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TMI Blog1975 (8) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... r 1970-71 and 1971-72 and the original assessment for 1971-72. 3. T.A. No. 536/74: As regards 1970-71, the appellants returned a total and taxable turnover of Rs. 74,83,207.03 and Rs. 4,70,046.75 respectively. As against this the AO determined the total and taxable turnover at Rs. 76,09,228.58 and Rs. 6,75,900.00 respectively. The AO had allowed exemption on a turnover of Rs. 69,33,328.58 as sales other than first sales of iron and steel. The appellants also filed a list of corresponding second purchases before the original assessing authority for Rs. 75,35,831.95. The purchase list are available at p. 95 to 108 of the assessment filed for 1970-71. These lists include the purchases which were subsequently stated as made from fictitious persons. Subsequently on the basis of report from intelligence staff that certain purchases were from fictitious person, the AO resorted to the revision of assessment. The extract of the investigating officer s report as adopted by the AO is as follows: "The dealers have effected purchases of declared goods under the cover of bills which are found to be fictitious as would e explained below. In addition, bulk of their purchases are covered by b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 7,14,600.70 NIL 8-7-71 10,78,977.00 1,19,720.00 27-12-73 1,19,720.00 NIL 27-12-71 37,90,404.00 16,07,657.00 10-1-74 9,12,870.00 NIL 28-2-73 29,16,222.00 13,18,146.00 15-12-73 9,17,061.65 NIL 31-12-73 T.O. returned 4,79,203.71 T.O. returned - 2,75,591.08 NIL 30-6-71 12,21,882.00 1,79,418.00 27-12-73 47,591.50 NIL 1-12-72 4,19,716.00 2,24,947.00 27-12-73 2,02,961.31 NIL 29/6. 6.70 5,992.50 30/15. 7.70 19,387.20 33/21. 7.70 1,092.00 35/25. 7.70 10,252.40 37/9. 8.70 091.20 47/16. 9.70 11,019.90 48/16.10.70 5,085.80 50/28 10.70 4,332.00 . 93,573.60 The duplicate copies of the above bills obtained from the dealers as enclosed. These bills do not contain the registration No. of the sellers. A perusal of these bills would indicate that they are not genuine. A registered notice sent to this address was ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the books of the Deputy Commercial Tax Officer, Mooremarket Division and the turnover relating to these dealers will be excluded from this proposal". In respect of purchases for Rs. 3,11,583.04, they were said to have been purchased on bought notes. The Investigating Officer seems to have taken the view that inasmuch as the supplies wee not supported by proper sale bills but only bought notes prepared by the assessees, there is no evidence that these goods had already suffered tax. The learned counsel argued stating that the so called investigation was made by the Officer behind the back of the appellants and that these records were not made available to the appellants. He also pointed out that the G.S.P. Co., who was held to be a fictitious dealer on enquiry by the Department, turned out to be a real dealer against whom assessment proceedings were taken by the Department. 4. T.A. No. 534/74 : As regards 1971-72, the appellants returned a total and taxable turnover of Rs. 81,97,752.92 and Rs. 1,49,682.00 respectively. The AO had however originally determined the total and taxable turnover at Rs. 81,97,752.92 and Rs. 7,14,600.70 respectively. In this year, the appellant filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Madras-33 1,11,662.23 . . 1,57,966.63 There is a suggestion atleast before the AAC that the above transactions are clouded and nothing is there to suggest anything adverse against the rest. The estimated sales turnover of the above two transactions is to be taken at Rs. 1,73,800.00 and the balance of Rs. 3,66,100.00 was treated as turnover for which there is no proof of the goods having suffered the single point tax by the AO. He had, however, not held that there were either fictitious purchases or purchases on bought notes in his assessment proceedings. Clearly the sellers in the latter cases were dealers It does not matter whether he is a registered dealer or not. The appellant contended that in these cases, the purchases were only covered by invoices issued by the local dealers that there was no allegations of malafide against the appellants and that the records of enquiry were not shown to the appellants. The learned Counsel also argued that in the latter category of turnover of Rs. 3,66,000 the AO finding was that sufferance of tax earlier was not proved and that he had not spelled out any cloud or malafide of these transactions and that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid that these dealers are non-existent or fictitious. It is the common practice in the Commercial Taxes Department for dealers to conduct stray or regular business even after the reported closure of business. It is, therefore, upon the Department to track down and find the dealers and recover the tax from these dealers, if they were the first dealers. In respect of other the AO presumed them to be fictitious relying on the return of the registered letters and the nature of enquiries in few cases were not found to have been furnished to the appellant. Ex-facie the AO was actuated to presume them to be a fictitious dealers on the basis of return of registered letter. 7. T.A. No. 515/74 : Reliance Hard Ware, No. 85 Sembudoss street, Madras-1. The appellants were originally assessed for 1970-71 by the AO on 27th Dec., 1971. He had given deduction of Rs. 30,45,911.12 from the turnover of second sales of iron and steel. The appellants filed detailed list of purchases and they are available in the assessment file from pp. 81 to 153. However, there was a report from the Intelligence Staff. They are about 18 purchases during 1970-71. In all these cases, the Intelligence Staff contended t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... postal endorsement "not known, etc. 8. T.A. No. 812/74 : Reliance Hardware Mart, 85, Sembudoss Street, Madras-1. In this case, the AO determined the total and taxable turnover at Rs. 29,16,221.87 and Rs. 4,01,084.76 respectively for 1971-72. He had allowed exemption on a turnover of Rs. 25,15,137.11 as second sales. The appellant had filed elaborate purchase statements and they were filed at pp. 121 to 189 of the assessment file for 1971-72. On the basis of the Intelligence Officer s report the AO revised the assessment. There were 12 purchases during the year 1971-72. The list of these purchases are these Sl No. Name and address found in the bill Turnover 1. Kohinoor Business Corporation, 25, Mannady, Madras-1. 1,16,125.29 2. D.T.V. Iron Corporation, 12, Nainiappa Naicken St., Madras. 3. 46,728.09 3. Progress Iron Traders, 48, Devaraja Mudali St., Ms. 1 1,58,013.76 4. Navy Deva Steel Corporation 36, Rasappa Chetty St., Ms. 3. 79,964.70 5. Kupumudali Iron and Steel Corporation, 63, Rassappa Chetty St. Ms. 3. 98,754.30 6. Rooptara Corporation, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f verifying the correctness by issuing registered letters to these sellers and they were received back undelivered with the endorsement "not known". This evidence corroborated the conclusion arrived at in the local enquiries by the AO. This case cannot be treated on par with the other cases in the batch appeals. The AO had sufficiently made out that the purchases are fictitious and they had not suffered the single point tax earlier. The appellant had not proved that the sellers were real dealers in these cases. We are, therefore, inclined to accept the findings of the AO and hold that the impugned turnover is assessable in the hands of the appellant. 10. T.A. No. 475/74: Abdullah Co. 32/33, Sembudoss St., Madras-1. This appeal relates to the appellants, Tvl. Abdullah and Col. No. 32/33, Sembudoss St., Madras-1. The AO revised the assessment and fixed the total and taxable turnover at Rs. 12,21,882.00 and Rs. 1,79,418.00 against the total and taxable turnover of Rs. 12,21,882.00 and Rs. 1,31,826.00 already determined for the year 1970-71. There were 5 purchases which were held to be fictitious as reported by the Intelligence Staff. The list of these purchases it this. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , dt. 13th July, 1964, Royal Tyre Reterading Co, Devandram, Salem, The Madras High Court happened to deal with the assessment made by the AO and confirmed by the AAC. In that case, the appellant was a dealer in tyres. The AO considered that through the old tyres which were purchased from persons from whom bought notes were obtained, were not subjected to tax already and held it to be reasonable to make an estimate for the purpose of assessment i.e., 50 per cent of the sales of the tyres are liable to be assessed at 7 per cent as first sales and the rest exempted as subsequent sales. This assessment was also confirmed by the AAC. The Tribunal, before whom the second appeal was preferred, had observed that r. 26(13) of the Rules nearly envisaged the procedure as to how an assessee should discharge the burden cast on him under s. 10 of the Act, that even if all the dealers from whom the assessee purchased old tyres were residents of Madras, it could not be predicted that all of them were dealers and further observed that it is only on the even of their being dealers could the assessee claim the exemption of sales as subsequent sales. The Tribunal also pointed out in that case that wha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods locally, it is not necessary for him to further prove that the sales effected by him of the goods are second sales entitled to exemption from tax. 14. In an another cases in T.C. No. 28 and 29/1970 dt. 16th July, 1973, M.P.S. Rathinaswamy Nadar Bros. Madras-1 which involves loan transaction as per certain anamath books, the Tribunal decided that sales and loan transaction might be of the ratio of 50 : 50 per cent. Their Lordships have accepted this apportionment and had observed as follows : "In these circumstances, we are not able to say that the Tribunal is not right in estimating the taxable turnover at 50 per cent of the turnover called out on the basis of the entries in the two anamath account books. We are not, therefore, inclined to interfere with the estimate, as sustained by the Tribunal". 15. In an identical case decided by the Tribunal (Main Bench of the Sales tax Tribunal, Madras), T.A. No. 820 to 823/73 dt. 30th Oct., 1973 (Kanna Stores, Nilgiris) the Main Bench, Sales Tax Tribunal, Madras had observed as follows : "Basically the source of purchase is not verifiable. None of the sellers to the appellants are shown to be dealers. None of these transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch of the Sale Tax Tribunal in T.A. No. 555/73, dt. 5th Dec., 1973, in dealing with the case of Tvl. Govindan Co., Madras-I who is also an appellant in the present batch considered the question of furnishing certificates under r. 26(13) of Tamil Nadu General Sales Tax Rules and also the bills issuable by the selling dealer. They have referred to the decision in 30 STC 148. State of Rajasthan vs. Mohanlal Ratanlal and 26 STC 505, Bundhram vs. State of Bihar and had observed the following: "This decision makes it clear that the production of a relevant cash bill or certificate as the case may be prescribed by the rule is not absolutely necessary if the assessee could satisfy the AO that he was entitled to the deduction claimed by him otherwise." The Tribunal took the view in that case that the Department had prima facie established that the persons from whom the appellant purported to purchase the iron and steel goods in question were fictitious and bogus persons. The assessment in that case relates to the year 1971-72 and it was made under s. 12. The Tribunal further held that the remand order of the AAC of that case was in order and that the assessing authority shall furnish th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds of the assessee even though it related to second sales, will be first sales in the State. In the present case there is no allegation that the goods were purchased from outside the State. The above decision was referred to by the Tribunal in its decision T.A. 555, dt. 5th Dec., 1973 (Govindan Co.) and on its being taken to the High Court on revision, the High Court in T.O. 1/74 held that it is not necessary for a dealer to show that his purchases had suffered tax earlier if the purchases were from local dealers. The decision in 16 STC 441, V. Bhatta vs. State of Madras came as a result of interpreting r. 26(13) of the Tamil Nadu General Sales Tax Rules and the onus to be discharged under s. 10 of the Act. In that decision the certificate prescribed under r. 26(13) was held to be mandatory. But in the later decision of the Madras High Court in 29 STC 145, Deputy Commissioner of Commissioner Taxes, Madras vs. O. K. Agencies, His Lordship Justice Veeraswami (as he then was) had observed that r. 26(13) of the Madras General Sales Tax Rules 1959 merely relates to a manner of keeping accounts and is not mandatory and that the concession under s. 3(2) of the Act is absolute and the on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chased locally and from outside) and had mixed up them on the ground of impossibility to maintain separate accounts. The Madras High Court in 28 STC page 610, Anwarullah A.N. Ghouse Co. vs. State of Tamil Nadu, had held as follows. "But if he fails to do so and has mixed up on the ground that it is impossible to keep separate accounts, the assessing authority is left with no alternative but to use its best judgment and estimate the relative turnover to be brought to charge" "The principles underlying in the above decision of the High Court, in our opinion, seem to apply to situations where taxable and taxable events of declared goods could not be clearly spelled out; there is room for estimation". It appears that in the decision of the Madras High Court in T.A. 122/64, dt. 5th April, 1967 Royal Tyre Retreading Co., Salem, and T.C. 55/63 dt. 13th July, 1964, Royal Tyre Retreading Co., vs. Deputy Commissioner (CT) where identical facts are involved, the High Court held 50:50 for taxable and non taxable goods in reasonable ration. These decisions were not brought to the notice of the Tribunal to apply them in its decisions in T.A. 641/73 and 647/73 dt. 5th Dec., 1973 and T.A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llers, either they contained wrong R.C. Nos. or no numbers at all. When this was pointed out the learned counsel at the outset contended that according to s. 4 of the Act, declared goods could be handled by dealers and they need not necessarily be registered dealers. He also added that he was not in a position to enlighten as much as they were issued by third parties. He also pointed out that under the Statute, purchasers are not called up to verify the R.C. Nos. of the sellers. Possible reasons adduced by him are that it is not uncommon for dealers to rush to the Registering authority s office pay the Registration Fee and get a number without awaiting the formal issue of R.C. which should ultimately reveal a different number. He also points out that r. 26 enshirines various duties and responsibilities of a dealer in respect of his sales only and that no test has been prescribed under the Statute for a dealer before making purchases. It cannot be derived that in the scheme of tax leviable on any one as prescribed in the chain of successive dealers, commencing from the manufacturer or Importer and ending with the last dealer R.C. No. in the sale bill as prescribed under r. 26(11) is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by a dealer on the sale or purchase inside the State of declared goods at the rate and only at the points specified against each in the Second Schedule irrespective of the quantum of turnover. 19. The point of tax as shown under item 4 of the Second Schedule is at the point of the first sale sin the State. The dealer referred to in s. 4 is defined under s. 2(g) as follows : "(g) "dealer" means any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash or for deferred payment or for commission, remuneration or other valuable consideration, and includes : (i) a local authority, company, HUF, firm or other AOP which carries on such business. (ii) a casual trader. (iii) a commission agent, a broker or a del credere agent. Or an auctioner or any other mercantile agent, by whatever name called, who carries on the business of buying, selling, supplying or distributing goods on behalf of any principal. (iv) every local branch of a firm or company situated outside the State". "Registered dealer" under s. 2(m) means, a dealer registered under this Act. The duties and privileges of a registered dealer are d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw to hold that such person never existed. On the other hand, it would only show that the persons who had been in that place would have shifted from that place to another and they have not been properly tracked by the Department. It may also happen if such dealer s intention was to evade such letters also. His Lordship Chief Justice Veeraswami (of Madras High Court) held in 1973 AIR (Madras) 255, (A.E.K. Kaliappa Nadar vs. S.V.K.R. Amirthavalavanthammal) observed that the postal endorsement Not known might be further supported by evidence that the addressee had evaded service or had been absent. Even amount the instances of such verification therein the Investigating Officers had concluded them so be fictitious persons, at least one of the appellants in the batch caset (T.A. 536/74) is able to show that a dealer named G.S.P. Co. 47, V.P. Colony Madras-33 who had sold iron and steel goods to them were still existent and he has been roped in by the Intelligence Officers and it cannot be taken to be a fool-proof method to hold that all these sellers are non-existent or fictitious. We also agree with the observation of the Sales Tax Tribunal, Main Bench, Madras, when it concludes o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upplies are made by Tata Steel and Hindustan Steel Works and also by the Rerolling Mills at Tamil Nadu. The steel goods as a concomitant feature of their being either an importer or a manufacturer would have suffered the first sales tax in their hands in the normal course. After this event, there was a diversity of circumstances and opportunities for such actual users to have a portion of their allotted quantity and sell them to the dealers. The dealers who go about for purchasing these surplus iron and steel with the actual users and other have now to find a market for sales. It is evidently in this connection, the brokers came into the picture, who arranged the sale of these goods by such dealers to the appellants. Thus in the series of successive sale, there is one incidence of tax imposition in the hands of the importers or Millers as stated above. As held by Their Lordships of the Punjab High Court, in 33 STC 42 it can be taken that in the series of successive dealers atleast one dealer, who is a registered dealer would have paid the first tax due on this impugned commodity. Secondly it was not the suggestion of the Revenue that these bought notes and vouchers were bolsted up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew taken by the learned Counsel is that in the revision of assessments, the onus of proving that a particular turnover and escaped assessment is on the Revenue as held by the High Court of Madhya Pradesh in 13 STC page 366, Commissioner of Sales Tax vs. Kunta Bros. The relevant provisions of the Madhya Pradesh Sales Tax Act are not before us for offering our views on the acceptability or otherwise of that decision and whether those provisions are in pari materia of the corresponding provisions of the Tamil Nadu General Sales Tax Act. 23. In a recent decision of the Allahabad High Court reported in 33 STC page 528 Commissioner of Sales Tax, U.P. vs. Surajmal Rajendra Prakash, that High Court went into similar facts of that case wherein, according to Utter Pradesh Sales Tax Act, the first purchaser of grains are liable to tax and in the case of importer the point of first sales does not lie on him but on the dealers who purchase food-grains from the importer. In that case, the High Court had held that merely because the Department was not able to trace out the persons who were liable to pay tax as the first purchasers, would be no ground for denying the relief to the assessee to w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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