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TMI Blog1975 (8) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the revision of assessment for the year 1970-71 and 1971-72 and the original assessment for 1971-72. 3. T.A. No. 536/74: As regards 1970-71, the appellants returned a total and taxable turnover of Rs. 74,83,207.03 and Rs. 4,70,046.75 respectively. As against this the AO determined the total and taxable turnover at Rs. 76,09,228.58 and Rs. 6,75,900.00 respectively. The AO had allowed exemption on a turnover of Rs. 69,33,328.58 as sales other than first sales of iron and steel. The appellants also filed a list of corresponding second purchases before the original assessing authority for Rs. 75,35,831.95. The purchase list are available at p. 95 to 108 of the assessment filed for 1970-71. These lists include the purchases which were subsequently stated as made from fictitious persons. Subsequently on the basis of report from intelligence staff that certain purchases were from fictitious person, the AO resorted to the revision of assessment. The extract of the investigating officer's report as adopted by the AO is as follows: "The dealers have effected purchases of declared goods under the cover of bills which are found to be fictitious as would e explained below. In addition, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,332.00 . 93,573.60 The duplicate copies of the above bills obtained from the dealers as enclosed. These bills do not contain the registration No. of the sellers. A perusal of these bills would indicate that they are not genuine. A registered notice sent to this address was returned undelivered with the postal endorsement 'Not in 47 V.P. Colony'. It is thus clear that the declared goods covered by these bills had not suffered tax at any earlier stage. In reply to a notice issued the assessee ( Mohamed Naina & Bros) represented that the same dealer is now doing business under the style 'Geespee Stee)' 15, Jones Street, Madras and he is on the file of the Joint Commercial Tax Officer, Harbour-III, in TNGST 2869/71-72. For the purpose of cowndering the assessee's liability to tax, it is unnecessary for the Department to investigate whether the dealers at Jones Street are the same connected with the business at V.P. Colony, Madras-23. It is up to the assessee to prove that the sellers were registered dealers during the relevant period and that the declared goods had already suffered single point tax. So long as the above mentioned sale bills do not contain any evidence to establish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -72, the appellants returned a total and taxable turnover of Rs. 81,97,752.92 and Rs. 1,49,682.00 respectively. The AO had however originally determined the total and taxable turnover at Rs. 81,97,752.92 and Rs. 7,14,600.70 respectively. In this year, the appellant filed a list of second purchases and it is filed at pp. 67 to 85 for Rs. 89,49,832.14. In the original assessment itself, the AO had examined the list of purchases and rejected the claim of second sales to a tune of Rs. 5,39,900.00 for the reason that there is no proof to show that the goods had already suffered the single point tax in the State. The proposals of the Intelligence Staff filed at p. 337 of the assessment file for 1971-72 show that the Intelligence Officers had categorised the purchases into two classes one as fictitious purchases and the other as purchases on the bought notes. It appears that the officers had made the actual verification and enquiries in respect of one Metro Steel Corporation, 253/3, Mint Street, Madras-I (Rs. 23,812.00) and Balaji Industrial Corporation, 176/7, Wall Tax Road, Madras-3 (Rs. 11,553.30). In these cases the AO found them to be non-existent. In respect of the others, there wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat in the latter category of turnover of Rs. 3,66,000 the AO finding was that sufferance of tax earlier was not proved and that he had not spelled out any cloud or malafide of these transactions and that these dealers are existing and it is for the Department to rope them to tax as laid down in the High Court's decision in Govindan's case. The appellant had shown the source of purchases in the latter category and according to the High Court judgment in Govindan's case, it is not necessary for the appellant to show that the goods had actually suffered the single point tax earlier and that it would suffice to show the real persons from whom he had purchased and it is upon the Department to go into this aspect and assess the tax if the dealer is also the first dealer." To impugned levy of tax on a turnover of Rs. 3,66,100.00 is therefore struck of and this turnover should be exempted. 6. T.A. No. 753/74: Govindan & Co., 1, Ayyappa Chetty Street, Madras-1. This is a case where the AO accepted the reported total and taxable turnover of Rs 10,78,976.56 and Rs. 1,527.41 respectively by the appellant for purpose of assessment for 1970-71. The appellant also filed the details of first sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n all these cases, the Intelligence Staff contended themselves with issuing registered letters to these parties and on receipt of undelivered registered letters, they concluded them to be fictitious. There appears to be no proper enquiries conducted in all these 18 cases. The list of the cases is as follows :-- S. No. Name and address found in the bill T.O. 1970-71 1. Radha Iron Mart, 19, Mannady, Madras-1 1,56,942.78 2. Kohinnor Business Corporation 25,Mannady, Madras-1 66,224.84 3. S.M. Badhbha 98, Mannady, Madras, 1. 1,38,315.64 4. T.R. Sastry & Sons 89, Broadway, Ms. 1. 1,78,370.91 5. D.T.V. Iron Corpn. 12 Nainiappa Naicken St., Ms 3. 73,894.50 6. Progress Iron Trader, 48, Devaraja Mudali St., Madras-1. 76,069.70 7. Navy Dava Steel Corpn. 36, Rasappa Chetty St., Madras 3. 7,889.66 8. Kuppumudali Iron & Steel Corporation 63,Rasappa Chetty St., Ms. 3. 60,040.18 9. Rooptara Corpn., 36, Mount Road, Ms. 6 63,929.10 10. Mehra Trading Co., Muthumari Chetty St., Ms. 1 49,002.00 11. Arrun Iron and Steel Traders, Muthumari Chetty St., Madras-1 31,524.40 12. Industrial Engg. Enterprises, 28, Dr. Rangachari Road. Ms. 58,260.30 13. Visvash Hardware, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ynampet, Ramaswami Mudali St., Ms. 2 8,906.20 . . 11,97,820.26 Except in one case viz. Pandian Metal Works, 14, Mettupalayam Road, Madras-37, in all other cases the Investigating Officers satisfied themselves about the fictitious nature of the purchase bills only with reference to the registered letters issued to the dealers and received back, undelivered, with endorsement "not known", "not in the address" etc. In respect of one Pandian Metal Works, 14, Mettupalayam Road, Madras-17, the postal zone for Madras-37 is the postal zone for Officers Training School. It is brought to our notice that Mettupalayam Road lies between West Mambalam and Saidapet, and perhaps the postal zone noted may be incorred. They have not issued even the registered letter to this address. The Officers seem to have concluded of their own accord, on the basis of the number of postal zone that it related to only Officers Trading School Area. In all other cases, they have been led to the conclusion of fictitious purchases on the basis of the undelivered registered letters. There were no enquiries conducted in these cases. 9. T.A. No. 586/74: Tvl. Kamal Hard Wares, 68, Venkata Maistry St., Madras-1 : The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oad, M.s. 37. Here without verifying where the Mettupalayam Road lies the officers below took the view that the postal zone, Madras-37, did not include Mettupalayam Road and hence they came to the conclusion that they were fictitious. As regard another seller Paramount Industries no. 17, Sarojini St., Madras-33, the AO, satisfied himself with the return of the registered letter without making independent enquiries. In respect of the other two cases viz., Kannan, Wall Tax Road and S.A. Salam, Wall Tax Road, there were not only no enquiries but also they have not issued any registered letters to these addresses. 11. T.A. No. 582/74 : This relates to Tvl. Abdullah & Co., No.32/33, Sembudoss Street, Madras-1. This is also a revision of assessment under s. 16 for 1971-72. The appellants total and taxable turnover was determined in the original assessment under s. 12 at Rs. 4,19,718.00 and Rs. 21,986.00 respectively. The total and taxable turnover refixed on revision are Rs. 4,19,716.00 and Rs. 2,24,947.00 respectively. In all these cases, registered letters sent to the addresses were returned undelivered with endorsement 'not known'. There appears to be enquiries only in the few cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would yield no useful result. The issue namely that the impugned goods were first sales in the hands of the appellant and they were purchased on the basis of bought notes prepared by the appellant were clearly before Their Lordships. 13. In a similar case for a different year of the same appellant viz. 1960-61 while disposing of a petition under s. 38 of the Tamil Nadu General Sales Tax Act, 1959, by Deputy Commissioner (Commercial taxes) Coimbatore, against the Tribunal's decision of apportioning the first sales and the subsequent sales on the basis of 50 per cent/50 per cent, the Madras High Court observed in T.C. 122 of 1964 dt. 5th April, 1967 as follows : "2. In the circumstances of this case, we are satisfied that the 50:50 basis adopted by the Tribunal is reasonable. the goods fall under Serial number 3 of Schedule 1 to the Madras General Sales tax Act and their sales attract tax at the stage of first sale in the State. The Tribunal proceeded on the principle and we think it is right in doing so that where it is clear that an assessee has made purchases of the goods locally, it is not necessary for him to further prove that the sales effected by him of the goods are secon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eatures involved also deserve mention. Probabilities cannot be ruled out in the consideration of these facts. It may be that some of the old tyres were purchased from tax paid sources by the consumers. When such tyres were worn out, the consumers might have sold them to the appellants. It is extremely difficult to go into further details in elaborate detail. It is equitable that a portion of the involved purchases should be treated as having come from tax paid source, in consideration of the special circumstances and material facts involved in these cases. In T.C. 122/64 and 55/63, cases of an analagous nature were considered. What is basically to be considered is the possibility of existence of purchases from tax paid sources. Holding such a probability is a reasonable one half of the disputed turnover was related to the exempted category. We feel that such treatment can be equitably applied to this case. We do not find any fresh facts or material circumstances to vary with this reasonable percentage of appointment". In another case arising out of the decision of the Tribunal apportioning 50:50 with regard to the contention of the appellant that the transactions as per the accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been paid by their sellers on the iron and steel goods sold by them to the petitioners does not appear to be correct". In 15 STC page 641, State of Orissa vs. M.A. Taluk & Co. Ltd., the Supreme Court had observed in a case that, where a dealer claimed deduction under s. 5(1)(a)(ii) of the Orissa Sales Tax Act from tax, being sales to a registered dealer or goods specified in the purchasing dealer's certificate of registration, if the assessing authority is satisfied with the other facts, it is not necessary that the selling dealer should produce the declaration before being entitled to deduction. In 26 STC page 505 Budhram Kasiram vs. State of Bihar, the Patna High Court had observed that even without the production of declaration form, the assessee can be granted the deduction in respect of credit sales, if the STO is satisfied from other materials on record that such sales had been made. 16. In 16 STC page 441, Bhatta vs. State of Madras, the Madras High Court had observed that under the changing provisions of the ST Act, the benefit of assessability only at a single point and non-assessability at other points in really in the nature of an exemption and burden of proving th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e totality of the circumstances the possibility of existence of some purchases from tax paid sources for which purchase bills could not be produced, has to be considered in favour of the appellants. We reasonable allow half of Rs. 38,930.08 to cover the affections on the above two counts and refix the assessable turnover o the schedule goods at Rs. 19,465.04". This decision was also rendered for an assessment made under s. 12 for the year 1971-72. The Additional Bench of the Sales Tax Tribunal in T.A. No. 968/70, dt. 21st Feb., 1972, which had the occasion to go into the details of the goods taxable and non-taxable had observed thus :-- "It is by now well settled that if the Tribunal functioning under fiscal alwas, while dealing with a contention raised before it, is of the view that it is not well founded, yet it could grant relief, if it is satisfied that the appellants' stand is otherwise justified. We, therefore, order exemption from tax on 50 per cent of such turnover as relating to sale of exempted goods and towards second sale of schedule goods." The Main Bench of the Sales Tax Tribunal, Madras, in T.A. No. 289/74 dt. 10th July, 1975 had found from the facts and circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Madras vs. T.N. Samuel on revision from the order of the Sales Tax Appellate Tribunal, (A.D) in TA 1320 of 1962 dt. 29th Nov., 1963, the High Court confirmed the order of the Sales Tax Tribunal giving deduction on 50:50 basis. In TA No. 976/72, dt. 15th Sept., 1973 Tvl. K. Dharmichand Jain and The State of Tamil Nadu a decision of the Main Bench, Sales Tax Tribunal Madras. In that case the appellant maintained bought vouchers in respect of purchase of fertilisers from the agriculturists. Even though the vouchers are not verifiable the Tribunal granted 50 per cent exemption for possible second sales. The observation of the Tribunal in the above case is this "Taking into consideration all the above details, facts, circumstances etc. Into consideration, we consider that a portion of the purchases covered by bought noes can be related to first sales category, wherein the goods have not suffered the single point tax under item 21 of the 1st Schedule. In the absence of any reasonable basis for apportionment between taxable & exempted categories, we considered that the proportion of 50:50 would be justified". In 33 STC page 1 State of Madras vs. Raman and Co., the question before their Lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xemption from payment of sales tax, sales tax should have been paid or had been undertaken to be paid by a person making the sale at the first stage and inasmuch as the State authorities have control only over the registered dealer, the certificate to the effect that somebody has paid or has undertaken to pay tax at the stage of sale must be a registered dealer. Their Lordships have also observed that the proviso does not mean that all subsequent hands through which the goods have to pass till they go to the consumers must be registered dealers for the reason that so long as the identity of the goods is there and the payment of sales tax at the first stage is insured, the object of the legislation is satisfied and accordingly held that the words 'registered dealer' at the end of the proviso to s. 5(1) mean a registered dealer from whom the goods were (originally) purchased or from whom the goods were purchased (at the first stage). It is evident from this ratio of the decision of the Punjab High Court that it is immaterial whether the impugned goods which are liable to be taxed at the first point of sale, had passed through various unregistered dealers if the tax at the first point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ructions of the Department that an AO, who is discharging the powers under the statute more specifically in the matter of granting exemptions should take a list of such purchases & make a cross verification to seek the point whether the sale of the impugned goods as contended by the appellants is the second or subsequent sales. Even though these are ellaborate purchase lists in the assessment files they did not show that the AO has discharged this rudimentary responsibility. After the lapse of several years, the Intelligence Wing Officers happened to unearth certain instances where the addresses given in the bought notes or purchase invoices were places where no such business was ever carried. This has reference to three or four cases specifically referred to in the decision of the Main Bench of the Sales Tax Tribunal but in respect of other what the Intelligence Wing Officers seem to have done in that they have issue registered letters to the addresses as per the bought notes or purchase invoices and found them to have been returned with endorsement. "Not known". Besides they had in certain cases verified from the present occupants whether there were any such addresses in that pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to go too far into this. However, on evidence as seen from the affidavits filed by brokers stating that they had arranged for the purchases between various sellers and the appellants there is abundant room for inferring that the bought vouchers could not have been bolstered by ingenious persons and that there is the accompaniment of sales and delivery of the goods as per these invoices or bought notes. 21. The appellants are mostly dealers in iron and steel goods, of which iron sheets are significant. It is stated that iron sheets could not be manufactured in any of the iron mills in Tamil Nadu, and they are the products of Tata Iron and steel Works and Hindustan Steel Works. It is also relevant to know the geneology of these goods before it goes to a dealer who is evidently the last dealer in the chain of successive dealers. There are few Iron & Steel Mills in Tamilnadu, where rerolling plates, channels etc. from out of their local and outside purchases of iron scrape takes place. It was also brought to our notice that they are subject to Excise restrictions. The bulk of supplies of these iron and steel were made by Tata Iron and Steel Words and Hindustan Steel Works, who have t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as (Main Bench) evidently held that there would be innocent victims also. But unfortunately, the decision of the Madras High Court in Royal Tyres, were not placed before him. On a factual appreciation of the identical facts of these cases, Their Lordships, conceded that 50:50 would be the reasonable ratio in similar unverifiable purchases. If these verifications have been taken, before the assessment or immediately thereafter, the result would have been very clinching and unescapable. The AOs have allowed a large efflux of time during which time sequence of natural force of placing and displacing dealers in their business and in financial matters cannot be ruled out. The appellant's Counsel points out that the result of enquiry was not placed before the appellants. It is in the context where the Intelligence Officers recorded certain evidence from the present occupants behind the back of the appellants. This piece of evidence should have been placed before the appellants for rebuttal. That has not been done. Secondly, the return of registered letter would not be an evidence to be acted upon unless and otherwise supported by other supporting evidence. In the instant batch of appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idence. (3) The revision of assessment under s. 16 is quite sustainable in this case and because it was a revision it would not absolve the discharge of the onus of proof cast on these appellants under s. 10 of Act of claim the exemption. (4) The determination of turnover to best of judgment with respect to the first sales and second sales is a question of fact to be found in the facts and circumstances of each case. It is therefore neither a yard to measure nor a stick to lead other cases. (5) In the facts and circumstances relating to the genesis of the impugned goods, it is quite possible that the impugned goods might be made of both the tax suffered and non-tax suffered goods. (6) It would therefore be reasonable and fair in the interest of both the Revenue and appellants to determine the turnover of these two varieties of goods in an equitable and justifiable manner, to the best of judgment. We are therefore inclined to follow the decision of the Madras High Court in T.C. No. 55/63, dt. 13th July, 1964. T.C. 122/64, dt. 5th April, 1967, T.C. 24 & 25/67. dt. 29th Jan., 1968 and the Tribunal's decisions (main Bench) TA 976/72, dt. 15th Sept., 1973. TA 820 and 823/73 dt. 30th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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