TMI Blog2008 (11) TMI 613X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent herein). On the basis of this, the assessing officer issued a show-cause notice and finalised the assessment for the year 1997-98 under the CST Act, rejecting the appellant's claim that it effected stock transfers to its head office-cum-sale depot at Bangalore and thereafter effected local sales in Karnataka. A turnover of Rs. 3,04,43,525 was subjected to tax at eight per cent in the absence of C forms, after overruling the objections of the appellant. Penalty at oneand-a-half times the tax due was also levied under section 9(2A) of the CST Act read with section 12(3)(b) of the TNGST Act. Aggrieved by the assessment and penalty order dated January 20, 2000, the appellant filed an appeal before the Appellate Assistant Commissioner, Salem, disputing the turnover of Rs. 2,78,87,229 (taxed at eight per cent) and penalty of Rs. 74,52,342. The Appellate Commissioner dismissed the appeal. The appellant then carried the matter in appeal to the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Coimbatore. The appellant failed to get any relief. The Tribunal held that the incriminating material gathered by the Department at the time of inspection on July 1, 1998 just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Nadu filed an appeal before the Tribunal. By an order identical to the one passed in respect of the appeal for the previous year, the Tribunal allowed the State's appeal. The question to be considered is whether the finding of the assessing authority that the alleged stock transfers were in fact inter-State sales directly made from the appellant's factory to the customers in Bangalore is sustainable and whether any relief is to be granted to the appellant wholly or partly. To bring the sale within the purview of section 3(a) of the CST Act, it must be proved that the movement of goods from one State to another was occasioned by reason of a contract of sale. The scope and ambit of section 3(a) was pithily expressed by the Supreme Court in the well-known case of Tata Iron and Steel Co. Ltd. v. S.R. Sarkar [1960] 11 STC 655, thus: . . . clause (a) of section 3 covers sales, other than those included in clause (b), in which the movement of goods from one State to another is the result of a covenant or incident of the contract of sale and property in the goods passes in either State. In Commissioner of Sales Tax, U.P. v. Bakhtawar Lal Kailash Chand Arhti [1992] 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umber of days before effecting the sales. Thus, there were instances of sales on the same day as well as on subsequent days. However, the other factors relied upon by the assessing authority and the Tribunal are very relevant. The fact that the sale invoices which should have been kept at the Bangalore office were found at the appellant's factory near Hosur, that too in a godown, shows that the invoices were prepared at the factory itself after getting firm orders from the buyers. The fact that the same person in management signed the invoice as well as the stock transfer delivery challan would reinforce the conclusion that they were simultaneously prepared at the factory before the goods were dispatched by the lorries. The explanation given by the appellant in this regard was that the files containing copies of invoices were taken by the auditors to the factory along with copies of delivery orders issued from the branch for the purpose of reconciliation between the production, stock transfers and sales, and in the normal course, they would have been brought back to the registered office by the auditors but for the seizure of the record. This version, to say the least, is highl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e finding on the quantum of turnover attributable to the disguised inter-State sales. The inspection by the Enforcement Wing took place on July 1, 1998. The records/ documents seized related to the period November 21, 1997 to April 30, 1998. Apart from the statement of the appellant in this regard, we get this information from the assessment/penalty orders. The taxable turnover under the CST Act arrived at by the Enforcement officials on a verification of the seized records comes to Rs. 1,60,23,984 for the year 1997-98. This is borne out by the clear statements in the assessment order itself. At page 14 of the assessment order, it is observed as follows: In the above circumstances, the claim of exemption as stock transfer is not in order. The direct inter-State sales were camouflaged as stock transfer. The actual state of affairs in this case is based on proved facts with reference to the D7 records. The direct inter-State sales camouflaged as stock transfer is for 1997-98: Rs. 1,60,23,984. Earlier, at page 7 also, it was observed: From the records seized at the time of inspection under D7 slips marked A, B, C, D, E, F, G, H it is seen that the direct inter-State sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged as stock transfer based on the records seized by the Enforcement Wing is stated to be Rs. 1,35,15,592. The same fact is noted at page 14. That is the figure arrived at by the inspecting officials of the Enforcement Wing up to the date of inspection, i.e. June 30, 1998. The assessing authority has not adverted to any material or any basis to conclude that subsequent to the inspection also, similar modus operandi was adopted. No basis and no reason was given by the assessing authority for treating the entire stock transfer transactions as inter-State sales even subsequent to inspection. That is why the first appellate authority made a pertinent comment at page 34 of the order which has been extracted earlier. The Tribunal which reversed the order of the first appellate authority has not said anything on this aspect. It cannot be presumed that even after the date of inspection, the appellant would have conducted his trading activity in the same manner. No specific reason was given for rejecting the claim of the appellant in toto for the entire year. The appeal relating to the assessment year 1998-99 is therefore allowed to the extent of the turnover of Rs. 4,74,38,176 in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on final assessment, (i) Turnover representing additions to the turnover as per books made by the assessing authority without any reference to any specific concealment of turnover from the accounts; . . . In the case of Siddhartha Apparels (P) Ltd. v. Secretary, Commercial Tax Department, Chennai [2008] 13 VST 222 (CSTAA), this authority held that an assessment to the best of judgment is what is contemplated by section 12(2) and in the absence of such assessment, penalty cannot be levied. The decision of the Supreme Court in State of Madras v. S.G. Jayaraj Nadar Sons [1971] 28 STC 700 and the decision of the Madras High Court in Appollo Saline Pharmaceuticals (P) Ltd. v. Commercial Tax Officer [2002] 125 STC 505 were relied on. In Jayaraj Nadar's case [1971] 28 STC 700 (SC), the concept of best judgment assessment was explained as follows (at page 702): . . . It is well-known that the best judgment assessment has to be on an estimate which the assessing authority has to make not capriciously but on settled and recognized principles of justice. . . Where account books are accepted along with other records there can be no ground for making a best judgment assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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