1994 (6) TMI 211 - HC - VAT and Sales Tax

Issues Involved:
1. Legality of assessing sales tax on purchases from unregistered dealers under section 7-A of the TNGST Act.
2. Validity of penalty levied under section 12(5)(iii) of the TNGST Act.
3. Applicability of section 16 of the TNGST Act in the reassessment proceedings.
4. Relevance of previous judicial decisions in similar contexts.

Issue-wise Detailed Analysis:

1. Legality of Assessing Sales Tax on Purchases from Unregistered Dealers under Section 7-A of the TNGST Act:
The core issue revolves around whether the purchases of bush, coupling, etc., from unregistered dealers, amounting to Rs. 1,29,699, can be subjected to sales tax under section 7-A of the TNGST Act. The court noted that the original assessing authority, the Appellate Assistant Commissioner, and the Appellate Tribunal all concluded that these purchases were liable to sales tax because they were made from unregistered dealers, and the dealer did not report these in their monthly returns. The court referred to the Supreme Court's interpretation in *State of Tamil Nadu v. Kandaswami [1975] 36 STC 191*, which clarified that section 7-A is designed to plug tax evasion and applies to purchases from both registered and unregistered dealers, provided the goods are used in the manufacture of other goods or dispatched in a manner specified under the Act. The court rejected the dealer's contention that the purchases were not taxable at their hands, affirming the applicability of section 7-A.

2. Validity of Penalty Levied under Section 12(5)(iii) of the TNGST Act:
The dealer contested the penalty imposed under section 12(5)(iii) of the TNGST Act, arguing that it was not justified. The court observed that the penalty was warranted because the dealer knowingly did not report the purchases from unregistered dealers in their returns, which made the returns incorrect and incomplete. The court upheld the penalty, noting that the Tribunal's affirmation of the Appellate Assistant Commissioner's order inherently included approval of the reasons for the penalty. The court emphasized that in cases of affirmation, the appellate or revisional authority's judgment need not be as elaborate as the original order.

3. Applicability of Section 16 of the TNGST Act in the Reassessment Proceedings:
The dealer argued that the reassessment should have been conducted under section 16 of the TNGST Act, which would preclude the imposition of a penalty. The court clarified that the proceedings were initiated under section 7-A, which serves both as a charging and remedial provision aimed at preventing tax evasion. The court stated that section 12(5) of the TNGST Act is applicable in cases of incorrect and incomplete returns, thus justifying the penalty.

4. Relevance of Previous Judicial Decisions in Similar Contexts:
The dealer cited the decisions in *Viswanathan & Co. v. State of Tamil Nadu [1990] 76 STC 221* and *State of Tamil Nadu v. Abdul Samak Sahib Sons [1984] 57 STC 68* to support their case. The court found that the decision in *Viswanathan & Co.* was rendered per incuriam because the Supreme Court's authoritative pronouncement in *Kandaswami* was not brought to the Division Bench's notice. Consequently, the court did not consider it a binding precedent. Regarding *Abdul Samak Sahib Sons*, the court noted that while it discussed the levy of sales tax and penalty under section 7-A read with section 12(5), it did not aid the dealer's argument.

Conclusion:
The court dismissed the petition, affirming the assessment of sales tax on purchases from unregistered dealers under section 7-A of the TNGST Act and upholding the penalty imposed under section 12(5)(iii). The court clarified that the reassessment proceedings were correctly initiated under section 7-A and not section 16, and previous judicial decisions cited by the dealer did not alter the legal position established by the Supreme Court.

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