2022 (12) TMI 1183 - HC - VAT and Sales Tax

Assessment of tax - calculation and clubbing of turnover of two units - sister concern or independent entities - rejection of calculation on the ground that the Registration Certificate, which was applied for Sri Annapoorna Sweets, a sister concern of Tirupur Sree Annapoorna Hotel was not accepted for registration - HELD THAT - A perusal of the assessment order unravels the fact that the dealer, namely, Tirupur Sree Annapoorna Hotel had, though, maintained separate accounts for sweet stall and hotel, there was no set up of detached kitchen and even both concerns were functioning in the same site. There was no proof adduced regarding disbursement of salary to the employees under different salary slips and on scrutiny of bills, it came to light that bills for common telephone expenditure and electricity charges were raised. Above all, there was a common cash counter for collection of sale amount in respect of both sweets and hotel. There is not even an iota of material evidence adduced to establish that Sree Annapoorna Sweet stall is the sister concern of the petitioner herein. The act of the petitioner herein is an attempt to swindle exchequer's money by evading payment of tax and if the contention of the petitioner that Tirupur Sree Annapoorna Hotel and Sree Annapoorna Sweets are independent entities is accepted, then the term sister concern will become diluted and all the firms will adopt the same tactics of creation of one or more sister concerns under one umbrella with different names and claim the benefit of tax. In that event, it will defeat the real intention of the legislature. The Assessing Authority, in support of his assessment by clubbing both units as one, had stated that based on the divulgence of the petitioner that Sree Annapoorna Sweet Stall got merged with Tirupur Sree Annapoorna Hotel with effect from 01.04.1997, common assessment was made by branding them as a single unit. Even prior to that, the petitioner was not in possession of valid registration certificate and therefore, it cannot be contended that the petitioner is entitled to the tax benefit for the previous year. The petitioner herein deserves no leniency from this Court, as the Tribunal has rightly analyzed the evidence on record and restored the findings of the Original Authority. Since there is a finding of fact and no question of law is involved, we are of the view that there is no perversity in the findings of the Tribunal, warranting interference by this Court - Petition dismissed.

Summary

Issues Involved:
1. Validity of clubbing the sales turnover of Tirupur Sree Annapoorna Hotel and Sree Annapoorna Sweets.
2. Legitimacy of the assessment order by the 3rd Respondent.
3. Applicability of the deemed registration provision.
4. Justification of the penalty under Section 12(3) of the TNGST Act, 1959.
5. Allegations of tax evasion by the petitioner.

Issue-wise Detailed Analysis:

1. Validity of Clubbing the Sales Turnover:
The petitioner argued that Tirupur Sree Annapoorna Hotel and Sree Annapoorna Sweets are separate entities with distinct accounts and operations. However, the Tribunal upheld the clubbing of turnovers based on shared premises, common kitchen, and a single cash counter. The Tribunal found no evidence to support the claim that the two were independent entities, emphasizing that the operations were interlinked, thus justifying the combined assessment.

2. Legitimacy of the Assessment Order by the 3rd Respondent:
The petitioner contested the 3rd Respondent's assessment, arguing that the sales turnover calculation was erroneous and based on a single day's cash flow. The Tribunal, however, upheld the assessment, noting that the petitioner failed to provide adequate documentation to prove the independence of the two entities. The Tribunal's decision was based on the observation that both businesses operated under one roof with shared resources, which validated the combined turnover assessment.

3. Applicability of the Deemed Registration Provision:
The petitioner claimed entitlement to a deemed registration for Sree Annapoorna Sweets, arguing that the application for registration was not addressed within the stipulated 30 days. Nonetheless, the Tribunal dismissed this claim, noting that the application was rejected by the Commercial Tax Officer and subsequently remanded for fresh consideration. The Tribunal found no evidence that the petitioner pursued the remand order, thus invalidating the deemed registration argument.

4. Justification of the Penalty under Section 12(3) of the TNGST Act, 1959:
The petitioner argued against the penalty imposed under Section 12(3) of the TNGST Act, citing a lapse of five years. The Tribunal, however, justified the penalty, stating that the original assessment was completed within the stipulated time frame. The Tribunal noted that the petitioner had agreed to club the turnover from 1997-1998, which implied that such business activities were ongoing prior to that period, thus warranting the penalty.

5. Allegations of Tax Evasion by the Petitioner:
The Tribunal supported the 3rd Respondent's claim that the petitioner created a fictitious firm to evade taxes. The Tribunal observed that the shared resources and common cash counter indicated an attempt to mislead tax authorities. The Tribunal emphasized that such practices undermine the legislative intent and contribute to tax evasion, which is detrimental to public welfare.

Conclusion:
The Tribunal dismissed the writ petitions, finding no merit in the petitioner's arguments. The Tribunal upheld the combined assessment of turnovers, justified the penalty under Section 12(3), and rejected the deemed registration claim. The decision emphasized the importance of transparency in business operations to prevent tax evasion and ensure compliance with tax laws.