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2016 (12) TMI 369 - MADRAS HIGH COURT

2016 (12) TMI 369 - MADRAS HIGH COURT - TMI - Benefit of second sale exemption - Section 10 of the TNGST Act - the petitioner Agency was that they have failed to prove the movement of goods, with the details of freight paid, loading and unloading charges paid, way bill number with date, name and address of the transporters, etc. Further they have not produced any proof for the turnover for which they have claimed exemption and they refused to sign the statement including the stock reconciliation .....

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nd by over ruling the objections raised by the petitioner, confirmed the proposal in the pre-revision notice. Thus, the impugned orders are flawed for reasons that the merit of the assessments were not gone into by the Assessing Officer. So far as the constitution of the petitioner-M/s Steel Exchange House is concerned, various factual issues have been raised by the petitioner in the affidavits filed in support of the Writ Petitions which cannot be adjudicated in a Writ proceedings - the issue r .....

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Mr.S.Kanmani Annamalai, learned Additional Government Pleader, assisted by Mr.K.Venkatesh, learned Government Advocate, appearing on behalf of the respondents. With the consent of the learned counsel appearing on either side, the Writ Petitions are taken up for final disposal. 2. The petitioner in W.P.Nos. 26730 to 26734 of 2016, is a registered dealer under the erstwhile Tamil Nadu General Sales Tax Act, 1956 [TNGST Act], presently Tamil Nadu Value Added Tax Act, 2006 [TNVAT Act] and the chall .....

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003 and 14.08.2003. A report was given by the officials of the Enforcement Wing on 31.03.2004 to the first respondent which is referred to as a D-3 proposal, when the provisions of TNGST Act were in vogue. That resulted in issuance of a show cause notice dated 31.05.2004 for the assessment year 1999-2000. Similar notices were issued for the other assessment years as well. 5. The sum and substance of the allegations against the petitioner Agency was that they have failed to prove the movement of .....

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er who is claiming exemption. The names of the the sister concerns of the petitioner as well as the Transport Contractors were referred to and ultimately, the first respondent stated that the petitioners have knowingly produced false Bills with a view to support or make the claim that the transaction of sale is not liable to be taxed. Accordingly, the respondent proposed to reject the second sale exemption, claimed by the petitioner and revised the assessment for the relevant years. 7. The petit .....

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n dated 29.07.2004, certified that during financial year 2000-2001, they have sold Iron & Steel to the petitioner and have duly included the said turnover in their returns before their Assessing Officer and accordingly considered for Assessment. For the financial years 1999-2000 to 2001-2002, on receipt of those particulars, the Officer, who was then functioning as Commercial Tax Officer, Harbour-III Assessment Circle, Chennai, submitted a Deviation proposal dated 18.10.2004, to the Assistan .....

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he D3 proposals dated 31.03.2004. However, the second respondent by an order dated 22.02.2005, stated that the deviation proposal is not accepted. It is thereafter, a proposal was given by the first respondent to the Assistant Commissioner (CT), Zone-I dated 28.03.2005, stating that no reasons have been given by the Deputy Commissioner for rejecting the deviation to the D3 proposal and therefore requested the deviation proposal to be considered. The Assistant Commissioner in turn addressed the f .....

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y other agency has been used to make out the proposal. Such observation was in response to the petitioner's request for cross examination of the persons, who are said to have given statements against the petitioner. 8. Thereafter, two separate notices were issued on 10.10.2008, for the years 2002-2003 and 2003-2004, calling upon the petitioner to give objections. Accordingly, the petitioner had submitted objections dated 09.02.2009 and enclosed voluminous records to substantiate their claims .....

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ioner, the Writ Petitions were allowed by an order dated 23.06.2009 and the petitioner was granted four weeks time to file their objections, which they have complied with by submitted their objections on 10.07.2009. 9. M/s SAIL addressed a letter to the petitioner on 08.07.2009, confirming that they have paid taxes for the relevant assessment years on the transactions effected with the petitioner. One more objection was submitted by the petitioner on 02.08.2009, for the assessment year 2002-2003 .....

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munication by the Deputy Commissioner (CT), Zone-I, dated 20.08.2009, to the 6th respondent/ Joint Commissioner (CT), Chennai (North) Division, with a request to re-open the petitioner's case and to examine the possibility of considering the second sale exemption, which was already allowed in so far as it relates to the purchase from SAIL, whose existence or bona fides of the transaction cannot be suspected. In the meantime, notices for personal hearing were issued and the petitioner also su .....

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o the factual averments and pointed out that the impugned proceedings are totally unsustainable and have been passed by way of implementation of the D3 proposals given by the second respondent and there is no independent application of mind by the Assessing Officer. 11. By referring to the phrases used in the pre-revision notices, it is submitted that there is a clear direction to implement the D3 proposals, and that is what the Assessing Officer has done. The learned Senior Counsel also referre .....

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re-submission of the arbitration proposal and in spite of the same, the order of rejection came to be passed on 25.04.2012, with an instruction to the Assessing Officer to implement the D3 proposal. Therefore, it is submitted that the action of the respondent in merely implementing the D3 proposal amounts to clear abdication of the duties and responsibilities of an Assessing Officer and this is sufficient to hold that the impugned orders are wholly illegal. 12. Further, it is submitted that alo .....

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r's godown and similar documents were produced for the assessment year 2003-2004. Thus, it is submitted that the materials placed by the petitioner before the first respondent were not considered and the first respondent solely proceeded to confirm the D-3 proposal, which he was directed to do. It is further submitted that the burden cast upon the petitioner under section 10 of the TNGST Act has been discharged and the burden has been re-shifted upon the first respondent to establish in the .....

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8 STC 61 (Ori)] (4) R.Abdul Azeez V. State of Tamil Nadu & Ors. [80 STC 53] (5) State of Tamil Nadu V. A.N.S.Guptha and Sons [(2011) 38 VST 45 (Mad.) (6) Ashok Electro Diamonds & Ors Vs. The Joint Commercial Tax Officer, Tiruchirapalli & The Senior Superintendent of Post Officers, Tiruchi [(1971) 28 STC 221 (Mad.) (7) Bikabhai Prabhudas Parekh and Company Vs The Commercial Tax Officer (Additional Circle), South Kanara, Mangalore. (8) Munnalal Muralidhar V. Commissioner of Income Tax, .....

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ve submissions, the learned Senior Counsel sought for setting aside the impugned orders and to remand the matter to the Assessing Officer for a thorough consideration of all the documents and redo the assessments. 14. Mr.S.Kanmani Annamalai, learned Additional Government Pleader appearing for the respondents reiterated the factual details which lead to the issuance of the pre-revision notices, emphasised upon the allegations against the petitioner and elaborate reference was made to the averment .....

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sed by the Inspecting Officer is to have a verification of the genuineness of the physical particulars of the said purchase and the petitioner was called upon to produce documents and they have failed to produce documents which clearly indicates that the said document (Invoice) is bogus, which cannot be relied on to prove the genuineness of the transactions. It is further submitted that on verification of the Books of Accounts, the quantum correlation alone could be verified and unless and until .....

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on record. 17. Before the Court proceeds to consider the factual matrix, it would be necessary to state as to what are duties and responsibilities enjoined upon the Assessing Officer. There can be no quarrel to the proposition that the Assessing Officer is an independent statutory authority, exercising statutory powers and cannot be bound over by the directions issued by his superior authorities. In Orient Paper Mills Ltd., V. Union of India [(1969) 1 SCR 245] (supra), the Hon'ble Supreme C .....

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partial and fair administration of the sales tax department. 18. In the case of Orient Paper Mills Ltd., V. Union of India [(1970) 3 SCC 76] (supra), the Hon'ble Supreme Court held that in respect of various taxation laws that the assessing authorities exercise quasi judicial functions and they have duty cast on them to act in a judicial and independent manner. If their judgment is controlled by the directions given by the Collector, it cannot be said to be their independent judgment in any .....

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authority is in substance exercised by another. The proper authority may share its power with someone else, or may allow someone else to dictate to it by declining to act without their consent or by submitting to their wishes or instructions. The effect then is that the discretion conferred by Parliament is exercised, at least in part, by the wrong authority, and the resulting decision is ultra vires and void." 20. In the case of R.Abdul Azeez, (supra), an interesting issue arose before the .....

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ST Act and any order of assessment is subject to appeal and further appeal and also revision. In the light of the hierarchy of remedies available the appellant/assessing officer cannot be proceeded against by way of disciplinary action. 21. The above decisions give a fair indication as to how the assessing officer should function and what are his powers and it is worthwhile to reiterate that the assessing officer exercises quasi judicial function and he has a duty to act judicially and in an ind .....

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the authority is vested with all powers including invoking the provisions of CPC in summoning the witnesses; compelling production of documents and also examining and cross-examining the parties in this regard by the assessee and above all these, the assessing officer if vested with a special power to collect or get information under section 54A of the Act and these sections are clearly intended for utilising for the benefit of both the assessee and the Department to gather evidence or informati .....

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red on the Assessing Officer are wide enough to conduct a comprehensive enquiry into the matter. 24. Having noted the powers exercisable by the Assessing Officer under the provisions of the Act, it has to be seen as to how the assessee has to be dealt with by the Assessing Officer. In Munnalal Muralidhar, a case arising under the Income Tax Act, 1922, the Hon'ble Division Bench of Allahabad High Court, pointed out that if the Income Tax Officer is not satisfied as to the return made by the a .....

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nly conclusion that can be arrived at is that the impugned orders are illegal and unjust. The impugned orders are arbitrary exercise of power and clear abdication of the duties cast upon the Assessing Officer, who has in fact acted as a mouthpiece of his superior authority by implementing the Enforcement proposal called as the D3 proposal. What is heartening to note is the two Assessing Officers, who were occupying the Office of the first respondent at the relevant point of time, had the vision .....

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rejected it by a non-speaking order, coupled with a positive direction to the Assessing Officer to implement the D3 proposal. Therefore, this Court is of the view that the Assessing Officer cannot be solely blamed, because considering the hierarchy in the Commercial Tax Department. It is seldom seen that the Assessing Officer refuses to implement the D3 proposal as they may earn the wrath of their superiors. Interestingly, in the instant case, while giving their views on the D3 proposal, the Of .....

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3 proposal. Thus, it is a classical case where the assessing officer has been compelled to abdicate his statutory duty, eventually, the illegal assessment orders have been passed. 27. The learned Senior Counsel appearing for the petitioner referred to the decision of the Hon'ble Division Bench of this Court in the case of S.HASTIMAL(supra), to support the proposition that the assessee cannot be called upon to explain, not merely the origin and source of his capital contribution, but, the ori .....

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o verify the accounts of the selling dealers to find out the correctness. 28. Referring to the decision of the Hon'ble Division Bench of this Court in the case of SIVAKUMAR AND CO., (supra), it is submitted that the assessee have to produce relevant bills, vouchers and he has to discharge the burden cast upon him under section 10 of the TNGST Act. 29. As noticed above, there has been no application of mind to the objections given by the petitioner nor to the documents produced by the petitio .....

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is with regard to the manner in which the petitioner's returns have been processed from 1987-88. From the Flow Chart, which has been produced, it is seen that from 1987-88, the petitioner's Billing have been accepted and the second sale exemptions have been allowed and the gap is between 1999-2000 and 2003-2004, which are the subject matter of these Writ Petitions. After 2004-2005 onwards, the turnovers have been accepted and second sale exemption has been granted upto 2013-2014, that t .....

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o 26925 of 2016, the petitioner in these case are M/s Steel Exchange House, (now defunct), represented by Mr. Nirmal Kumar, son and legal heir of late Moolchand Maheswari. The difference in these cases when compared to the case relating to M/s Kapil Agencies, are only two fold. Firstly, in these cases, the first respondent Assessing Officer sent a deviation proposal with regard to the purchases effected by M/s Steel Exchange House from M/s Steal Authority of India and the devision proposal was a .....

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the said contention and by over ruling the objections raised by the petitioner, confirmed the proposal in the pre-revision notice. Thus, the impugned orders are flawed for reasons that the merit of the assessments were not gone into by the Assessing Officer. So far as the constitution of the petitioner-M/s Steel Exchange House is concerned, various factual issues have been raised by the petitioner in the affidavits filed in support of the Writ Petitions which cannot be adjudicated in a Writ pro .....

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