2014 (2) TMI 102 - HC - VAT and Sales Tax

Assessment u/s 7A of the Tamil Nadu General Sales Tax Act, 1959 - Penalty u/s 16(2) - Whether the petitioners are liable to purchase tax under Section 7A on the purchases effected from unregistered dealers who were liable to pay tax under Section 3 by virtue of such sellers having turnover in excess of the exemption limit - Held that - As is evident from the reading of the Section 7A of the Tamil Nadu General Sales Tax Act,1959 every dealer, who in the course of his business purchases from a registered dealer or from any other person, any goods, (the sale or purchase of which is liable to tax under this Act) and in the circumstances, if no tax is payable under Sections 3 or 4 and consumes or uses such goods in or for the manufacture of other goods for sale or otherwise, Section 7A would stand attracted - Considering the fact that Section 7A of the Tamil Nadu General Sales Tax Act, 1959 is a charging section aimed at plugging the loop hole in cases where goods had not suffered tax and by reason of circumstances stated in the Section are not available for further dealing under the provisions of the Act, the contention of the assessee that the failure on the part of the seller to get himself registered and pay tax would be a circumstance, which has to be considered in favour of the assessee for the purposes to levy of tax under Section 7A of the Tamil Nadu General Sales Tax Act, 1959 cannot be accepted, as the contention, goes within the scheme under Section 7A of the Act. As is evident from the reading of the said Section penalty could be levied in respect of the assessment made under Section 16(1)(a) of the Act, only if and when the authorities satisfy that the escape from assessment is due to wilful non-disclosure of assessable turnover by the dealer. Thus unless and until the Assessing Officer is satisfied that there is wilful non-disclosure of assessable turnover, the question of levy of penalty under Section 16(2) of the Act does not arise - As is evident from the reading of the order passed by the Assessing Officer, we find there is hardly any reference to the satisfaction on the wilfulness on not reporting the turnover for assessment. Except for the singular statement in the order that the turnover had not been disclosed in the return, penalty was levied in this case. Considering the requirement as to the satisfaction to be recorded on the wilful suppression as stated under Section 16(2) of the Tamil Nadu General Sales Tax Act, 1959, we find there exists no case for levying penalty - Decided in favour of assessee.

Summary

Issues:
1. Liability to purchase tax under Section 7A on purchases from unregistered dealers.
2. Legality of restoring penalty under Section 16(2) without finding of wilfulness or non-disclosure.

Analysis:

Issue 1: The case involved the assessment year 1992-93 under the Tamil Nadu General Sales Tax Act, 1959, where the assessee purchased Bagasse from unregistered dealers for manufacturing paper boards. The Assessing Officer revised the assessment under Section 7A due to non-disclosure of assessable turnover. The First Appellate Authority allowed the appeal, stating that Section 7A would not apply if sellers were liable to register themselves but failed to do so. The Sales Tax Appellate Tribunal, relying on a Supreme Court decision, upheld the assessment and penalty, as the goods purchased had not suffered tax earlier under Sections 3 or 4. The High Court confirmed the Tribunal's decision, emphasizing that Section 7A applies when goods are not available for further dealing under the Act due to specific circumstances, rejecting the argument that seller's non-registration should exempt the assessee from Section 7A.

Issue 2: Regarding the penalty under Section 16(2), the High Court found that the Assessing Officer did not establish wilful non-disclosure of turnover, a prerequisite for penalty under the Act. As there was no clear evidence of wilful suppression in the assessment order, the High Court set aside the penalty but confirmed the assessment under Section 7A. The High Court dismissed the Revision on the quantum assessment but allowed the writ petition challenging the penalty, ultimately setting aside the penalty imposed by the Tribunal.

In conclusion, the High Court upheld the assessment under Section 7A but set aside the penalty under Section 16(2) due to the lack of evidence for wilful non-disclosure. The decision highlighted the importance of complying with tax obligations under the Act and clarified the application of Section 7A in cases of purchases from unregistered dealers.