The State of Tamil Nadu v. Tvl.Majestic Exports

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 27.01.2012CORAMTHE HONOURABLE MR.JUSTICE D.MURUGESANANDTHE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJATax Case (Revision) No.612 of 2006The State of Tamil Nadu represented by the Deputy Commissioner (Commercial Taxes)Coimbatore DivisionCoimbatore-18..Petitioner-vs-Tvl.Majestic ExportsTirupur..RespondentMemorandum of Grounds of Tax Case Revision under Section 38 ofthe TNGST Act, 1959 to revise the order of the Tamil Nadu Sales TaxAppellate Tribunal (Additional Bench) Coimbatore dated 11.03.2002made in T.A No.144 of 1999 for the assessment year 1992-93 againstorder of the Additional Deputy Commercial Tax Officer, Tiruppur Northin TNGST No.250803/92-93 dt. 15.3.99 against Commercial Tax Officer,Tiruppur [North] dt. 31/03/1997.For Petitioner::Mr.R.SivaramanSpecial Government Pleader (T)For Respondent::Mr.B.RaveendranORDER(Order of the Court was delivered by D.MURUGESAN, J.)This tax case revision, at the instance of the DeputyCommissioner (Commercial Taxes), Coimbatore, was admitted on thefollowing substantial question of law:-“Whether in the facts and circumstances of the case,the Appellate Tribunal is right in deleting thepenalty imposed over a transaction of the REPlicence when the transaction has not been disclosedin the returns?" https://hcservices.ecourts.gov.in/hcservices/

2. The respondent-assessee is engaged in the business ofmanufacture and exports of hosiery garments. The relevant assessmentyear is 1992-1993.. They had reported total and taxable turnover ofRs.5,74,376/- and 'Nil' respectively. Later accounts were calledfor and checked by the assessing officer and pre-assessment noticewas issued proposing to levy of tax on sale of REP licence andExim scrip. No objection was filed and therefore, the assessingofficer confirmed the proposal and finally assessed on total andtaxable turn over of Rs.5,74,376/- and Rs.5,74,376/- respectively.Later, the assessing officer passed an order dated 30.03.1998,proposing to levy penalty at 150% for the tax assessed on the groundthat the assessee has not disclosed the taxable and turn over atpremium received on sale of REP licence and Exim Scrip and leviedpenalty of Rs.33,849/- at 150% under Section 12(5)(iii) of theTamil Nadu General Sales Tax Act, 1959. Aggrieved by that order, theassessee has filed an appeal before the Appellate AssistantCommissioner. The Appellate Assistant Commissioner taking intoconsideration of the plea that there was bona fide belief, reducedthe penalty to 50% and modified the penalty amount at Rs.11,283/-under Section 12(5)(iii) of the Act. Aggrieved by that order, theassessee filed and appeal before the Tamil Nadu Sales Tax AppellateTribunal. The Tribunal deleted the penalty and allowed the appeal onthe ground that the assessee has not included the taxable turn overunder the bona fide belief. Aggrieved by that order, the Revenue hasfiled the present appeal.3. The learned counsel appearing for the Revenue submitted thatthe Tribunal ought not to have deleted the penalty when the assesseedoes not disclose the taxable and turn over on sale of REP licenceand Exim scrip in the monthly return for the assessment year 1992-1993 and hence, the order passed by the Tribunal is not in accordancewith law and the same has to be set aside.4. The learned counsel appearing for the respondent-assesseesubmitted that the assessee has not included the turnover under thebona fide belief that they are not liable to show it and therefore,it is not a fit case for levying penalty under Section 12(5)(iii) ofthe Act and in support of his contention, he relied on the judgmentsin the case of P.S.Apparels v. Deputy Commercial Tax Officer,T.Nagar East Assessment Circle, Madras, reported in (1994) 94 STC 139and State of Tamil Nadu v. Indian Silk Traders, reported in (1992) 1MTCR 81. Therefore, the order passed by the Tribunal is inconfirmitywith law and the same has to be confirmed.5. We heard the learned Special Government Pleader (Taxes) forthe petitioner and the learned counsel for the respondent-assessee.The case of the assessee is that they were under the bonafide beliefthat they are not liable to tax on sale of REP licence and EximScrip and hence, they have not included the same in the total and https://hcservices.ecourts.gov.in/hcservices/ taxable turn over. The only question to be decided is whether, on thegiven facts and circumstances of the case, the assessing authoritycould invoke the provisions of Section 12(5)(iii) of the Tamil NaduGeneral Sales Tax Act for imposing penalty on the ground of non-disclosure of the turnover on the sale of REP licences and Eximscrips. The Tribunal allowed the appeal in favour of the assessee byfollowing the judgment of this Court in P.S.Apparels v. DeputyCommercial Tax Officer, T.Nagar East Assessment Circle, Madras,(1994) 94 STC 139 on the ground that the assessee had paid the tax asassessed by the assessing authority and that they had acted onlyunder the bona fide belief that they were not liable to include thesales turnover of REP licences/Exim scrips. That was a case wherethis Court was considering the question as to whether REPlicences/exim scrips are "goods" in etymological sense and in commonparlance as also within the meaning of Section 2(j) of the TNGST Act,1959 and Section 2(d) of the CST Act, 1956 and ultimately held thatthe transfer, sale or assignment of those licences for value orconsideration shall be liable to levy of sales tax and the levy ofpenalty under Section 12 to 16 of the TNGST Act from the assessmentyear 1992-93 onwards. The said judgment was quoted with approval bythe Supreme Court in Vikas Sales Corporation and another v.Commissioner of Commercial Taxes and another, (1996) 102 STC 106. 6. However, in P.S.Apparel's case, this Court held that thoughfor purposes of levy of penalty under sections 12(3) and 16(2) of theAct, a finding regarding wilful non-disclosure is a necessaryingredient and pre-requisite, it cannot be claimed that theculpability or bona fides of the assessee are totally strangeconcepts even while considering the levy of penalty under section 12(4) and 12(5) of the Act. This Court also referred to a DivisionBench judgment of this Court in State of Tamil Nadu v. Indian SilkTraders, (1992) 1 MTCR 81 holding that though the element ofdeliberateness, wilfulness or blameworthy conduct on the part of theassessee may not be necessary for invoking section 12(4) or 12(5),yet the bona fides of the assessee requires to be gone into beforeimposing the penalty since the underlying intent of penalty is onlyto deal with the non-disclosure of a turnover which with the obliquepurpose of evading liability or postponing the payment of taxlawfully due to the State. 7. Having regard to the above legal position, the case on handmust be considered. While considering the appeal, the AppellateAssistant Commissioner had not gone into the question of bona fidesof the assessee. Nevertheless, by placing reliance on the judgmentof this Court in P.S.Apparel's case, while affirming the levy ofpenalty, had reduced the penalty from 150% to 50% which, according tothe assessee, was not in accordance with the said judgment. Sincethe claim of the assessee was that they were under the bona fidebelief that the sale of REP licences/Exim scrips was not goods, theydid not disclose the same in the returns and they preferred appeal to https://hcservices.ecourts.gov.in/hcservices/ the Tribunal. The Tribunal also upheld their contention and allowedthe appeal. In our opinion, as the issue has been settled by thisCourt in the above said judgment, we are unable to take a differentview on the facts and circumstances of this case. Accordingly, weare of the view that the Tribunal is correct in deleting the penaltyand we confirm the order of the Tribunal and dismiss the tax case(revision) with no order as to costs. Sd/-Asst. Registrar/true copy/Sub Asst. Registrar.To1. The Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench) Chennai 600 1042. The Deputy Commissioner (CT) Coimbatore Division Coimbatore-183. The Deputy Commercial Tax Officer, Tiruppur North, Tiruppur.1 cc to Mr.Chandran, Advocate, SR No.5571T.C.(R) No.612 of 2006ssk[co]gp/1.3