2021 (4) TMI 412 - HC - VAT and Sales Tax

Validity of assessment order - validity of estimation done by the Assessing Officer based upon records, which were recovered during the inspection - HELD THAT - The Tribunal found that the petitioner had paid wages during the relevant year to the tune of ₹ 4,12,515/- as per book marked B and based upon the payment of wages, the Assessing Officer estimated the value of the electrical goods manufactured and sold outside the accounts at ₹ 22,27,551/- and the purchase of raw materials outside the accounts at ₹ 16,50,060/- under Section 7A of the TNGST Act. The Tribunal noted that there was no proof by way of delivery note for the supply of raw materials for manufacture of finished goods for labour charges. Further, it noted that there was no proof for the supply of finished goods to the customers with the labour bills raised by the petitioner in the name of the customers whereas, there was receipt of raw materials by the petitioner in the name of some other party. The extract of the bank account showed that a sum of ₹ 9,07,529/- was credited for the year 1997- 98 and though the petitioner contended that the amount related to labour charges, no proof was produced by the petitioner and in the absence of evidence to prove that the receipt of money was for labour charges, the Tribunal concluded that the Assessing Authority was justified in drawing an inference of sales suppression. Levy of penalty - Section 12(3)(b) of the TNGST Act - HELD THAT - The turnover has been estimated based upon the bank statement, the entries in the books, which were recovered during inspection and there is no allegation of concealment. Further, we find that there is no specific allegation made against the petitioner as to on what basis, the Assessing Officer was of the view that penalty has to be imposed on that petitioner, that too, at 150% - in the absence of proper proposal, the levy of penalty cannot be sustained. The writ petition is partly allowed.

Summary

Issues Involved:
1. Challenge to an order passed by the Tamil Nadu Sales Tax Appellate Tribunal.
2. Assessment based on estimation without cooperation from the assessee.
3. Burden of proof in cases of alleged sales suppression.
4. Justification of penalty imposition under Section 12(3)(b) of the TNGST Act.

Analysis:

Issue 1:
The petitioner challenged an order passed by the Tamil Nadu Sales Tax Appellate Tribunal, which reversed the order of the first appellate authority setting aside the assessment order. The Tribunal found sales suppression by the petitioner and confirmed the assessment on a best judgment basis, leading to the challenge.

Issue 2:
The petitioner did not cooperate in the assessment proceedings, leading to an estimation by the Assessing Officer based on recovered records. The Tribunal considered the records, including purchases and sales values, to determine the alleged sales suppression and upheld the assessment.

Issue 3:
Regarding the burden of proof, the Department alleged sales suppression, shifting the initial burden to them to establish the case. The Tribunal noted discrepancies in records, wages paid, and lack of evidence for raw material supply, concluding that the Assessing Authority's estimation was justified due to sales suppression.

Issue 4:
The Tribunal upheld the penalty under Section 12(3)(b) of the TNGST Act, based on recovered records and bank statements. However, the High Court found the penalty imposition lacking a proper proposal and specific allegations against the petitioner, leading to setting aside the penalty.

In conclusion, the High Court partly allowed the writ petition, affirming the Tribunal's decision on the assessment but setting aside the penalty imposition due to insufficient grounds. The Tribunal's order restoring the assessment was affirmed, emphasizing the importance of proper evidence and burden of proof in tax assessments.