1976 (3) TMI 225 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of penalty under section 12(3) of the Tamil Nadu General Sales Tax Act.
2. Requirement of wilful non-disclosure for penalty under section 12(3).
3. Jurisdiction and discretion of the assessing authority in imposing penalties.
4. Proof of utilization of imported art silk yarn in the manufacture of handloom cloth.
5. Validity of sales tax assessment based on the import licenses and turnover.

Detailed Analysis:

1. Validity of Penalty under Section 12(3) of the Tamil Nadu General Sales Tax Act:
The assessees were penalized under section 12(3) for not disclosing their turnover. The court upheld the penalty, stating that section 12(3) does not require proof of wilful non-disclosure. The language of section 12(3) only necessitates the fact of non-disclosure or failure to submit a return. The court cited Madras Metal Works v. State of Madras [1973] 31 S.T.C. 566 to support this view, confirming that the penalty under section 12(3) is valid without needing to prove contumacious conduct or wilful non-disclosure.

2. Requirement of Wilful Non-Disclosure for Penalty under Section 12(3):
The assessees argued that a finding of wilful non-disclosure was necessary for imposing penalties under section 12(3). The court referenced A. V. Meiyappan v. Commissioner of Commercial Taxes, Board of Revenue, Madras [1967] 20 S.T.C. 115 but distinguished it, noting that while judicial discretion is required, wilful non-disclosure is not essential under section 12(3). The court also referred to Hindustan Steel Ltd. v. State of Orissa [1970] 25 S.T.C. 211 (S.C.), explaining that the decision was based on different statutory language that required a finding of wilful non-disclosure, unlike section 12(3).

3. Jurisdiction and Discretion of the Assessing Authority in Imposing Penalties:
The court emphasized that the assessing authority has the jurisdiction to impose penalties under section 12(3) based on non-disclosure alone. It reiterated that the exercise of this power must be judicial and not routine, as per the principles laid down in A. V. Meiyappan v. Commissioner of Commercial Taxes. The court maintained that the legislature's intent was to penalize non-disclosure without necessarily proving wilful intent.

4. Proof of Utilization of Imported Art Silk Yarn in the Manufacture of Handloom Cloth:
The assessees failed to provide evidence that the imported art silk yarn was used in the manufacture of handloom cloth. The court noted that the assessees had initially recorded in their accounts that the yarn was used for manufacturing handloom cloth. The Appellate Assistant Commissioner and the Tribunal confirmed the assessment due to the lack of proof from the assessees. The court held that once the assessees imported the yarn, it was their responsibility to prove its utilization to claim exemption.

5. Validity of Sales Tax Assessment Based on the Import Licenses and Turnover:
The assessing officer determined the taxable turnover by taking the face value of the import licenses and adding 11 times that value for excise duty, commission, freight charges, etc. The court upheld this method, stating that the assessees did not provide evidence to refute the assessment. The court confirmed that the assessees were liable for sales tax as they failed to prove the yarn was used for manufacturing handloom cloth or sold locally or by export.

Conclusion:
The court dismissed all tax revision petitions, confirming the penalties and assessments imposed by the assessing officer and upheld by the Appellate Assistant Commissioner and the Tribunal. The court reiterated that section 12(3) does not require a finding of wilful non-disclosure and that the assessees were responsible for proving the utilization of imported goods to claim exemptions. The petitions were dismissed with costs, and counsel's fee was set at Rs. 150 in each case.

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