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2018 (4) TMI 1011 - HC - VAT and Sales TaxRevision of assessment order - whether the estimation of first sales made on the sales of cotton yarn is proper or not? - penalty u/s 12(3)(b) - Held that - In Indira Industries Vs. State of Tamil Nadu, 2014 (5) TMI 305 - MADRAS HIGH COURT , this Court considered a question, as to whether, levy of penalty under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959, was justifiable, particularly, when there was no suppression pointed out by the Revenue, that the Claim of the assessee related only to concessional rate of tax - This Court held that When the turnover assessed under the assessment order is drawn from the books of accounts and no reference to any specific concealment of the turnover in the accounts made, the question of invoking Section 12(3)(b) would not arise. Tax case revision petition is dismissed.
Issues Involved:
1. Assessment of first sales turnover. 2. Burden of proof for claiming exemption. 3. Levy of penalty under Section 12(3)(b) of the TNGST Act. Issue-wise Detailed Analysis: 1. Assessment of First Sales Turnover: The primary issue addressed is whether the estimation of first sales made on the sales of cotton yarn purchased by the respondent was proper. The Assessing Officer determined that the respondent's purchase of cotton yarn was not exempt from tax as it was resold locally, contrary to the claim that it was sent for knitting/fabrication purposes. The officer added 2% towards freight and 15% towards gross profit, assessing the first sales turnover at ?2,52,706/-. The Appellate Assistant Commissioner upheld this assessment, stating that the respondent failed to prove that the purchase had already suffered tax under the TNGST Act. The Tribunal, however, confirmed the assessment but found that the sellers were not genuine registered dealers, thus treating the disputed turnover as first sales. 2. Burden of Proof for Claiming Exemption: The respondent argued that they purchased from registered dealers and claimed these as second sales eligible for exemption. However, the burden of proof, as per Section 10 of the TNGST Act, lies on the dealer to prove that the sales had already suffered tax. The Tribunal noted that the respondent failed to discharge this burden, as the purchase bill did not show tax collection and indicated that the goods were sent for knitting/fabrication purposes. Consequently, the Tribunal confirmed the assessment of the disputed turnover as first sales. 3. Levy of Penalty under Section 12(3)(b) of the TNGST Act: The Tribunal set aside the penalty levied under Section 12(3)(b), reasoning that the assessment was based on the respondent's books of accounts and not on an estimate. The Tribunal referenced the Supreme Court's decision in State of Madras Vs. Jayaraj Nadar & Sons, which held that penalty could only be levied when an assessment is made to the best of judgment, not solely based on the account books. The Tribunal also referred to the decision in Appollo Saline Pharmaceuticals (P) Ltd. Vs. Commercial Tax Officer, which supported this view. The Tribunal concluded that since the disputed turnover was disclosed in the books of accounts and the exemption was claimed (though disallowed), the levy of penalty was not justified. Conclusion: The High Court dismissed the Tax Case Revision filed by the State, upholding the Tribunal's decision. The Court reiterated that the levy of penalty under Section 12(3)(b) is not automatic and must consider the bona fides of the assessee. The Court emphasized that penalty is not justified if the turnover is recorded in the books of accounts and verified by the department, without any specific concealment being identified.
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