IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 7.11.2008 Coram : THE HONOURABLE MRS.JUSTICE PRABHA SRIDEVAN and THE HONOURABLE MR.JUSTICE K.K.SASIDHARAN Tax Case (Revision) No.1554 of 2006 The State of Tamil Nadu rep. by the Deputy Commissioner (CT) Madurai Division, Madurai. .. Petitioner v. Tvl.Bangalore Iyyangar Backery Madurai. .. Respondent Prayer :- Revision Under Section 38(1) of the TNGST Act against the order dated 7.9.2000 in Madurai Tribunal Appeal No.157 of 2000 on the file of Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Madurai. Against the order dated 10.1.2000 on the file of Appellate Assistant Commissioner (South), Madurai in appeal No. A.P.398/98 against the order of commercial Tax Officer, Kamarajar Salai Circle, Madurai in Assessment No. TNGST 4820760/96-97 dated 29.9.98. For petitioner : Mr.Haja Nazirudeen, Sp.G.P. (Taxes) For respondent : Mr.P.Radhakrishnan --------------------- O R D E R (Order of the Court was made by K.K.Sasidharan, J) This tax case is at the instance of the department and the following substantial question of law is raised for our consideration:- https://hcservices.ecourts.gov.in/hcservices/ "Whether in the facts and circumstances of the case, the Tribunal is right in setting aside the estimation of turnover and consequential penalty based on survey report on an erroneous assumption that the assessment was based on one day survey?" Factual Matrix:- 2. The assessee is engaged in the manufacture and sale of bakery products and for the assessment year 1996-1997 they have reported a total and taxable turnover of Rs.8,33,151/- and Rs.6,17,065/- respectively. The assessee had claimed exemption on a turnover of Rs.2,16,086/- as second sales of biscuits and chocolates. However the returns submitted by the assessee was not accepted by the Assessing Officer on account of the suppression noticed during the test purchase made by the enforcement officials of the department on 14.12.1996 and on 16.12.1996 as well as the survey conducted in the business premises of the dealer on 5.9.1996, 6.9.1996 and 11.9.1996. 3. During the survey it was found that the assessee was not maintaining production-cum-stock account in respect of Maida being the raw-material, besides Sugar and Dalda. Therefore, the quantum of production was compared with reference to the consumption of Maida, Sugar and Dalda. The survey officials noticed that the dealers have shown in the accounts, a quantity of 6735 kgs of Maida as having taken for production of bakery items for the period from 1.4.1996 to 4.9.1996. The survey officials also found from the quantum of consumption of Maida with reference to sale of bakery products that there was a consumption of 3214.236 kgs of Maida only for the period from 1.4.1996 to 4.9.1996. The ratio of production shown by the dealer with the quantity of Maida taken for consumption as per accounts were compared and it was confirmed that an excess of 3520.764 kgs. of Maida should have been consumed for manufacture of Bakery products from 1.4.1996 to 4.9.1996. Those details were taken by the Assessing Authority and the sale value of the end product manufactured out of such excess consumption of Maida was added to the turnover shown in the accounts and an equal addition was also made for probable omission and the turnover was re-determined accordingly and imposed penalty under Section 12(3)(B) of Tamil Nadu General Sales Tax Act. Appellate Proceedings:- 4. The order of the Assessing Authority was taken up in appeal by the assessee before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner confirmed the https://hcservices.ecourts.gov.in/hcservices/ finding with regard to actual suppression in respect of the bakery products manufactured by the assessee and accordingly, the suppression worked out to Rs.2,19,206/- was ordered to be sustained. The Appellate Assistant Commissioner also found that the Assessing Officer has applied the results of survey for the entire year, even for the period not covered by survey and as such was of the opinion that addition was not at all necessary and unwarranted as the results of survey itself was the cumulative effect of non-maintenance of stock accounts and other defects noticed in the accounts. In such view of the matter, the Appellant Assistant Commissioner deleted the addition made by the Assessing Officer. The penalty was re-determined in accordance with the revised turnover and accordingly, the appeal was partly allowed. FINDING OF THE TRIBUNAL 5. The appellate order was taken up by the assessee before the Tamil Nadu Sales Tax Appellate Tribunal and the Tribunal was pleased to set aside the order of the Appellate Assistant Commissioner on the ground that the survey was conducted only on a single day and as such the Assessing Authority was not justified in making reassessment on the basis of such single day survey. By way of a brief order the Sales Tax Appellate Tribunal also quashed the levy of penalty. Aggrieved by the said order, the department has come up with the present tax case. 6. We have heard Thiru Haja Nazirudeen, learned Special Government Pleader appearing for the petitioner and Mr.P.Radhakrishnan, learned counsel appearing on behalf of the respondent. ANALYSIS 7. It is evident from the order of the Tribunal that the order of assessment as modified by the order of the Appellate Assistant Commissioner was set aside only on the ground that the actual suppression was arrived at by the Assessing Authority on the basis of a single day survey. While arriving at such a finding, the Tribunal overlooked the fact that the survey was conducted in the business premises of the dealer on three days besides the test purchase made by the officials on 14.12.1996 and on 16.12.1996. On a careful scrutiny of the records by the survey officials it was revealed that the consumption of raw- materials like Maida do not commensurate with the ultimate product. The dealer was not maintaining production-cum-stock account ad as such in order to estimate the suppression the Assessing Authority compared the quantum of production with reference to the consumption of raw materials like Maida, Surgar https://hcservices.ecourts.gov.in/hcservices/ and Dalda. In the said process, the Assessing Authority was convinced about the actual production of bakery items and the resultant sale and accordingly the actual suppression was determined. It was not a guess work done by the Assessing Officer to determine the actual production. The method adopted by the Assessing Officer by analysing the production details as well as the raw-materials consumed for the period appears tobe correct and in the said examination the Assessing Officer found on the basis of specific data that there was suppression quantified at Rs.2,19,206/-. Even though equal addition was made in the turnover on the ground of possible omission, the same was not found favoured with the Appellate Assistant Commissioner and it was rightly set aside. However the Tribunal without any reasoning set aside the order under the mistaken notion that the entire re-assessment was made on the basis of one day survey. Even though the Assessment Order as well as the Appellate Order contains reasons which made the Assessing Officer and the Appellate Authority respectively to pass a particular order, no such reasons are found mentioned in the order of the Tribunal. 8. The Order of the Tribunal must contain reasons howsoever brief it may be in support of its decision in one way or the other. In case, reasons are supplemented, it would enable the appellate or revisional authority to ascertain the factors which weighed with the authorities to pass a particular order. 9. The Apex Court in M/S.GOYAL ENTERPRISES v. STATE OF JHARKHAND (AIR 2008 SUPREME COURT 1510), indicated the necessity to record reasons and observed thus:- 7. Reason is the heartbeat of every conclusion, and without the same it becomes lifeless.(see Raj Kishore Jha v. State of Bihar 2003(11) SCC 519). 8. Even in respect of administrative orders Lord Denning M.R. in BREEN v. MALGAMATED ENGG.UNION (1971 (1) ALL ER 1148, Observed: "The giving of reasons is one of the fundamentals of good administration." In ALEXANDER MACHINERY (DUDLEY) LTD. v. CRABTREE 1974 ICR 120 (NIRC) it was observed: "Failure to give reasons amounts to denial of justice". "Reasons are live links between the mind of the decision- taker to the controversy in question https://hcservices.ecourts.gov.in/hcservices/ and the decision or conclusion arrived at." Reasons substitute subjectivity by objectivity. The emphasis on recording reasons is that if the decision reveals the "inscrutable face of the sphinx", it can, by its silence, render it virtually impossible for the courts to perform their appellate function or exercise the power of judicial review in adjudging the validity of the decision. Right to reason is an indispensable part of a sound judicial system; reasons at least sufficient to indicate an application of mind to the matter before court. Another rationale is that the affected party can know why the decision has gone against him. One of the salutary requirements of natural justice is spelling out reasons for the order made; in other words, a speaking- out. The "inscrutable face of the sphinx" is ordinarily incongruous with a judicial and quasi-judicial performance." 10 Therefore, we are of the considered opinion that the Tribunal was not justified in setting aside the order of the Appellate Assistant Commissioner. In the result, the substantial question of law is answered in favour of the department and against the assessee. The order dated 7.9.2000 on the file of the Sales Tax Appellate Tribunal is set aside and the order of the Appellate Assistant Commissioner dated 10.1.2000 is restored. No costs. Tr/ Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar https://hcservices.ecourts.gov.in/hcservices/ To 1. The Appellate Assistant Commissioner (CT) Madurai (South) 2. The Commercial Tax Officer Kamarajar Circle Madurai. 3. The Presiding Officer, Sales Tax Appellate Tribunal (Addl.Bench) Madurai. + 1 cc to Mr. P. Radha Krishnan, Advocate SR No. 62006 + 1 cc to the Government Pleader, High Court, Madras SR No.62156 T.C. (R) No.1554 of 2006 KA(CO) SR/21.11.2008 https://hcservices.ecourts.gov.in/hcservices/