2007 (11) TMI 562 - HC - VAT and Sales Tax

Undervaluation - non payment of duty - Held that - In view of the orders passed by the Commissioner of Income-tax (Appeals), Chennai, dated March 31, 1998 holding that there are contradictory statements made by the witnesses examined by the Central excise authorities, reliance placed on such statements, by the assessing officer to revise the taxable turnover, is not proper. Therefore, in the interest of justice, the petitioner should be given an opportunity to place before the Appellate Tribunal, the orders passed by the CEGAT and the Commissioner of Income-tax (Appeals), Chennai in Appeal Nos. 198 and 199/199798, dated March 31, 1998 to prove their case that there was no undervaluation. In so far as issue relating to removal of veneers without payment of duty, during the year 1991, local sales made to Tvl. Duoesty, Madras were not billed and accounted for and treated as suppression under the Tamil Nadu General Sales Tax Act for the year 1990-91, the petitioner shall pay a sum of ₹ 50,000 towards the tax element and on such payment, the appellate authority shall consider the issue afresh. Appeal allowed and the matter is remitted back to the appellate authority to dispose of the appeal in accordance with the statutory provisions, within a period of six weeks from the date of receipt of a copy of this order.

Summary

Issues Involved:
1. Limitation of the revision of assessment order.
2. Service of summons and reasonable opportunity of being heard.
3. Consideration of third-party materials and contradictory statements.
4. Alleged undervaluation and suppression of transactions.
5. Compliance with procedural requirements under the TNGST Act and Rules.

Detailed Analysis:

1. Limitation of the Revision of Assessment Order:
The petitioner contended that the revision of the assessment order was barred by limitation as it was passed after five years from the end of the assessment year. The assessment year in question was 1990-91, and the revised assessment order was passed on June 1, 1998. This issue hinges on whether the revision was initiated within the permissible timeframe under the Tamil Nadu General Sales Tax Act, 1959 (TNGST Act).

2. Service of Summons and Reasonable Opportunity of Being Heard:
The petitioner argued that they were not given a reasonable opportunity to be heard before the appeal was decided. The final summons issued by the second respondent on November 10, 2003, was returned by the postal authorities with an endorsement that the premises remained closed. The petitioner claimed that the procedure under Rule 52 of the Tamil Nadu General Sales Tax Rules, 1959 (TNGST Rules), was not followed, thereby denying them the chance to contest the appeal.

The court noted that the petitioner had taken more than 50 adjournments and that the appellate authority had made multiple attempts to serve the summons. Despite these efforts, the petitioner did not appear for the hearing, leading to the ex parte dismissal of the appeal.

3. Consideration of Third-Party Materials and Contradictory Statements:
The petitioner highlighted that the appeal filed under the Income-tax Act was allowed by the Commissioner of Income-tax (Appeals), who noted contradictory statements of witnesses and concluded that the allegation of manufacturing various qualities of plywoods was not proved. Similarly, the appeal before the Central Excise Gold (Control) Appellate Tribunal (CEGAT) was allowed on the grounds of violation of natural justice and lack of opportunity to cross-examine witnesses.

The court emphasized that the appellate authority should have considered whether the assessing officer followed the proper procedure under Section 12A of the TNGST Act and Rule 18C of the TNGST Rules, especially in light of the contradictory statements and the orders passed by the Commissioner of Income-tax (Appeals) and CEGAT.

4. Alleged Undervaluation and Suppression of Transactions:
The assessing officer concluded that the petitioner had grossly undervalued goods and suppressed transactions based on the statement of Shri Sivakumar Jindal and documents recovered by the Central excise authorities. The total unaccounted transactions were determined to be Rs. 1,02,25,663, leading to a revised total and taxable turnover of Rs. 1,68,50,585.

Section 12A of the TNGST Act allows for reassessment if a dealer is found to have shown abnormally low prices to evade tax, provided an enquiry is conducted and the dealer is given a reasonable opportunity to show cause. The court found that the assessing officer failed to conduct the necessary enquiry and consider relevant factors under Rule 18C, relying instead on the proceedings of the Central excise authorities.

5. Compliance with Procedural Requirements under the TNGST Act and Rules:
The court observed that the revised assessment order did not comply with the procedural requirements under Section 12A of the TNGST Act and Rule 18C of the TNGST Rules. The appellate authority also failed to examine whether the original authority followed the correct procedure, merely confirming the assessment based on documents from the assessing officer.

Judgment:
The court set aside the impugned order and remitted the matter back to the appellate authority to dispose of the appeal in accordance with the statutory provisions within six weeks. The petitioner was directed to pay Rs. 50,000 towards the tax element for the issue relating to removal of veneers without payment of duty and unaccounted local sales. The writ petition was allowed with no costs, and the connected miscellaneous petition was closed.