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TMI Blog2001 (2) TMI 1014X X X X Extracts X X X X X X X X Extracts X X X X ..... ner of Commercial Taxes, Coimbatore Division, in the order passed on March 22, 1990 confirmed the order of the assessing authority. While confirming the order, the Deputy Commissioner of Commercial Taxes observed that the registration of the sellers, namely, M/s. Rekha Distributors, Madras was not renewed for the assessment year 1989-90 and therefore the seller was not a registered dealer for the assessment year 1989-90. No documents for transport of goods were produced at the time of provisional assessment. Even the transport documents produced before him showed that the sale bills have not been sealed at the check-post on the way and therefore the transport documents do not appear to be genuine. Even in respect of cheque payments made through Syndicate Bank, Coimbatore, the sellers obtained the money of Rs. 1,44,330 in cash across the counter from the bank after being identified by the appellants. Therefore it was construed by the Deputy Commissioner of Commercial Taxes that the selling dealer was not a genuine dealer. The assessee filed second revision before the Joint Commissioner of Commercial Taxes (Revision Petition) Chennai. When the revision petition was pending, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the assessee. Based on the above observation, the Joint Commissioner of Commercial Taxes stated as follows: "Only in cases wherever no actual movement of goods, cheques would be issued and encashed across the counter instead of realising the amounts through the banks of the sellers in order to avoid proof of accounting. If this is considered, the realisation of all the cheques across the counter throws ample light as to the shady dealings by this assessee with the alleged sellers, namely, Rekha Distributors." 3.. Thereafter, referring to the records of M/s. Rekha Distributors, the Joint Commissioner of Commercial Taxes observed that even the assessments for the year 1987-88 and 1988-89 were to the best judgment in the absence of accounts and that as early as on November 28, 1988, it was found that there was no person in the premises declared as the business premises of M/s. Rekha Distributors. On February 9, 1989 a detailed enquiry was conducted which revealed the nonexistence of M/s. Rekha Distributors in the declared premises. The investigation by the department also revealed the non-existence of M/s. Rekha Distributors. A verification of the person who signed as witne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sistant Commissioner granted relief on the basis of bills issued by existing sellers, the lorry way-bills showing movement of goods from Madras to Coimbatore and the payments effected by issuing cheques to the sellers. Thus, the assessee has proved that the sales effected by him are only second sales and that the sellers, namely, M/s. Rekha Distributors alone are liable to tax as first sellers. In such circumstances, the Joint Commissioner of Commercial Taxes was not justified in reversing the order of the Appellate Assistant Commissioner. On the basis of the records of M/s. Rekha Distributors, the sellers, the claim of exemption relating to the assessee cannot be rejected. Neither the absence of check-post seals in the bills nor the encashment of cheques across the counter will result in denial of exemption to the appellant in this case. M/s. Rekha Distributors were registered dealers during 1987-88 and 1988-89 and in such circumstances, the non-renewal of registration during 1988-89 should not be held against the appellant who has obtained clear bills for purchases effected from the sellers during April 1989 and May 1989 as held in Sree Narayan Timbers v. Joint Commissioner (Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ales, they need not show that their sellers had in fact paid the tax at the first point and it was enough for them to show that the earlier sales were taxable sales and that the tax was really payable by their sellers." 8.. In the present case, the assessing authority disallowed the claim because the sellers, namely, M/s. Rekha Distributors, Chennai were bogus dealers and that the registration was not renewed for the assessment year 1989-90. Even when the assessee preferred a revision against the provisional assessment, the Deputy Commissioner of Commercial Taxes clearly held that the assessee did not show any transport documents before the assessing authority and that the documents shown before him also did not bear the check-post seals and that payment have been obtained in cash against the cheques issued after the sellers have been identified at Coimbatore by the assessee. With this back ground, if we look at the order of the Joint Commissioner of Commercial Taxes, we find that the order of the Appellate Assistant Commissioner who relied on the bills and waybills so as to allow the claim of the assessee was reversed only by categorically stating once again the reasons urged by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s by the dealer cannot be rejected. In the decision reported in Lakshmi Steel Traders v. Board of Revenue (Commercial Taxes) [1991] 82 STC 409 (Mad.) also, the observation of the High Court was that merely on the closure of the business by the sellers during the assessment year, the sale bills issued by the sellers subsequent to the date of closure reported cannot be rejected without further investigation as to the genuineness of the transaction. In the decision reported in P. Narayanasamy v. State of Tamil Nadu [1997] 104 STC 421 (Mad.), the Appellate Assistant Commissioner granted relief on July 28, 1989 by holding that the assessee was only decorticating groundnut gathered from the ryots and that the assessee is not a dealer in groundnut. However, the Joint Commissioner of Commercial Taxes on the basis of reports gathered subsequently on March 18, 1993, April 15, 1993 and May 11, 1993 came to the conclusion that the assessee is a dealer in groundnut. Only in the context, the Madras High Court set aside the order passed by the Joint Commissioner of Commercial Taxes by holding that the finding arrived at by the Joint Commissioner of Commercial Taxes based on records gathered subse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " in those proceedings were valueless inasmuch as "C" had no opportunity to cross-examine "H". 9.. However in the present case before us as discussed supra, the revenue has established that the sellers, namely, M/s. Rekha Distributors did not renew the registration for the assessment year 1989-90 and that the department has also after investigation of the sellers on February 9, 1989 issued a notice for cancellation of registration on February 16, 1989 and eventually passed an order cancelling the registration on April 28, 1989. In fact, the cancellation of registration in this case was on the basis of the dealer not being found at the place of business. This is not a mere case of cancellation for non-renewal alone and the registration cancellation is on the basis of investigation done by the department after noticing no business activity at the place of business of sellers on February 9, 1989. Therefore, this is not a case of closed business during the assessment year as considered in the decision reported in Lakshmi Steel Traders v. Board of Revenue (Commercial Taxes) [1991] 82 STC 409 (Mad.) or a mere cancellation of registration of a dealer doing business merely on the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... materials gathered subsequent to the order passed by the Appellate Assistant Commissioner. Therefore, the reliance placed on the decision reported in N.S. Choodamani v. Commissioner of Income-tax [1959] 35 ITR 676 (Ker) also is not relevant to the present case. 10.. On the whole, we find that it has been clearly established that the sellers, namely, M/s. Rekha Distributors were not doing business during 1989-90 and that really no movement of goods took place from Madras to Coimbatore as contended and in such circumstances, as the appellant in this case has not proved that the earlier sales were taxable sales and that tax was payable by the earlier sellers in terms of the ratio of the decision of the Supreme Court in State of Tamil Nadu v. Govindan Co. [1994] 93 STC 185, the conclusions reached by the Joint Commissioner of Commercial Taxes so as to assess a turnover of Rs. 3,33,855 by adding gross profit of 9.31 per cent on the purchase value of Rs. 3,05,420 is fully justified and there is no case to interfere and accordingly the tax appeal case is dismissed. And this Tribunal doth further order that this order on being produced be punctually observed and carried into executi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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