII, the assessee should be conferred with theconcessional rate of tax as prescribed under Section 3(3) of the Actand that any other consequential liability should be fastened onlyon the purchaser.14. The various principles set out in the decisions referredto above, can have no application to the case of the petitionersince the Form-XVII produced by the petitioner does not confirm tothe one statutorily prescribed under the Act. We are not thereforein a position to countenance the stand of the petitioner in seekingto apply the principles that the contravention of the condition ofForm-XVII, tax and penalty can only be levied against the purchasingdealer and not against the seller as per Section 3(3) of the Act.15. In our considered opinion, since the alleged Form-XVII cannot be construed as Form-XVII at all, the said principlewill have no application to the facts of this case. The revisiontherefore fails and the same is dismissed. The substantial questionof law is answered against the petitioner. Sd/Asst.Registrar/true copy/Sub Asst.Registrarkk https://hcservices.ecourts.gov.in/hcservices/ To1.The Sales Tax Appellate Tribunal (AB), Coimbatore.2.The Appellate Assistant Commissioner,(CT)Pollachi.3.The Deputy Commercial Tax Officer,(Rural),Commercial Taxes Department, Pollachi.+1cc to Spl.Govt. Pleader (Taxes) Sr 36215+1cc to Mr.S.Ramanathan,Advocate Sr 35875PKB(CO)km/11.9.Tax Case No.2026 of 2006