1990 (7) TMI 332 - HC - VAT and Sales Tax

Issues Involved:
1. Determination of taxable turnover.
2. Eligibility for exemption on second sales.
3. Validity of the Board of Revenue's assumptions and presumptions.

Issue-wise Detailed Analysis:

1. Determination of Taxable Turnover:

The appellant-assessee returned a total turnover of Rs. 5,68,581.22 and a taxable turnover of "NIL" for the assessment year 1973-74 under the Tamil Nadu General Sales Tax Act, 1959. The Joint Commercial Tax Officer found discrepancies in the purchases of iron and steel amounting to Rs. 1,51,747.66, which were not supported by proper purchase bills. Additionally, the assessee was found to have purchased goods worth Rs. 30,034.38 from outside the State. Consequently, the assessing officer determined the total and taxable turnover at Rs. 5,67,509 and Rs. 2,11,443 respectively.

2. Eligibility for Exemption on Second Sales:

The Appellate Assistant Commissioner found that Rs. 1,10,110 out of Rs. 1,51,747.66 were from registered dealers and thus could not be subjected to tax. However, the Board of Revenue reviewed this decision and found that two of the dealers, Mohideen Traders and Manickam Enterprises, had closed their businesses during 1973-74. Therefore, the sales from these dealers were not considered taxable sales, denying the appellant-assessee the exemption. The Board of Revenue included Rs. 1,06,351 in the taxable turnover, a decision contested by the appellant.

3. Validity of the Board of Revenue's Assumptions and Presumptions:

The appellant's counsel argued that the appellant could not be expected to know about the closure of the businesses of Mohideen Traders and Manickam Enterprises. The counsel cited several judgments to support the contention that the appellant is entitled to claim exemption on second sales if the first sale was by a dealer liable to pay tax. The learned Additional Government Pleader countered that since the dealers had ceased to carry on business, the appellant could not prove the taxable nature of the first sales.

Judicial Precedents and Ratios:

- Govindan & Co. v. State of Tamil Nadu [1975] 35 STC 50: It was held that the petitioners need only show that there was an anterior taxable sale and not that the tax had been paid on those sales.
- Deputy Commissioner (CT) v. Sivakumar and Company [1980] 45 STC 436: The court held that as long as the purchases were second purchases from registered dealers, the assessee would not be liable to tax.
- State of Tamil Nadu v. Chamundeswari Enterprises [1983] 52 STC 124: The court held that the onus is on the Revenue to prove that the first sale has not suffered tax, not on the assessee.
- State of Tamil Nadu v. J.C. Electricals [1984] 57 STC 16: The court reiterated that the subsequent sales cannot be taxed if there was a prior taxable sale.
- State of Tamil Nadu v. C.K. Gajapathy & Co. [1984] 57 STC 137: The court held that the registration status of the first seller is immaterial if the first sale was taxable.
- State of Tamil Nadu v. Raichael Chacko [1985] 59 STC 144: The court emphasized that the second sales are exempt if the first sales were taxable, regardless of whether the first seller paid the tax.

Findings of the Court:

The court found that the Board of Revenue's conclusions were based on assumptions and lacked thorough investigation. The appellant had established that the sales by Mohideen Traders and Manickam Enterprises were first sales exigible to tax. The Revenue failed to prove that the bills issued by these dealers were not genuine or that they had not conducted any business during the relevant period. The court held that the cancellation of the registration certificates of the first sellers did not affect the taxable nature of their sales.

Conclusion:

The appeal was allowed, and the order of the Board of Revenue was set aside. The court emphasized that the Revenue must investigate thoroughly to establish the genuineness of the bills and the business activities of the first sellers before denying exemptions on second sales. There was no order as to costs.

Appeal allowed.

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