TMI Blog2009 (4) TMI 843X X X X Extracts X X X X X X X X Extracts X X X X ..... 2008 & W.P. Nos. 4709 to 4711 of 2009 - - - Dated:- 21-4-2009 - RAMASUBRAMANIAN V. , J. ORDER:- V. RAMASUBRAMANIAN J. The petitioner has come up with the present writ petitions, challenging the orders of assessment passed by the first respondent in all these writ petitions, under the Central Sales Tax Act, 1956, in respect of the assessment years 2001-02, 2002-03 and 2003-04. I have heard Mr. C. Natarajan, learned Senior Counsel for the petitioner and Mr. Haja Naziruddin, learned Special Government Pleader (Taxes). Since the petitioner bracketed a portion of the turnover as branch transfer and claimed to have paid tax in other States, but the same was disallowed by the first respondent, the petitioner has also impleaded the States of Kerala and Karnataka apart from the Union Territory of Pondicherry and the Union of India, as parties to the writ petitions. However, notices to them have been dispensed with, in view of the nature of the disposal that I propose to give to the writ petitions. Admittedly, the petitioner is a registered dealer, manufacturing cement and effecting both local sales as well as inter-State sales. They have a factory at Madukkarai in Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er seeks to justify the invocation of the writ jurisdiction of this court, by-passing the alternative remedy, primarily on two grounds, viz., (i) that there was violation of the principles of natural justice and (ii) that there was a failure to comply with the mandatory requirement of section 6A(2) of the Central Sales Tax Act, 1956. Complaint of violation of principles of natural justice: There is no quarrel with the proposition that the writ jurisdiction of this court can be invoked without exhausting the alternative remedy, if there was a violation of the principles of natural justice. In Harbanslal Sahnia v. Indian Oil Corporation Ltd. [2003] 2 SCC 107, the Supreme Court held as follows: The rule of exclusion of writ jurisdiction by availability of an alternative remedy is a rule of discretion and not one of compulsion. In an appropriate case, in spite of availability of the alternative remedy, the High Court may still exercise its writ jurisdiction in at least three contingencies: (i) where the writ petition seeks enforcement of any of the fundamental rights; (ii) where there is failure of principles of natural justice; or (iii) where the orders or proceedings are wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s can be entertained. But normally, the High Court should not entertain writ petitions unless it is shown that there is something more in a case, something going to the root of the jurisdiction of the officer, something which would show that it would be a case of palpable injustice to the writ petitioner to force him to adopt the remedies provided by the statute... Again in L.K. Verma v. H.M.T. Ltd. [2006] 2 SCC 269, the Supreme Court pointed out that despite the existence of an alternative remedy, a writ court may exercise its discretionary jurisdiction of judicial review, inter alia, in cases where the court or the Tribunal lacks inherent jurisdiction or for enforcement of a fundamental right or if there has been a violation of a principle of natural justice or where vires of the Act is in question. The grievance of the petitioner is that without providing sufficient opportunity to produce the statements and records and without even an opportunity to show cause against the proposed penalty, the first respondent passed the impugned orders of assessment and that therefore there was violation of the principles of natural justice. However, the first respondent has filed a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly. 10-17-2008 The petitioners were permitted to take copies of D7 records on 24-10-2008. On 26-12-2008, the petitioners filed reply to the notice dated 7-8-2008. 1-30-2009 Pre-assessment notice issued granting 15 days time. On 16-2-2009, the petitioner sought 15 days time. On 2-3-2009, they sought for three weeks time to cross-examine the transporter. 3-9-2009 Final assessment orders passed OPPORTUNITIES IN RESPECT OF THE ASSESSMENT YEAR 2003-04 10-10-2006 Summons issued fixing the hearing on 22-11-2006. On 21-11-2006, the petitioner sought adjournment. 1-25-2007 Summons issued fixing the hearing on 9-3-2007. No reply. 1-25-2007 The petitioner was issued summons to bring the books of accounts on the following dates: The petitioners sought more time. 2001-2002 20-02-2007 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mons were only under the State Act. The first notice under the Central Act was dated January 30, 2009 and this notice did not allege non-production of records or books. It referred only to non-compliance with rule 4(3A) of the CST (Tamil Nadu) Rules, which is applicable to movement to a selling agent on behalf of a principal and not applicable to a case of stock transfer to one's own branch or warehouse. (iii) Similarly, all notices with regard to the assessment year 2003-04, were also only under the State Act. But the show-cause notice dated August 7, 2008, was under the Central Sales Tax Act, for the years 2001-02, 2002-03 and 2003-04, seeking to delete the stock transfer items. There was no show-cause notice issued till January 30, 2009 to assess the sales in other States under the Central Act. In short, the contention of the petitioner is that under the Central Sales Tax Act, the first notice was issued only on January 13, 2009 in respect of the year 2001-02; the first notice was issued on January 30, 2009 in respect of the assessment year 2002-03 and the first notice was issued on January 30, 2009 for the year 2003-04. Therefore, according to the petitioner, the clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Summon dated 10-10-2006 Under the TNGST Act, in form XII Summon dated 25-1-2007 Under the TNGST Act, in form XII Best-of-judgment notice dated 10-8-2007 Though this is also only under the TNGST Act, it refers to the claim under section 6A of the CST Act. In this notice, there is a proposal to disallow the claim for exemption in the penultimate para. But it refers only to the inspection by the Enforcement wing on 14-3-2002 which revealed (i) lower rate of tax paid on discarded materials and on fly ash and (ii) purchase of hand gloves from unregistered dealers. Notice dated 17-10-2007 Under the TNGST Act directing the petitioner to produce records, forms, declarations, etc., on 29-10-2007. In their reply dated 29-10-2007 to this notice, the petitioner points out in paragraph 5, that regarding stock transfer, they had already submitted F forms along with despatch details and tax-paid certificates from other States and that they are willing to submit any other details. Preassessment notice dated 6-8-2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orm XII Summon/notice dated 16-4-2007 Under the TNGST Act, form XII Best-of-judgment notice dated 10-8-2007 Though it was captioned as one under the TNGST Act, this notice specifically dealt with branch transfer and the contention of the department that the goods moved from Madukkarai were not unloaded at Palakkad, but continued their journey in the same vehicle to the buyers under the control of the RMO and that the depot was acting only as a conduit. Therefore there was a proposal to disallow exemption on branch transfer and also to impose penalty Pre assessment notice dated 7-8-2008 It is clearly under the CST Act and specifically dealt with stock transfer Notice dated 4-9-2008 Under the CST Act Notice dated 24-9-2008 Under the CST Act Notice dated 17-10-2008 Under the CST Act permitting the petitioner to take copies of D7 records as per the order of this court in W. P. Nos. 23754 to 23759 of 2008 Pre assessment notice dated 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and also take copies even before the issue of the second pre-assessment notice. Therefore, it is uncharitable on the part of the petitioner to contend that there was any violation of the principles of natural justice. The petitioner is not a petty dealer. It is a company having a wide network and was represented before the assessing officer, every time, by professionally qualified persons as seen from the replies sent by them. They understood what these notices purported to be. Therefore, I am of the considered view that the allegation of violation of natural justice, made by the petitioner cannot be accepted. Non-compliance with section 6A of the CST Act: Apart from the allegation of violation of the principles of natural justice, the petitioner also alleges violation of the mandatory provisions of section 6A of the Central Sales Tax Act, 1956. The contention of the petitioner is that once an assessee has produced form F declarations, the assessing authority is duty-bound to conduct an enquiry in accordance with section 6A(2). But the first respondent obviously did not hold any such enquiry. Therefore, according to the petitioner, the impugned orders of assessment suffer fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns are true. This satisfaction may be arrived at either at the time of or at any time before the assessment. Once the assessing authority is satisfied, the second limb of sub-section (2) requires him to make an order to that effect. Though sub-section (2) uses the expression he may , it appears that (i) the scrutiny of the declaration, (ii) conduct of an enquiry, (iii) arriving at a satisfaction and (iv) then making an order, are all essential requirements, to be satisfied before the assessee can be held to have failed to discharge the burden of proof cast upon him under sub-section (1) of section 6A. In A. Dhandapani v. State of Tamil Nadu [1995] 96 STC 98, a Division Bench of this court held (in paragraph 3.4 of its judgment) that the failure to render a finding that the particulars contained in the declaration are untrue, before foisting liability would vitiate the assessment and that the enquiry with regard to the declaration is mandatory . Such a view was taken by the Division Bench, even at a time, (before the amendment Act 20 of 2002), when the filing of form F declaration was only optional and not mandatory. In Ashok Leyland Ltd. v. State of Tamil Nadu [2004] 134 ST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In other words, the claim of the petitioner that it was a case of stock transfer, has been rejected by the first respondent (i) due to the alleged failure on the part of the petitioner to file statements and records in terms of rule 4(3A) of the CST (Tamil Nadu) Rules, 1957 and (ii) on the basis of inspection findings and scrutiny of D7 records. There is no indication whatsoever, that any kind of inquiry, even a perfunctory one, was conducted by the first respondent, before coming to the above conclusion. Neither the impugned orders of assessment nor even the common counter-affidavit, contains a claim that any such inquiry was ever conducted. Therefore there is no escape from the conclusion that the first respondent committed a serious error of jurisdiction, in terms of section 6A(2) of the Act. As stated above, the non-filing of the statements and records prescribed in rule 4(3A) of the CST (Tamil Nadu) Rules, 1957, is one of the grounds on which the first respondent rejected the claim for exemption on branch transfer. But in A. Dhandapani's case [1995] 96 STC 98, the Division Bench of this court held that rule 4(3A) is only directory and not mandatory and that when form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of putting the goods in the possession of the buyer or any person authorised by him. Section 39(1) of the Sale of Goods Act, 1930, creates a deeming fiction by holding that the delivery of the goods by the seller to a carrier, whether named by the buyer or not, in pursuance of a contract of sale, to be a delivery of the goods to the buyer. However, sub-section (2) creates certain obligations on the part of the seller to make such contract with the carrier as would be reasonable, having regard to the nature of the goods and other circumstances. Today, with the development of on-line trading and such other electronic methods, a transfer of title in movable property can take place both without the actual payment of the price and without actual delivery taking place. It takes place at times without even the buyer and the seller knowing or ever meeting each other. Today, many transactions are initiated, conducted and closed at the click of the mouse, as the operators in the field of trade and commerce, have also got into mouse-traps . Therefore, the mere fact that the goods sent from Madukkarai were not unloaded at the Palakkad depot and that after taking delivery receipts, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n paragraph 9 (page 435 of STC) therein that the mere delivery of railway receipts representing the title to the goods, will not constitute actual delivery of goods for the purpose of article 286. Moreover, in business transactions attracting fiscal statutes, the motive or substance is of little consequence than the form in which they take place. In Board of Revenue, Madras Chief Controlling Revenue Authority v. N. Narasimhan AIR 1961 Mad 504, it was held by the Full Bench of this court as follows: (page 510) 31. In the application of a taxing enactment to a subject, the emphasis on the so-called substance of the transaction in antithesis to the form of it should be made with a good deal of caution. In Bank of Chettinad Ltd. v. Commissioner of Income-tax [1940] 8 ITR 522 at page 526; AIR 1940 PC 183 at page 185, Sir Lancelot Saunderson delivering the judgment of the Board observed thus: 'Their Lordships think it necessary once more to protest against the suggestion that in revenue cases, the substance of the matter may be regarded as distinguished from the strict legal position. In Inland Revenue Commissioners v. Duke of Westminster [1936] AC 1 disapproval of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Revenue Commissioners v. Duke of Westminster [1936] AC 1 and that of Lord Cairns in Partington v. Attorney-General [1869] LR 4 HL 100 as well as the decision of the Privy Council in Bank of Chettinad [1940] 8 ITR 522; AIR 1940 PC 183 which were followed by the Full Bench of this court in Board of Revenue, Madras Chief Controlling Revenue Authority v. N. Narasimhan AIR 1961 Mad 504. Therefore, tax planning as opposed to tax evasion, has legal sanction. If a dealer plans his transactions in such a manner that he pays less tax, it is not open to the Revenue to subject him to a conscience audit or moral assessment. The power to lift the veil, has to be exercised with great care and caution. In the case on hand, the dealer has a factory in Tamil Nadu and he claims exemption in this State on stock transfer made to his branches in other States. In an exact reversal of the situation, another dealer having a factory in other States, may make similar claims in those States on the basis of the stock transferred to a branch in Tamil Nadu and the tax paid here under the local sales tax law. While the State is deprived of revenue in the former situation, it is benefited with revenue in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e writ petitions. This statement substantiates the claim of the petitioner that if an enquiry had been held, under section 6A(2), the result could have been different. Therefore, the impugned orders are liable to be set aside, though not on the ground of violation of principles of natural justice, but on account of the failure of the first respondent to hold an inquiry and pass orders in terms of section 6A of the Central Sales Tax Act, 1956. In view of the above, the writ petitions are allowed, the impugned orders of assessment are set aside and the matters remitted back to the first respondent for an enquiry under section 6A(2) of the CST Act. The first respondent shall issue a notice to the petitioner within 2 weeks from the date of receipt of a copy of this order, specifically fixing 2 alternative dates for the enquiry under section 6A(2) of the Central Sales Tax Act, 1956. The notice shall contain proposals both in respect of tax and in respect of penalty and also call upon the petitioner to substantiate their claim regarding branch transfer. The notice shall specify two alternative dates for the hearing fixed by the first respondent and the notice shall be served at the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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