2018 (5) TMI 718 - HC - VAT and Sales Tax

Levy of turnover tax - penalty u/s 12(3)(b) of TNGST Act - Held that - There is no suppression in the books of accounts. Reliance placed in the case of Appollo Saline Pharmaceuticals (P) Ltd., Vs. Commercial Tax Officer (FAC) and Others 2001 (10) TMI 1100 - MADRAS HIGH COURT , where it was held that on and after April 1, 1996 an explanation has been added below Section 12 (3) which requires the turnover relating to the tax assessed on the basis of the accounts of the assessee, to be disregarded, while determining the turnover on which the penalty is to be levied under Section 12 (3). Petition dismissed - decided against petitioner-Revenue.

Summary

Issues Involved:
1. Validity of turnover estimation and suppression.
2. Legitimacy of penalty imposition under Section 12(3)(b) and 16(2) of the TNGST Act.

Issue-wise Detailed Analysis:

1. Validity of Turnover Estimation and Suppression:
The case revolves around the assessment of Tvl. Mangal Marbles for the year 1994-95, where the Assessing Authority enhanced the turnover based on an inspection conducted on 04.03.1994. The dealers failed to maintain a detailed closing stock inventory or day-to-day stock account, leading to an estimated purchase suppression of ?5,21,339/-. The Appellate Assistant Commissioner (CT) upheld the actual suppression but deleted the estimated suppression, stating that the entire period of assessment had been considered. The Tamil Nadu Sales Tax Appellate Tribunal confirmed the deletion of the estimated suppression and sustained the actual suppression based on the stock variation detected during the inspection.

2. Legitimacy of Penalty Imposition under Section 12(3)(b) and 16(2) of the TNGST Act:
The Tribunal set aside the penalty imposed under Section 12(3)(b), arguing that the suppression was based on notional calculations rather than concrete evidence. The Tribunal emphasized that penalties under Sections 12(3)(b) and 16(2) require proof of actual suppression beyond the accounts. The Tribunal referenced several judgments, including the Supreme Court's decision in State of Madras vs. Jayaraj Nadar & Sons, which stated that penalties can only be levied if the assessment is based on best judgment and not solely on account books. The Tribunal concluded that since the assessment was based on the accounts and no specific purchase or sales suppressions were detected, the levy of penalty was unwarranted.

Conclusion:
The High Court upheld the Tribunal's decision, emphasizing that penalties under Sections 12(3)(b) and 16(2) of the TNGST Act require concrete evidence of suppression, which was not present in this case. The assessment was based on the accounts, and the discrepancies were not sufficient to justify the penalties. The Tax Case Revision was dismissed, and the substantial question of law was answered in favor of the assessee.