TaxTMI 
TaxTMI 
2009 (4) TMI 843
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....owever, notices to them have been dispensed with, in view of the nature of the disposal that I propose to give to the writ petitions. Admittedly, the petitioner is a registered dealer, manufacturing cement and effecting both local sales as well as inter-State sales. They have a factory at Madukkarai in Coimbatore District. The petitioner claims that the cement manufactured at Madukkarai is despatched, by way of stock transfer to their warehouses and depots located in the States of Kerala and Karnataka and also in the Union Territory of Pondicherry and that thereafter, it is sold in the respective States and Union Territory, after paying local sales tax in the respective States. On the basis that the cement manufactured in Tamil Nadu is despatched to their warehouses and depots in other States and sold only thereafter, the petitioner made a claim for exemption on the turnover relating to branch/ stock transfer. But suspecting the claim of the petitioner to be untrue and claiming that the petitioner was moving goods to other State buyers from the factory site itself to reach the ultimate buyers in other States, the first respondent started issuing pre-assessment notices.....
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....ailability of the alternative remedy, the High Court may still exercise its writ jurisdiction in at least three contingencies: (i) where the writ petition seeks enforcement of any of the fundamental rights; (ii) where there is failure of principles of natural justice; or (iii) where the orders or proceedings are wholly without jurisdiction or the vires of an Act is challenged..." The same principles are reiterated in Popcorn Entertainment v. City Industrial Development Corpn. [2007] 9 SCC 593 and in M.P. State Agro Industries Development Corpn. Ltd. v. Jahan Khan [2007] 10 SCC 88. In Union of India v. Hindalco Industries [2004] 135 STC 281; [2003] 1 RC 88; [2003] 5 SCC 194, the Supreme Court held as follows: "12. There can be no doubt that in matters of taxation, it is inappropriate for the High Court to interfere in exercise of jurisdiction under article 226 of the Constitution either at the stage of show-cause notice or at the stage of assessment where alternative remedy by way of filing a reply or appeal, as the case may be, is available but these are the limitations imposed by the courts themselves in exercise of their jurisdiction and they are not matters of juris....
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....ufficient opportunity to produce the statements and records and without even an opportunity to show cause against the proposed penalty, the first respondent passed the impugned orders of assessment and that therefore there was violation of the principles of natural justice. However, the first respondent has filed a counter-affidavit, giving graphic details of the number of opportunities allegedly provided to the petitioner, in respect of each of these assessment years, viz., 2001-02, 200203 and 2003-04. Paragraph 8 of the common counter-affidavit filed by the first respondent contains these details and they are extracted as follows: OPPORTUNITIES IN RESPECT OF THE ASSESSMENT YEAR 2001-02 12-8-2009 Summons issued to produce accounts on 12-2-2009. Accounts books produced on 18-22009. 31-12-009 Final assessment orders passed. OPPORTUNITIES IN RESPECT OF THE ASSESSMENT YEAR 2002-03 Date Details Remarks 4-16-2004 Summons issued fixing the date of hearing on 26-4-2004. No reply. 10-10-2006 Summons issued fixing the date of hearing on 10-11-2006. No reply. 1-25-2007 Notice issued fixing the date of hearing on 28-2-2007. ....
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....9-18-2008 On 18-9-2008, the petitioner asked for copies of D7 records. 9-24-2008 A notice was issued narrating all the previous notices giving 15 days time. 10-17-2008 Opportunity granted to take copies of D7 records on 24-10-2008. The petitioner filed reply on 26-12-2008 for the notices issued on 7-8-2008 along with some declaration forms. 1-30-2009 Pre-assessment notice issued granting 15 days time. On 16-2-2009, the petitioner sought 15 days time. On 2-3-2009 he filed letter to cross-examine the transporter and further asked for three weeks time. 3-9-2009 Final assessment order passed. In response to the overwhelming details furnished by the first respondent, in paragraph 8 of the common counter, which is extracted above, the petitioner filed a common rejoinder contending as follows: (i) As regards the CST assessment for 2001-02, all the summons referred to in paragraph 8 of the counter were issued under the Tamil Nadu General Sales Tax Act and not under the Central Sales Tax Act. The only show-cause notice issued for assessment of stock transfer to levy, under the Central Sales Tax Act, was the one dated Janua....
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....er-affidavit, so as to see whether they related to the assessment under the State Act or the Central Act and the learned Special Government Pleader produced the notices as well as the replies. Interestingly, a majority of these notices, as rightly contended by the petitioner in the rejoinder, were only under the State Act and not under the Central Act. But the question of compliance with the principles of natural justice cannot be judged on the basis of the number of opportunities granted and the number of notices issued, but is to be judged only on the basis of sufficiency of opportunity. Sufficiency of opportunity can be measured both from the circumstances and from the status of the person who complains of violation of natural justice. Tamed horses and wild horses react differently to the same command and hence the scales with which one would measure the sufficiency in both cases would differ. Keeping the above principles in mind, if we look into the notices issued (referred to in paragraph 8 of the common counter-affidavit), the picture that emerges can be projected in a tabular statement as follows: FOR THE ASSESSMENT YEAR 2001-2002 Summon dated 16-5-2003 Und....
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....under the CST Act. In this notice, in the 3rd last paragraph, it is stated that the petitioner had filed form F and tax-paid proof, but had not filed other statements and records as per rule 4(3)(A) of the CST (Tamil Nadu) Rules. This notice gives 15-days time, but on the 15th day, viz.., 28-1-009, a notice to produce books on 12-2-2009 is issued. Notice dated 28-1-2009 to produce books on 12-2-2009 issued. Admittedly, a reply was sent by the petitioner on 27-1-2009 and the books were produced on 18-2-2009 Notice dated 2-3-2009 By this notice a proposal to levy penalty under section 9(2) read with 12(3)(b) is made. The petitioner seeks time of 2 weeks to react to this proposal, but an order is passed on 11-3-2009. FOR THE YEAR 2002-2003. Summon/notice dated 1-6-2004 Under the TNGST Act, form XII Summon/notice dated 10-10-2006 Under the TNGST Act, form XII Summon/notice dated 2512007 Under the TNGST Act, form XII Summon/notice dated 16-4-2007 Under the TNGST Act, form XII Best-of-judgment notice dated 10-8-2007 Though it was captioned as one under the TNGST Act, this notice specifically dealt with branch transfer and the contention of ....
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....in response to the best-of-judgment notices and the preassessment notices under the CST Act; and (d) that the petitioner in fact filed writ petitions in W.P. Nos. 23754 to 23759 of 2008 seeking copies of D7 records and obtained orders from this court, as a consequence of which, the petitioner was permitted to peruse the D7 records and also take copies even before the issue of the second pre-assessment notice. Therefore, it is uncharitable on the part of the petitioner to contend that there was any violation of the principles of natural justice. The petitioner is not a petty dealer. It is a company having a wide network and was represented before the assessing officer, every time, by professionally qualified persons as seen from the replies sent by them. They understood what these notices purported to be. Therefore, I am of the considered view that the allegation of violation of natural justice, made by the petitioner cannot be accepted. Non-compliance with section 6A of the CST Act: Apart from the allegation of violation of the principles of natural justice, the petitioner also alleges violation of the mandatory provisions of section 6A of the Central Sales Tax Act, 1956. The....
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....9;, in relation to a dealer, means the authority for the time being competent to assess the tax payable by the dealer under this Act." A plain reading of sub-section (2) of section 6A shows that the assessing authority is bound to reach a satisfaction, after making such inquiry that the particulars contained in form F declarations are true. This satisfaction may be arrived at either at the time of or at any time before the assessment. Once the assessing authority is satisfied, the second limb of sub-section (2) requires him to make an order to that effect. Though sub-section (2) uses the expression "he may", it appears that (i) the scrutiny of the declaration, (ii) conduct of an enquiry, (iii) arriving at a satisfaction and (iv) then making an order, are all essential requirements, to be satisfied before the assessee can be held to have failed to discharge the burden of proof cast upon him under sub-section (1) of section 6A. In A. Dhandapani v. State of Tamil Nadu [1995] 96 STC 98, a Division Bench of this court held (in paragraph 3.4 of its judgment) that "the failure to render a finding that the particulars contained in the declaration are untrue, before foisting liability....
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....f scrutiny of the D7 records recovered from their place of business, it was established crystal clear that they have moved the goods to other State buyers from factory site itself to reach the ultimate buyers in other States." In all the three impugned orders of assessment, the above paragraphs find a place, with very little modifications. In other words, the claim of the petitioner that it was a case of stock transfer, has been rejected by the first respondent (i) due to the alleged failure on the part of the petitioner to file statements and records in terms of rule 4(3A) of the CST (Tamil Nadu) Rules, 1957 and (ii) on the basis of inspection findings and scrutiny of D7 records. There is no indication whatsoever, that any kind of inquiry, even a perfunctory one, was conducted by the first respondent, before coming to the above conclusion. Neither the impugned orders of assessment nor even the common counter-affidavit, contains a claim that any such inquiry was ever conducted. Therefore there is no escape from the conclusion that the first respondent committed a serious error of jurisdiction, in terms of section 6A(2) of the Act. As stated above, the non-filing of the statem....
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....ent of the price are concurrent conditions, unless otherwise agreed. The word "delivery" itself was defined under section 2(2) of the Sale of Goods Act, 1930, as voluntary transfer of possession from one person to another and section 33 enabled the delivery of goods sold, by doing anything either agreed to between the parties or which had the effect of putting the goods in the possession of the buyer or any person authorised by him. Section 39(1) of the Sale of Goods Act, 1930, creates a deeming fiction by holding that the delivery of the goods by the seller to a carrier, whether named by the buyer or not, in pursuance of a contract of sale, to be a delivery of the goods to the buyer. However, sub-section (2) creates certain obligations on the part of the seller to make such contract with the carrier as would be reasonable, having regard to the nature of the goods and other circumstances. Today, with the development of on-line trading and such other electronic methods, a transfer of title in movable property can take place both without the actual payment of the price and without actual delivery taking place. It takes place at times without even the buyer and the seller knowing o....
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....r against payment of price, vis-a-vis actual delivery of goods and the impact of section 39(1) of the Sale of Goods Act, upon article 286 of the Constitution was considered by a Constitution Bench of the Supreme Court as early as in 1964 in Shree Bajarang Jute Mills Ltd. v. State of Andhra Pradesh [1964] 15 STC 430; AIR 1966 SC 376. It was held in paragraph 9 (page 435 of STC) therein that the mere delivery of railway receipts representing the title to the goods, will not constitute actual delivery of goods for the purpose of article 286. Moreover, in business transactions attracting fiscal statutes, the motive or substance is of little consequence than the form in which they take place. In Board of Revenue, Madras Chief Controlling Revenue Authority v. N. Narasimhan AIR 1961 Mad 504, it was held by the Full Bench of this court as follows: (page 510) "31. In the application of a taxing enactment to a subject, the emphasis on the so-called substance of the transaction in antithesis to the form of it should be made with a good deal of caution. In Bank of Chettinad Ltd. v. Commissioner of Income-tax [1940] 8 ITR 522 at page 526; AIR 1940 PC 183 at page 185, Sir Lancelot S....
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....of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the Legislature and by considering what was the substance of the matter..." Before coming to the said conclusion, the Supreme Court actually referred to the very same observations of lord Russel of Killowen in Inland Revenue Commissioners v. Duke of Westminster [1936] AC 1 and that of Lord Cairns in Partington v. Attorney-General [1869] LR 4 HL 100 as well as the decision of the Privy Council in Bank of Chettinad [1940] 8 ITR 522; AIR 1940 PC 183 which were followed by the Full Bench of this court in Board of Revenue, Madras Chief Controlling Revenue Authority v. N. Narasimhan AIR 1961 Mad 504. Therefore, tax planning as opposed to tax evasion, has legal sanction. If a dealer plans his transactions in such a manner that he pays less tax, it is not open to the Revenue to subject him to a conscience audit or moral assessment. The power to lift the veil, has to be exercised with great care and caution. In the case on hand, the dealer has a factory in Tamil Nadu and he claims exemption in this State on stock transfer made to his branches in other ....
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....e basis of the records available." The above statement makes it clear that even according to the first respondent, there was a possibility, even if remote, that he could have come to a different conclusion, if the petitioner had explained the modus operandi of the transactions, in the manner in which they have done in the affidavit in support of the writ petitions. This statement substantiates the claim of the petitioner that if an enquiry had been held, under section 6A(2), the result could have been different. Therefore, the impugned orders are liable to be set aside, though not on the ground of violation of principles of natural justice, but on account of the failure of the first respondent to hold an inquiry and pass orders in terms of section 6A of the Central Sales Tax Act, 1956. In view of the above, the writ petitions are allowed, the impugned orders of assessment are set aside and the matters remitted back to the first respondent for an enquiry under section 6A(2) of the CST Act. The first respondent shall issue a notice to the petitioner within 2 weeks from the date of receipt of a copy of this order, specifically fixing 2 alternative dates for the enquiry under ....