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2016 (10) TMI 560 - MADRAS HIGH COURT

2016 (10) TMI 560 - MADRAS HIGH COURT - TMI - Principles of natural justice - levy of penalty u/s 12(3)(b) and 10(3)(1) of the Act - determination of total and taxable turnover for the relevant year - inspection of the business premises by the officials of the Enforcement Wing - while denying the allegations made in the pre-revision notice dated 16.11.2004, as defamatory and mala fide, the petitioner requested copies of the records, which were relied upon in the notice, agreeing to pay cost and .....

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nt and passing the impugned order. Thus, the inherent defect, which has crept in the order, affects its very validity. The violation of the principles of natural justice is writ large on the face of the impugned order, which is sufficient to hold that the same is not sustainable. - Petition allowed - matter remitted back to the respondent with a direction to consider the request of the petitioner for furnishing of statements and records and an opportunity of cross examination and thereafter .....

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For the assessment year 2003-04, the petitioner reported a total and taxable turnover of ₹ 78.76 crores and ₹ 54.43 lakhs respectively. The respondent, on verification, issued a notice proposing to disallow the entire claim of second sale exemption on the basis of certain purchases effected from four registered dealers for ₹ 3.05 crores. 3. The petitioner filed their interim objections requesting the respondent to furnish copies of the records and the statements relied upon in .....

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challenged in this writ petition. 5. Mr.T.Pramod Kumar Chopda, learned counsel for the petitioner submitted that the impugned order having been passed without providing a reasonable opportunity, in spite of a specific request, is against the principles of natural justice and fair play. According to the learned counsel, the respondent ought to have furnished copies of the records relied upon and provided an opportunity of cross examination with reference to the accounts of the registered dealers .....

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ferred by Mr.Mahendra Kumar Jain, but also dealers like M/s.Rashtriya Ispat Nigam Limited and various re-rolling mills, which transactions have not been disputed by the respondent. Therefore, the respondent committed a serious error in disallowing the entire second sale exemption. It is further submitted that those dealers, whose statements and records, which were relied upon by the respondent, are existing dealers and had claimed exemption on their sale. Hence, it is submitted that only those d .....

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allalar Nagar Assessment Circle, Chennai [W.P.No.32133 of 2004 dated 5.11.2004] and the decision in the case of M/s.AMA Steels Vs. Assistant Commissioner (CT), Harbour III Assessment Circle, Chennai-1 [W.P.No.21238 of 2011 dated 18.10.2011]. 8. The learned counsel for the petitioner has also filed a typed set of papers consisting of details of first purchases made from the registered dealers for the relevant assessment year, details of second and subsequent purchases made from registered dealers .....

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ded to and the failure to do so has resulted in the violation of the principles of natural justice. To support such a contention, reliance was placed on the decision of the Hon'ble Supreme Court in the case of Kalra Glue Factory Vs. Sales Tax Tribunal [reported in (1987) 66 STC 292]. 10. On the above grounds, the learned counsel for the petitioner would submit that the impugned order is unsustainable and as the same has been passed in violation of the principles of natural justice, the petit .....

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as made to the decisions of the Hon'ble Division Bench of this Court in the cases of (i) Govindan & Co. Vs. State of Tamil Nadu [reported in (1975) 35 STC 50], as confirmed by the decision of the Hon'ble Supreme Court in the case of State of Tamil Nadu Vs. Govindan & Co. [reported in (1994) 93 STC 185]; (ii) Deputy Commissioner (CT) Vs. Sivakumar & Company [reported in (1980) 45 STC 436]; (iii) State of Tamil Nadu Vs. A.R.Duraisamy Chettiar [reported in (1986) 61 STC 560] and .....

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VST 256], which was confirmed by the Hon'ble Division Bench in W.A.No.946 of 2016, etc. batch dated 1.9.2016 after following the decision of the Hon'ble Supreme Court in the case of State of Maharashtra Vs. Suresh Trading Co. [reported in (1998) 109 STC 439]. 13. Per contra, Mrs.Vasudha Thiagarajan, learned Additional Government Pleader appearing for the respondent submitted that the petitioner, which is a dealer in iron and steel, is an assessee on the file of the respondent and their .....

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rietor/Partner/Director of M/s.Aashna Enterprises, M/s.Kamalesh Enterprises and M/s.Shreyansh Ispat Private Limited, the learned Additional Government Pleader submitted that the said person had categorically admitted before the Inspecting Officers that they never handled any goods, but they issued only sale invoices. Further, the deposition made on behalf of M/s.Balaji Transports also confirmed the same in the statement given to the Department and in the case of M/s.Tulsyan NEC Limited, they adm .....

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rror in the order passed by the respondent. 16. According to the learned Additional Government Pleader, the main contention of the petitioner is that the said Mr.Mahendrakumar Jain has not been produced for cross examination and that the petitioner was not given such an opportunity. In this regard, it was submitted by the learned Additional Government Pleader that similar case involving Mr.Mahendrakumar Jain came up for consideration before this Court in W.P.Nos.27576 and 27577 of 2006, which we .....

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cted to avail the alternate remedy. Therefore, it was submitted that if the petitioner is aggrieved, they could have filed an appeal before the Appellate Assistant Commissioner (CT) (VI), Chennai and that they are not entitled to by-pass the appeal remedy and approach this Court. 18. Heard the learned counsel for the parties and perused the material documents. 19. The undisputed facts are that the place of business of the petitioner was inspected by the officials of the Enforcement Wing on 1.7.2 .....

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ctions, while denying the allegations made in the pre-revision notice dated 16.11.2004, as defamatory and mala fide, the petitioner requested copies of the records, which were relied upon in the notice, agreeing to pay cost and further requested for an opportunity to enable them to file their objections to the proposal. 21. In the said interim objections, the petitioner also requested the photostat copies of the statements, a file containing 44 pages recovered at the time of inspection on 1.7.20 .....

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ther dealers namely M/s.Tulsyan NEC Ltd. and M/s.Balaji Transport Corporation. 22. It was further stated in the interim objections that in respect of their sister concern M/s.J.R.Industries, which is also a registered dealer on the file of the respondent, the proposal for disallowance of claim for exemption was confined only to the value of the purchases made by the assessees/dealers from the three companies only and no other disallowance/ additions were made and however, in the case of the peti .....

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urchases made by the petitioner were from local registered dealers either on payment of tax or tax suffered except inter-State purchases, which were sold as first sale and tax was paid. It was further stated that the details furnished in the Annexure would show that the tax paid purchase is about ₹ 37.23 crores and the balance tax suffered purchase from various existing registered dealers as on date on the file of the Department. These purchases were duly reflected in the other dealer' .....

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nts furnished at the time of inspection. 25. Hence, it was contended that the allegation that the petitioner has not produced evidence for movement of goods for the entire local purchases is incorrect. After taking the above stand, the petitioner pointed out that at the time of verification of the petitioner's accounts, several documents were verified and they were listed out in the interim objections. Therefore, it was contended that mere recording of alleged self serving statement of Mr.Ma .....

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d 18.11.2004 wherein under similar circumstances, the Department was directed to furnish D7 records and afford an opportunity to cross examine the third parties before passing the order. 27. With the above averments as well as some more facts, the petitioner requested for furnishing of copies and for cross examination and also for an opportunity to file their final objections. The respondent, while admitting the receipt of the interim objections, stated that all the defects were on the basis of .....

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ers and that the Act does not compel the Assessing Officers to provide for the documents for cross examination and they are required only to give a reasonable opportunity. 28. The extract of the statements and other records have been clearly set out in the pre-revision notice, which is found to be enough. Thus, the respondent concluded that the petitioner has indulged themselves in bill trading purchase menace and that the Department has every reason to doubt other transactions and accordingly c .....

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ns, who have given those statements and records. 31. The Hon'ble Supreme Court in Kalra Glue Factory was considering the case of the assessee, which was a manufacturer of glue and which was assessed under the provisions of the Central Sales Tax Act, 1956. The Assistant Commissioner set aside the assessment. But on appeal, the Sales Tax Tribunal upheld the assessment. While doing so, the Tribunal relied upon the statements of certain persons to support its conclusion. Challenging the order of .....

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ccepting the case of the dealer, the Hon'ble Supreme Court set aside the order of the High Court as well as the Sales Tax Tribunal and remitted the matter back to the Tribunal with liberty to the assessee to produce documents subject to proof of its genuineness and the Tribunal was directed to redo the matter. 33. Therefore, when statements recorded from a third party was the sole basis of revision of assessment, such material is an adverse material to the interest of the dealer. In any even .....

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