1978 (4) TMI 210 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Limitation of assessment.
2. Tax liability on turnover.
3. Justification of penalty imposition.

Summary:

1. Limitation of Assessment:
The petitioners argued that the assessment was barred by time as it was made beyond five years from the expiry of the assessment year 1964-65. The Tribunal found that this was not a case of escaped turnover being assessed u/s 16 of the Act. Proceedings were initiated u/s 12 of the Act with a notice dated 18th July 1966, and subsequent notices and replies followed. The assessment was confirmed by an order dated 30th November 1972. The Tribunal rightly negatived the plea of limitation as no question of limitation arises where action has been taken u/s 12(2) of the Act.

2. Tax Liability on Turnover:
The petitioners contended that the art silk imported through the Port of Bombay was never brought to Tamil Nadu, converted into handloom cloth, or sold in Tamil Nadu, and that it was sold in Bombay. However, there was no proof of such sale in Bombay. The Tribunal inferred that the goods were brought to Madras, converted into handloom cloth, and sold in Madras, supported by the decision in State of Madras v. Mohammed Samiulla Sahib and Company [1973] 32 S.T.C. 179. The court saw no reason to interfere with the Tribunal's view on this point.

3. Justification of Penalty Imposition:
Penalty was imposed u/s 12(3) of the Act. The petitioners argued that the sub-section did not require any conscious violation of the Act and no mental element to constitute a guilty mind had to be established for penalty imposition. The court reviewed various decisions, including Oveekee Textiles v. Deputy Commercial Tax Officer [1971] 27 S.T.C. 439, Madras Metal Works v. State of Madras [1973] 31 S.T.C. 566, and Rajam Textiles v. State of Tamil Nadu [1977] 39 S.T.C. 124, which held that wilful non-disclosure was not essential for invoking the power of penalty u/s 12(3). However, the court preferred the reasoning in A.V. Meiyappan v. Commissioner of Commercial Taxes [1967] 20 S.T.C. 115 and Commissioner of Income-tax, West Bengal v. Anwar Ali [1970] 76 I.T.R. 696 (S.C.), emphasizing that for penalty imposition, it must be proven that there was actual turnover not disclosed. The court concluded that the degree of proof required for penalty is higher than that for a best judgment assessment. Consequently, the order of the Tribunal imposing penalty was set aside.

Conclusion:
The revision petition was partly allowed by setting aside the penalty imposed on the petitioners, while the assessment on merits was upheld. The parties were directed to bear their respective costs.