1998 (2) TMI 570 - HC - VAT and Sales Tax

Disputes Over Taxable Turnover & Penalty Imposition: Tribunal's Power & Precedent

DCW Limited Versus State of Tamil Nadu

DCW Limited Versus State of Tamil Nadu - [1999] 112 STC 491 (Mad) Issues Involved:1. Determination of taxable turnover and tax due.2. Imposition of penalty for alleged willful misrepresentation.3. Refixing of taxable turnover by the Appellate Assistant Commissioner.4. Tribunal's handling of the appeal and enhancement petition.5. Tribunal's remand order and its validity.6. Legal question on the Tribunal's power to enhance assessment without an enhancement petition.Detailed Analysis:1. Determination of Taxable Turnover and Tax Due:The assessee-dealers reported a total and taxable turnover of Rs. 23,85,42,268.13 and Rs. 23,81,81,763.35 respectively for the assessment year 1986-87. The assessing officer, after checking the accounts, determined the taxable turnover as Rs. 24,70,73,015.00, with a tax due of Rs. 1,06,46,039.54.2. Imposition of Penalty:A penalty at one and half times the tax due was levied on the assessee-dealers, amounting to Rs. 11,23,002.60. The penalty was imposed on the grounds that the assessee-dealers had allegedly camouflaged inter-State sales as stock transfers to depots for open market sale.3. Refixing of Taxable Turnover by the Appellate Assistant Commissioner:The aggrieved assessee-dealers filed an appeal before the Appellate Assistant Commissioner, who refixed the taxable turnover for the assessment year as Rs. 23,77,57,883. The Commissioner allowed exemptions for depot transfers, consignment sales, and discounts, and remanded turnover covered with defective 'C' forms for rectification. The penalty of Rs. 11,23,002 was set aside.4. Tribunal's Handling of the Appeal and Enhancement Petition:The assessee-dealers filed an appeal before the Tamil Nadu Sales Tax Appellate Tribunal, challenging only the disallowance of DMRs treated as inter-State sales at 10% amounting to Rs. 3,67,513. During the pendency of the appeal, the Revenue filed an enhancement petition, which was initially delayed but later condoned. The Tribunal ultimately dismissed the enhancement petition and remanded the main appeal for de novo examination.5. Tribunal's Remand Order and Its Validity:The Tribunal's remand order was challenged for lack of clarity and rationale. The Court found that the remand order suffered from several infirmities:- No rationale or reasoning for the remand.- Unclear whether the remand was to the lower appellate authority or the assessing officer.- Ambiguity on whether the remand covered only the disputed turnover of Rs. 3,67,513 or the entire transactions for the assessment year 1986-87.6. Legal Question on the Tribunal's Power to Enhance Assessment Without an Enhancement Petition:The Court considered whether the Tribunal had the power to enhance the assessment under section 36(3)(a)(i) of the Tamil Nadu General Sales Tax Act, 1959, without an enhancement petition filed by the Revenue. The Court referred to precedents, including:- M. Chokkalingam v. State of Tamil Nadu, which held that the Tribunal had the power to enhance assessments even before the introduction of section 36(3-A).- State of Tamil Nadu v. Jeevanlal Ltd., which indicated that the Tribunal could enhance assessments in appeals filed by the assessee if the Revenue filed cross-objections.- State of Kerala v. Vijaya Stores, which held that the Tribunal had no jurisdiction to enhance assessments in the absence of an appeal or cross-objections by the department.The Court concluded that the Tribunal had no power to enhance the assessment when the enhancement petition was dismissed as time-barred. The remand order was set aside, and the matter was remitted back to the Tribunal for consideration of the disputed turnover of Rs. 3,67,513 only.Conclusion:The judgment remanded the case back to the Tribunal for fresh consideration of the disputed turnover of Rs. 3,67,513, setting aside the Tribunal's previous order. The Tribunal's power to enhance the assessment without an enhancement petition was found to be invalid, aligning with the precedent set by the Supreme Court in Vijaya Stores.