2023 (8) TMI 844 - HC - VAT and Sales Tax

Determination of appellant's turnover under Section 3-B of the TNGST Act 1959 - levy of penalty under Section 16(2) of the Act - revision of assessment on the basis of third party records - assessment confirmed on the basis of information collected from the place of business of a third party that too when those information reveal only the commission received by the said third party, for the invoices allegedly raised in the name of the appellant - burden to prove - violation of principles of natural justice. HELD THAT - Admittedly, the assessments of the appellant have been revised based upon certain records said to have been seized by the Enforcement Wing from the Photo Marketing Service in Chennai which is said to have revealed that the assessee had purchased the goods vide six invoices from one Jindal Photo Films, New Delhi. Therefore, it is clear that the assessments have been revised based upon third party documents and not based upon any inspection conducted in the premises of the assessee. The authorities have failed to furnish a copy of the said third party document to the assessee, especially when the assessee has taken a stand that their names and registration number have been misused by some one to evade tax. No opportunity has been provided to the assessee to cross examine the said third party. Therefore, it is clear that the entire revision of assessment has been made based on documents which have been screened from the purview of the assessee. On the other hand, the burden has been fixed upon the assessee to prove the negative that he did not have any transaction with those third party entities. The orders of the authorities are clearly in violation of the principles of natural justice and they are liable to be set aside and accordingly, set aside - All the substantial questions of law are answered in favour of the appellant - Appeal allowed.

Summary

Issues involved:
The judgment involves challenges to orders passed by the Sales Tax Appellate Tribunal for two tax cases related to assessment years 1989-1990 and 1990-1991. The primary issue concerns the revision of assessment based on third-party records without providing the appellant with an opportunity to defend against the allegations.

Details of the judgment:

1. Background and Allegations:
The appellant, engaged in photographic jobs, was alleged to have received commission for goods purchased from Jindal Photo Films, New Delhi. The revised order of assessment proposed by the official respondent included determining turnover and levying penalties under the TNGST Act 1959.

2. Appellant's Defense:
The appellant denied purchasing goods from Jindal Photo Films, claiming their name and registration number were misused. They also stated that their books of accounts were destroyed in floods, hindering their ability to provide evidence.

3. Appellate Proceedings:
The First Appellate Authority and Sales Tax Appellate Tribunal confirmed the revised assessment, although the penalty was reduced. The appellant challenged the disallowed portion through the present tax cases.

4. Contentions and Arguments:
The appellant argued that they were not provided with copies of third-party records or given the opportunity to cross-examine, thus unable to defend against the allegations. The respondent contended that the appellant failed to produce documents to prove their innocence.

5. Judgment and Findings:
The High Court found that the revision of assessment was solely based on third-party documents without providing the appellant with a fair chance to refute the claims. The burden of proof was unfairly placed on the appellant to establish a negative fact. Consequently, the orders were deemed to violate principles of natural justice and were set aside in favor of the appellant.

6. Substantial Questions of Law:
The judgment addressed various legal issues raised by the appellant, including the correctness of relying on third-party records, the burden of proof, and the lack of opportunity for the appellant to defend against the allegations. The court found in favor of the appellant on all substantial questions of law.

7. Conclusion:
Both tax cases were allowed, and the orders of the authorities were set aside due to the violation of natural justice principles. The appellant succeeded in challenging the revision of assessment and penalties imposed, with the court ruling in their favor without costs.