TMI Blog1994 (4) TMI 366X X X X Extracts X X X X X X X X Extracts X X X X ..... ature, purport and the attributes of those category of licences need mention before the highly debated issue as to whether they are "goods" generally and if so whether they answer the description of "goods" within the meaning of section 2(j) of the State law and section 2(d) of the Central Act is taken up for consideration. The Imports and Exports (Control) Act, 1947, as amended from time to time, the Imports (Control) Order, 1955 and the periodical policy notified thereunder regulated the imports into and export outside the country and also the channelisation of imports and exports of certain commodities. The policy so declared from time to time also contained incentive schemes and subsidies to build up the foreign exchange resources of the country. As part of such schemes the issue of replenishment licences was introduced to provide to registered exporters by way of import replenishment the essential inputs required in the manufacture of the products exported and also permit flexibility to enable diversification of the export products. Apart from enabling import of relevant items of raw materials, components, consumables and packing materials the same can be availed of for im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transparency, the Government evolved and announced several guidelines. As part of the above, while recognising the existing categories of traders in exim scrips, the designated financial institutions, viz., IDBI, IFCI, ICICI, EXIM Bank, UTI, LIC, GIC and subsidiaries have been allowed either as agents of their importer/exporter customers or on their own to buy or hold or sell exim scrips. Banks, directly dealing in the import/export transactions as authorised dealers of foreign exchange and purveyors of credit, were also authorised to buy, hold or sell exim scrips and further allowed them to be traded on the stock exchanges subject to certain conditions. The modalities and procedure for such tradings have also been laid down and the existing system of transfer mechanism through issue of a transfer letter accompanying the exim scrips was made to continue and a broker could buy or sell only on behalf of his importers/exporters, customers and not in his own name or in his own behalf. The State Bank of India, enabled to purchase exim scrips were obliged to forward paid exim scrip to the issuing offices of the JC CIE for post payment scrutiny. As a matter of fact, the Reserve Bank of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re could be no dispute, the lottery tickets as such would be movable property as opposed to immovable property and consequently would normally qualify to fall within the expression "goods". In Solmond on Jurisprudence, Twelfth Edition, by P.J. Fitzgerald, at page 421, it is stated as follows: "In connection with the distinction between movable and immovable and between real and personal property, we must notice the legal significance of the term chattel. This word has apparently three different meanings in English law: (1) A movable physical object; for example, a horse, a book, or a shilling, as contrasted with a piece of land. (2) Movable property, whether corporeal or incorporeal; that is to say, chattels in the first sense together with all proprietary rights except those which are classed as immovable. In the usage debts, shares, contracts, and other choosesin-action are chattels, no less than furniture or stock-in-trade. So also are patents, copyrights, and other rights in rem which are not rights over land. This double use of the word chattel to indicate both material things and rights is simply an application, within the sphere of movable property, of the metonymy w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciples underlying the definition of "goods " in the various provisions referred to supra including the definition of the said expression in the sales tax laws in force in the State and the ratio of the decisions referred to above. It needs no serious efforts or exercise to hold that the licences in question would constitute "goods" generally and also for purposes of sales tax laws in force in the State. 7.. The next submission that requires for our consideration would be as to whether the licences could be called or classified as "actionable claims", stocks and shares-and securities and thereby stand excluded on account of the exception created by the sales tax laws in force in the State. As to what constitutes an "actionable claim" has been dealt with also by the apex Court in Anraj case [1986] 61 STC 165. While adopting the principles enunciated in section 3 of the Transfer of Property Act, 1882, for that purpose, it has been held therein as hereunder: "Since 'goods' are defined to exclude actionable claims it will be useful at this stage to refer to the definition of 'actionable claim' as given in section 3 of the Transfer of Property Act, which runs thus: 'Actionable claim' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r consideration cannot also be claimed to be "securities" which again and particularly having regard to the context is referable to only shares, scrips, stocks, bonds, debentures and should always mean or aim at making the payment of any money more assured payment and more readily recoverable. The licences under consideration can hardly be claimed to satisfy this criteria also. Therefore, we are of view that the licences under consideration which have been held by us to be "goods" do not fall within the excluded category or class of goods so as to take them outside the purview of the sales tax laws in force in the State. 9.. The learned counsel appearing for the petitioners with the exception of Mr. C. Natarajan, one of the learned counsel who also made submissions by way of addition to the submissions made by the others, forcefully contended that the licences in question have been issued as part of the scheme and policy underlying exports and imports evolved under the Imports and Exports (Control) Act, 1947 and with effect from June 19, 1992 under the Foreign Trade (Development and Regulation) Act, 1992, a subject and topic of legislation exclusively within the competence of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ist I and List II, the general subjects are distinctly dealt with as one group of entries and powers of taxation as a separate group and this method of mutual exclusiveness is brought out by the further fact that in List III, the Concurrent List, there is no entry relating to a tax but it contains only an entry relating to levy of fees in respect of topics specified in that List, other than court fees. The framers of Constitution have taken sufficient care to ensure that a conflict of the taxing power of the Union and of the States cannot arise. Further, the power of taxation has always been treated as a distinct matter for purposes of legislative competence and consequently apart from the position that the power to tax cannot be deduced from a general legislative entry as an ancillary power, the element of taxation has been held not to directly flow from the power to regulate trade and commerce. We find no rhyme or reason in the attempt sought to be made to visualise an alleged conflict without any regard to the pith and substance of the legislative enactments made in exercise of the powers under List I, entry 41 on the one hand and List II. entry 54 on the other and acceptance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny one place to render any dealing with such property a local sale in this State within the meaning of section 4 of the Central Sales Tax Act, 1956. In this connection, the learned counsel invited our attention to some of the English decisions pertaining to patent rights, bond, debt, share certificate, goodwill and benefits arising out of a contract. Having regard to the above, the ultimate submission made on behalf of the petitioners was that the pre-requisite for the State power of taxation treating a sale to be inside sale is the existence or situs of sale within the meaning of article 286(2) of the Constitution and section 4 of the Central Act and the State cannot adopt or apply any other rule or principle. We consider it wholly unnecessary to refer to the various English decisions relied upon in this regard. The norms for fixing of situs or local situation of a property varies with the purpose, depending also on the context and the nature of the property concerned. The normal principle is that if a chattel is a physical, tangible thing which can be touched and seen and which can be placed in a particular place, it may be locally situate at the place where it was at the appropr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfer or sales of REP/exim scrip licences and not of any goods actually exported or to be imported. So far as the taxable event for consideration in these cases being the sale or transfer of the licences under consideration by a document to be executed coupled with the handing over of the original licence, we are unable to visualise any serious difficulty in fixing the situs of the sale with the place of such sale or transfer. The fact that those licences issued have validity or force of enforcement at all or any part of the country or that it may be availed of to import goods from outside the country into any other part of this country, at times even outside the State of Tamil Nadu has no relevance whatsoever in fixing or identifying the actual place or situs of the sale of these licences which alone attract the levy of sales tax. 13.. Mr. Habibullah Badsha, learned Senior Counsel for the petitioner in W.P. No. 9136 of 1992, while reiterating the contentions urged by the other learned counsel, contended that the licences under consideration have been issued in order to compensate the loss to the traders in this country competing in the world market and being a statutory right flo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t sales tax on REP licences/exim scrips sought to be levied with retrospective effect from 1986-87. As part of implementation of the new industrial policy announced by the Government during the year 1992-93, they resolved to retain the levy of tax and at the same time offered a compensatory export subsidy to electronics and leather industries alone which shall be equivalent to the sales tax payable from the date of the order in G.O. Ms. No. 258, Industries, dated June 30, 1993. The State Government also nominated Industries Commissioner and Director of Industries and Commerce as the agents of the Government for disbursement of the export subsidy sanctioned to the tune of Rs. 200 lakhs for disbursement. Para 7 of the said order makes it very clear that the Industries Commissioner and Director of Industries and Commerce should draw and disburse the export subsidy to the eligible industrialists "after obtaining the necessary application along with the assessment order issued by the concerned commercial tax authority" and it further provided that "the subsidy should be limited to the tax actually paid and should be released only after the applicant produces a certificate issued by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r is one where the licence granted is returned back to the grantor. In the context of surrender of rights generally it conveys an abdication or giving up of a right in favour of some one who also holds an interest in the very matter. The word "surrender" is an anachronistic word for the identification or description of the action of the petitioner. It is not the case of the petitioner that the licence under consideration was returned to or handed over back to the grantor-department of the Government of India but on the other hand the specific claim is that it has been delivered to the designated bank on receipt of valuable consideration therefor. The circular orders of the department, in unmistakable terms provide, that the Reserve Bank of India has authorised the State Bank of India "to buy the exim scrips" which term would also cover the post paid REP licences up to February 29, 1992 and that the Reserve Bank of India had also disclosed details of the designated branches of the State Bank of India and the procedure therefor. The copy of the Press release issued by the Reserve Bank of India, REP Circular No. 12/92 dated March 27, 1992, made available by the petitioner in W.P. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the transaction and the assessability of such transactions to tax till the decision of the Karnataka High Court reported in [1992] 86 STC 170 and [1992] 86 STC 175 (Bharat Fritz Werner Ltd. v. Commissioner of Commercial Taxes) and, therefore, the petitioners and other assessees could not be attributed with wilful non-disclosure of assessable turnover. The fact remains and it is beyond controversy that at no time before the department has assessed the transactions of the nature to tax and that both the assessees and the department shared a common view that there is no taxable turnover involved for assessment in such cases. Not only there were bona fide reasons and genuine grounds for thinking that such transactions as are now under consideration could not be treated as sales attracting levy of tax but the assessees could not in these cases be considered to have not disclosed the same as taxable turnover with a view to evade or avoid or postpone the payment of tax legitimately due to the State. Though for purposes of levy of penalty under sections 12(3) and 16(2) of the Act, a finding regarding wilful non-disclosure is a necessary ingredient and pre-requisite, it cannot be claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be at liberty to file statutory appeals/ revisions as are permissible under law vindicating their rights in respect of such claims and as and when such proceedings are filed, the competent and concerned authorities shall consider the claims in individual cases in accordance with law and on their own merits. The petitioners or such of those assessees who are desirous of filing appeals/revisions in respect of levy already made either under the State Act or Central Act by passing assessment orders shall have the period of statutory limitation fixed therefor counted and computed from this date and the authorities shall entertain and dispose of the appeals, if any filed, in accordance with law. 17.. We may also place on record the fact that a learned single Judge as also a Division Bench of the Karnataka High Court in the decisions reported in [1992] 86 STC 170 and 175 (Bharat Fritz Werner Ltd. v. Commissioner of Commercial Taxes) respectively have sustained the levy of sales tax on similar transactions. No doubt, the petitioners have urged in these cases before us some additional points which have been dealt with by us on their own merits. That apart, we are also in respectful agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for. Since, in our view, the question involved in the writ petitions does not involve any substantial question of law of great importance or as to the interpretation of the Constitution, leave is refused. Writ petitions dismissed. The judgment of the Court was delivered by KANAKARAJ, J.-The respondents/assessees are carrying on business in readymade garments. For the assessment year 1979-80 they filed returns declaring a total and taxable turnover of Rs. 3,04,295 and Rs. 78,935 respectively claiming exemption on a turnover of Rs. 2,25,360. Their accounts were called for and checked. The assessing authority found two defects on verification of accounts. (1) Purchase of hosiery goods under a brand name for a sum of Rs. 35,124.29 from outside the State of Tamil Nadu, had not been separately accounted for. The relative first sales turnover in respect of the said goods was arrived at as Rs. 42,990 taxable at 5 per cent. (2) A sum of Rs. 68,091 was found to relate to inter-State purchase of readymade goods and the same had been wrongly included in the total purchase of readymade goods. The sales turnover on this account was worked out as Rs. 83,341 taxable at 2 per cent. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... berate concealment in the return is found out. The Tribunal observes as follows: "Having regard to the facts and circumstances of the case, we find in the instant case that the appellants had not acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation and as such the penalty is not called for under section 12(5) of the Act." The Revenue is in revision before us. 3.. Elaborate arguments have been advanced on the scope of section 12(4) and 12(5) of the Act. While it is the contention of the Revenue that deliberate concealment or wilful suppression is not necessary for the purpose of levying penalty under section 12(5) of the Act, it is the contention of the assessee that a bona fide belief that a particular turnover is exempt or is assessable at a particular rate does not call for a penalty merely because the authorities think otherwise about the bona fide belief of the assessees. Elaborating the contention it is argued on behalf of the Revenue that the provisions of sections 12(3) and 16(2) of the Act have been differently enacted. Notions of wilfulness or a deliberate intention to conceal do no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing authority that the accounts maintained by a dealer are correct and the assessment of such dealer is on the basis of such accounts. In such an event if the assessing authority finds that the return submitted by the assessee is incorrect or incomplete section 12(5)(iii) provides for penalty which shall not be less than 50 per cent but which shall not be more than 150 per cent of the difference in tax payable on the turnover disclosed in the return and that determined by the assessing authority. While section 12(3)(a) and (b) refers to "turnover that was not wilfully disclosed" and "wilful failure to submit a return", such phraseology is absent in section 12(5) of the Act. Therefore from a plain reading of section 12 of the Act, as a whole it appears to us that if the assessment is made on the basis of the accounts, and it is found that the return does not truly reflect the accounts, levy of penalty is called for. In other words, it will not be an answer to plead that the assessee had maintained the accounts properly, and in filing the returns he had either omitted or incorrectly shown the total and taxable turnover. 4.. The above interpretation based on the plain reading of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to unlock the problems posed by section 12(4) and 12(5) of the Tamil Nadu Act, and as to the circumstances in which a return can be said to be incorrect or incomplete: "What section 43 of the Madhya Pradesh General Sales Tax Act, 1958, requires is that the assessee should have filed a 'false' return and a return cannot be said to be 'false' unless there is an element of deliberateness in it. It is possible that even where the incorrectness of the return is claimed to be due to want of care on the part of the assessee and there is no reasonable explanation forthcoming from the assessee for such want of care, the court may, in a given case, infer deliberateness and the return may be liable to be branded as a false return. But where the assessee does not include a particular item in the taxable turnover under a bona fide belief that he is not liable so to include it, it would not be right to condemn the return as a 'false' return inviting imposition of penalty." On the facts of the case the Supreme Court held that the assessee could not be said to have filed a "false" return when it did not include the amount of freight in the taxable turnover in the returns filed by them. In Hin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses of assessees which are brought to the portals of courts of law, are not always identical. 6.. Any attempt to define the limits of section 12(4) and 12(5) of the Act and lay down a universal formula for the imposition of the penalty would, in our attempt be improper and would not be adequate to meet the diverse situations which may arise on the facts of the particular case. We have already noticed a few cases under the Madhya Pradesh Act. We may also notice in this connection that, in several cases, this Court has taken the view that where an assessee files a revised return and pays the tax on such revised return, before the assessment is completed, penalty cannot be levied under section 12(5) of the Act. In this connection, reference may be made to the recent judgment of this Court in Bhavani Mills Ltd. v. State of Tamil Nadu [T.C. (R) No. 1297 of 1982 dated October 3, 1991*], Kalyani Agencies v. State of Tamil Nadu [1984] 10 STL 151 (Mad.) and State of Tamil Nadu v. P.S. Srinivasa Iyengar Sons [1993] 89 STC 349 (Mad.); [1989] 10 SISTC 155 (Mad.) (T.C. No. 77 of 1989 dated April 19, 1989). The exceptions, we have noticed where the assessee can escape the penal consequences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when the assessment is made on the basis of the entries found in the books of account of the assessee, and not when the assessment is made de hors the accounts and after rejecting the same. Thus, the Tribunal in this case appears to be right in holding that the penalty under section 12(5) cannot be justified on the facts of the case." 8.. We are in respectful agreement with the view expressed in the last two judgments of this Court. In our view section 12(2) and 12(3) of the Act operates in a particular field where the assessing authority resorts to best of judgment assessment. Section 12(4) and 12(5) operates in a different field where the assessment is made on the basis of the books of account rejecting the return submitted by the assessee as incorrect and incomplete. We have already indicated that once an assessment is made on the basis of the books of accounts the penalty under section 12(5) of the Act will be attracted. While the element of deliberateness, wilfulness or a blameworthy conduct on the part of the assessee may not be necessary for invoking section 12(5) of the Act, we are clearly of the opinion that the bona fides of the assessee have to be gone into before impo ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
