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TMI Blog1976 (3) TMI 225X X X X Extracts X X X X X X X X Extracts X X X X ..... oth. Some of the assessees submitted their returns and claimed exemption on the ground that the imported art silk yarns were utilised by them in the course of manufacture of handloom cloth and this was accepted by the assessing authorities and they were not assessed. The others did not submit any return in form A-1. But on the basis of the routine check of the accounts made during the year and on the basis that the assessees had written that the imported art silk yarns were utilised in the manufacture of handloom, no action was taken by the assessing officer. But, later on, on certain information gathered from the Special Police Establishment, which had raided the assessees' premises for contravention of the conditions of the import licences and the statements given by the assessees before the officials of the income-tax department, the assessing officer initiated proceedings under the Sales Tax Act and issued notices to all the assessees to produce their accounts and prove that they have actually used the imported goods for manufacture of handloom cloth and that they actually sold such manufactured handloom cloth. Though sufficient opportunity was given to the petitioners, they di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , only the merits of the assessment and the quantum of penalty under section 12(3) were left to be decided by the Appellate Assistant Commissioner. When the appeals were taken up for hearing by the Appellate Assistant Commissioner, it was argued on behalf of the assessees that they had sold the import licences through brokers in Bombay, that they did not know the ultimate consumers and that, therefore, they could not be assessed. They also contended that the goods had been imported in the Bombay Port and that there is no evidence to show that the goods were actually sent to Tamil Nadu from Maharashtra State for the purpose of manufacture of handloom goods or for sale as such imported art silk yarn. The Appellate Assistant Commissioner pointed out that in the accounts maintained by the assessees they have written in all the years in question that the imported art silk yarns were utilised by them in the course of manufacture of handloom cloth and if the assessees wanted to contend that either they had sold the import licences through the brokers at Bombay or did not bring the imported art silk yarn into Tamil Nadu, it is for them to prove that fact. In spite of sufficient opportuni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12(3) and 16(2), as they stood for the relevant period, read as follows: "12. (3) When making any assessment under sub-section (2), the assessing authority may also direct the dealer to pay, in addition to the tax assessed, a penalty not exceeding one and a half times the amount of tax due on the turnover that was not disclosed by the dealer in his return or, in the case of failure to submit a return, one and a half times the tax assessed, as the case may be." "16. (2) In making an assessment under clause (a) of sub-section (1), the assessing authority may, if it is satisfied that the escape from assessment is due to wilful non-disclosure of assessable turnover by the dealer, direct the dealer to pay, in addition to the tax assessed under clause (a) of sub-section (1), a penalty not exceeding one and a half times the tax so assessed." The legislature in the two provisions relating to levy of penalty had used two different languages. While in section 16(2) a wilful nondisclosure of assessable turnover by the dealer is the gravamen of the offence, section 12(3) refers to the fact of non-disclosure alone or the failure to submit the return. On the plain language used in section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, the assessing authority has to find that there has been an evasion of the tax due to wilful non-disclosure of turnover which should have been disclosed. Section 12(3), on the other hand, does not appear to require any such finding of wilful non-disclosure in the return. The mere fact that some item of turnover has failed to be included in the return would appear to confer upon the assessing authority the jurisdiction to impose a penalty. It seems to us that even in the case covered by section 12(3) of the Act, a deliberate non-disclosure is really contemplated. The section refers to the imposition as a penalty and a penal provision of this nature cannot have been intended to apply to cases other than where a deliberate concealment by non-disclosure is involved. But, on the question whether such a provision is unconstitutional, we are unable to agree with the learned counsel. It is well-recognised that a power to penalise evasion of tax which is lawfully due is ancillary to the taxing power and the provision cannot therefore be struck down. On the further part of the argument of the learned counsel that mere non-disclosure cannot invite the levy of penalty, we agree. Having reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel for the assessees is the decision of the Supreme Court in Hindustan Steel Ltd. v. State of Orissa[1970] 25 S.T.C. 211 (S.C.). That was a case arising under the Orissa Sales Tax Act, and the passage relied on by the learned counsel reads as follows: "Under the Act penalty may be imposed for failure to register as a dealer: section 9(1) read with section 25(1)(a) of the Act. But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court is, therefore, of no assistance to the learned counsel. We are, therefore, of the view that a wilful non-disclosure is not essential for invoking the powers under section 12(3) of the Tamil Nadu General Sales Tax Act. This court in Madras Metal Works v. State of Madras[1973] 31 S.T.C. 566. has also taken a similar view that section 12(3) of the Tamil Nadu General Sales Tax Act, 1959, empowers the assessing authority to levy penalty for suppressing turnover and it does not make it a condition that the assessee should have the necessary mens rea before he is found guilty of making the suppression. It was next contended by the learned counsel for the assessees that there was no sale of the imported art silk yarn; but the licences themselves have been sold. But to a specific question, the learned counsel stated that he could not produce any evidence of sale and it is not possible for him to do that and that, in form, the import was effected as if it was by the assessees themselves. Further, we are unable to permit the assessees to contend that they have sold the licences or that the art silk yarn imported had not been brought into this State. Once they have imported the art sil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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