IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 21.7.2011 CORAM THE HONOURABLE MRS.JUSTICE CHITRA VENKATARAMAN AND THE HONOURABLE MR.JUSTICE M.JAICHANDREN Tax Case (Revision) No.1066 of 2006 The State of Tamilnadu Represented by the Deputy Commissioner (Commercial Taxes) Coimbatore Division, Coimbatore-18. .. Petitioner. Versus Tvl.National Hardwares 42, Mill Road, Coimbatore. .. Respondent. Prayer: Revision filed under Section 38 of the TNGST Act to revise the order of the Tamil Nadu Sales Tax Appellate Tribunal (Additional) Bench), Coimbatore, dated 15.12.2000, passed in Coimbatore Tribunal Appeal No.288 of 1999. on the file of the Additional Appellate Assistant Commissioner (CT) Coimbatore in Appeal No and year 1233/98 dated 30.11.1998 and; against the proceedings of the Deputy Commercial Tax Officer, Oppanakara Street, Assessment Circle, Coimbatore, in TNGST No.220108/93-94 dated 18.5.1998 and against the proceedings of the Deputy Commercial Tax Officer, Oppanakara Street Circle, Coimbatore in TNGST No.220108/93-94 dated 18.10.1994. For Petitioner: Mr.R.Sivaraman, Spl.G.P. (Taxes) For Respondent: Mr.S.Ramanathan JUDGMENT (Judgment of the Court was made by JAICHANDREN,J.) The Revenue is on revision against the order of the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Coimbatore, dated 15.12.2000, made in Appeal No.288/99, raising the following substantial question of law:- "Whether on the facts and in the circumstances, the order of the Tribunal in affirming the deletion of penalty under Section 12(3)(b) of the Tamil Nadu General https://hcservices.ecourts.gov.in/hcservices/ Sales Tax Act is legally sustainable in view of the amendment of Section 12(3) under Act 25 of 1993?" 2. The present Tax Case Revision relates to the assessment year 1993-1994. In the original order of assessment, the Assessing Officer had found that the assessee had reported a total and taxable turnover of Rs.2,75,63,248/- and Rs.4,73,209/-, respectively, in the return in Form A1 filed for the year 1993- 1994, under the Tamilnadu General Sales Tax Act, 1959. The books of accounts and the other records produced in support of the returns had been checked, with the following results: a) No day-to-day stock account had been maintained even though purchases had been effected from other states. b) No opening and closing stock inventories had been maintained for taxable and non-taxable goods. c) No separate sales accounts had been maintained for taxable and non-taxable goods. 3. In view of the said position, it was proposed to reject the return of the assessee and the accounts as incorrect and incomplete and to determine the total and taxable turnover relating to the business of the assessee, for the assessment year 1993-1994, to the best of judgement as follows: Interstate purchases of M.S.Channels as per accounts Rs.5,98,255.00 ADD 10% towards G.Profit and Freight Rs. 59,826.00 ------------- ----- Taxable turnover proposed at 4% Rs.6,58,081.00 ------------- ----- Accordingly, a notice had been issued and duly served on the dealer inviting objections, if any, against the above proposal. However, the dealer did not file any objections. Therefore, the Assessing Officer had confirmed the proposals and had finally determined the total and taxable turnover of the assessee at Rs.2,75,63,255.00 and Rs.6,58,081.00, at 4%, respectively, for the year 1993-1994, under the Tamilnadu General Sales Tax Act, 1959. Tax due : Rs.26,323.00 Paid : Rs.18,927.00 --------------- Balance : Rs. 7,396/- --------------- 4. From a further scrutiny of the assessment records relating to the assessment year 1993-1994 it was revealed that the turnover reported by the dealer had been rejected and the dealer had been finally assessed on the total and taxable turnover of https://hcservices.ecourts.gov.in/hcservices/ Rs.2,75,63,255/- and Rs.6,58,081/-, respectively, under the Tamilnadu General Sales Tax Act, 1959, to the best of judgement. There was a balance of tax due of Rs.7,396/- against the total due of Rs.26,323/-, as per the final assessment order. The difference between the tax assessed and tax paid worked out to 28%. Therefore, it was proposed to levy a penalty, under Section 12(3)(b)(iii) of the Tamilnadu General Sales Tax Act, 1959, as follows: Penalty due at 100% on the balance of Tax of Rs.7,396/- : Rs.7,396/- 5. The dealer was required to file the objections, if any, to the proposal with sufficient documentary evidence. The dealer had filed the objections, on 21.11.1997. In the said objections, the dealer had opposed the original assessment order stating that, before invoking any penal provision, it is incumbent on the Assessing Authority to exercise the power in a discreet manner. However, in the present case the penalty had been proposed purely based on the difference in the quantum of tax determined to the best of judgement and the tax paid on the admitted turnover. Further, the dealer had relied on the decision, reported in Birla Cement Works and another Vs. State of Rajasthan and another [94 STC 422 (SC)] to state that the penalty was not leviable. Accordingly, the dealer had requested the Assessing Authority to drop the levy of penalty. On examining the objections raised by the assessee the Assessing Authority had stated that the amended Section 12(3)(b) of the Tamilnadu General Sales Tax Act, 1959, was applicable only for the assessment year 1996-1997 and thereafter. Only by the said amendment, the charge of penal action under Section 12(3)(b) of the Tamilnadu General Sales Tax Act, 1959, was blended towards the addition made by the Assessing Officer and for the failure to submit the statutory form. 6. In the present case the imposing of penalty, under Section 12(3)(b) of the Tamilnadu General Sales Tax Act, 1959, related to the assessment year 1993-1994. The assessment was made, under Section 12(2) of the Tamilnadu General Sales Tax Act, 1959, as per the amendment Act 25 of 1993, with effect from 28.5.1993. The difference between the tax assessed and the tax paid is to be charged with penalty provisions under Section 12(3)(b) of the Tamilnadu General Sales Tax Act, 1959. 7. It had also been stated that the decision, reported in Birla Cement Works and another Vs. State of Rajasthan and another [94 STC 422 (SC)] did not have any relevance to the case on hand. As such, the Deputy Commercial Tax Officer, Coimbatore, had confirmed the proposal and the levy of penalty of Rs.7,396/-, under Section 12(3)(b)(iii) of the Tamilnadu General Sales Tax Act, 1959. Aggrieved by the revised order, dated 18.5.1998, the assessee had filed an appeal before the Additional Appellate Assistant Commissioner (CT), Coimbatore. 8. On considering the contentions raised on behalf of the https://hcservices.ecourts.gov.in/hcservices/ assessee, as well as the Revenue, the Additional Appellate Assistant Commissioner (CT), Coimbatore, had held that in the assessment order the assessing authority had considered the objections filed by the assessee and had concluded that the assessment was made, under Section 12(2) of the Tamilnadu General Sales Tax Act, 1959, and therefore, the penalty was leviable on the basis of the tax balance for the assessment year 1993-1994, as per the amended provisions of Act 25 of 1993. 9. It had also been found that the Assessing Authority had concluded that the decision, reported in Birla Cement Works and another Vs. State of Rajasthan and another [94 STC 422 (SC)], is not applicable to the amended provisions of Section 12(3) of the Tamilnadu General Sales Tax Act, 1959. It had also been held that it is an admitted fact that the assessee had not paid the entire tax due, on or before the final assessment and therefore, the Assessing Authority was empowered to impose the penalty in a separate proceedings, as per the amended provisions of Section 12 (3)(b) of the Tamilnadu General Sales Tax Act, 1959. Accordingly, the Additional Appellate Assistant Commissioner (CT), Coimbatore, had dismissed the appeal filed by the assessee. 10. Aggrieved by the said order, the assessee had preferred a further appeal before the Tamilnadu Sales Tax Appellate Tribunal, Additional Bench, Coimbatore. The Tribunal had allowed the appeal stating that the decisions, reported in State of Tamil Nadu Vs. S.G.Jayaraj Nadar and Sons (28 STC 700) and The State of TamilNadu Vs. Indian Metal and Metallurgical Corporation (41 STC 165) had not been followed by the authorities below. 11. In State of Tamil Nadu Vs. S.G.Jayaraj Nadar and Sons (28 STC 700), the Supreme Court had held as follows: "Where certain items which are not included in the turnover (in the returns) are discovered from the dealer's own account books and the assessing authority includes those items in the dealer's turnover, the assessment cannot be regarded as based on best judgment and penalty cannot be levied in respect of such items. It was also pointed out that where account books are accepted along with other records, there can be no grounds for making a best judgement assessment." 12. In The State of TamilNadu Vs. Indian Metal and Metallurgical Corporation (41 STC 165), it had been held as follows: "Best judgement assessment would be the consequence, only in those cases, where the return submitted by the assessee appeared to the assessing authority to be incomplete or incorrect. In the present case, the only amount that had been added to the turnover was that found in the books which had been accepted. There was therefore no best judgement assessment, in fact, as a result of the appellate order and the Tribunal was right in deleting https://hcservices.ecourts.gov.in/hcservices/ the penalty." 13. The Tribunal had held that the above decisions would show that there must be turnover off the books to classify the assessment as having been made to the best judgement. In this case on hand, the assessment had been completed adopting the turnover of inter-state purchase as per books. No addition had been made towards omission either in purchase or sales and hence, the levy of penalty under Section 12(3) is illegal. 14. The Tribunal had stated that in State of Tamil Nadu Vs. Indian Silk Traders (94 STC 157), it had been held that "the bonafide of the assessee have to be gone into before imposing penalty". In Cement Marketing Company of India Vs. Assistant Commissioner of Sales Tax (45 STC 197), it had been held that Section 12(3) would operate only in the case of best of judgement assessment, whereby the returns filed by the assessee appears to the Assessing Authority to be incomplete or incorrect. It was held that in the case on hand there was no best of judgement assessment and hence, the levy of penalty was set aside, relying on the decision, reported in State of Tamil Nadu Vs. S.G.Jayaraj Nadar and Sons (28 STC 700), wherein it was held that unless the assessment was made under best of judgement, no penalty under Section 9(2) of the Central Sales Tax Act, 1956, read with Section 12(3) of the Tamilnadu General Sales Tax Act, 1959, could be imposed. Aggrieved by the said order of the Tribunal, the revenue has filed the present Tax Case Revision before this Court. 15. The learned counsel appearing on behalf of the revenue had contended that the Tribunal had erred in deleting the penalty levied, under Section 12(3)(b) of the Tamilnadu General Sales Tax Act, 1959, on the ground that the books of accounts had been accepted by the Department and therefore, no penalty could be levied on the assessee. The order of the Tribunal cannot be accepted as the Assessing Officer had made the assessment only under Section 12(2) of the Tamilnadu General Sales Tax Act, 1959, after considering the reply filed by the dealer and not under Section 12(1) of the Act, as held by the Tribunal. He had also stated that the Tribunal had failed to note that the levy of penalty, for the difference of the tax assessed and the tax paid, is automatic, after the introduction of the provisions, under Section 12(3)(b) of the Tamilnadu General Sales Tax Act, 1959, vide the amendment Act 25 of 1993. 16. Considering the submissions made by the learned counsels appearing on behalf of the Revenue, as well as the Assessee, and on a perusal of the records available and in the given facts and circumstances of the case, we find that the addition was only as regards the gross profit and freight and there was no suppression found in the turnover, otherwise. Further, in Appollo Saline Pharmaceuticals Private Limited Vs. Commercial Tax Officer (SAC) and others, reported in 125 STC 505, it had been held that penalty may be levied only in case where the assessment is best of https://hcservices.ecourts.gov.in/hcservices/ judgement assessment. 17. In such circumstances, in view of the above cited decision, we do not find sufficient cause or reason to set aside the order of the Tribunal. Hence, the Tax Case Revision stands dismissed. No costs. csh Sd/- Asst. Registrar //True Copy// Sub Asst. Registrar To 1.The Deputy Commissioner, (Commercial Tax) Coimbatore Division, Coimbatore-18. 2.The Additional Appellate Assistant Commissioner (CT), Coimbatore. 3.The Sales Tax Appellate Tribunal, (Additional Bench), Coimbatore. + 1 cc to Mr. S. Ramanathan, Advocate SR No.44325 + 1 cc to Spl Government Pleader , SR No.44403 UG(CO) SR/6.9.2011 Tax Case (Appeal) No.1066 of 2006 https://hcservices.ecourts.gov.in/hcservices/