[Order of the Court was delivered by N. SATHISH KUMAR, J.,] Aggrieved over the Order of the Tamil Nadu Sales Tax Appellate Tribunal, Main Bench, Chennai in T.A. No.123 of 2004 dated 13.10.2009 the Revenue has preferred the present Revision Petition. While admitting the Revision Petition, the Revenue raised the following substantial questions of law:
“1. Whether in the facts and circumstances of the case, the Appellate Tribunal is right in law in entertaining the appeal of the dealer once again gone into the question of tax liability in respect of disputed turnover when the same was attained finality by order of first appellate authority and no appeal was filed against it?
2. Whether in the facts and circumstances of the case, the Tribunal is right in law in accepting the claim of compounding rate of tax under Section 7(c) of the Act when the respondent/dealer has not exercised his option at the time of commencement of assessment year?
2. The brief facts leading to file this Revision is as follows:
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2.(a) Tvl.Sharada Enterprises are the dealers in Polycarbonate Plastic Sheets, Vinyl Stickers, Self Adhesive Film. They were finally assessed for the year 1999-2000 under the TNGST Act 1959 on a total and taxable turnover of Rs.1,20,36,481/- and Rs.46,56,690/- respectively, as per the Assessment Order dated 29.05.2001. Aggrieved over the above order of assessment, the assessee preferred an appeal before the Appellate Assistant Commissioner (CT)-VI, Chennai, who by his order in AP.191/2001 dated 26.12.2001, has set aside the assessment made on a turnover of Rs.8,26,029/- at 12% and remanded the case back to the Assessing Officer for passing fresh order, after issue of a notice in order to enable the Assessing Officer to segregate the turnover under item Nos.(i) and (ii) as referred to therein and to assess the taxable turnover allowing 15% deduction towards labour charges and to allow deduction under 3-B(2)(b) in respect of item (i).
2(b) In order to comply with the directions of the Appellate Assistant Commissioner (CT)-VI, the dealers were required to produce their accounts with necessary details and break-up figures under the respective categories together with relevant http://www.judis.nic.in 4 purchase bills, vide notice dated 08.07.2002. In this connection, the dealer have stated that the corresponding purchase was made from Tvl.Mc.Coy Silicone Pvt Ltd., but the dealers have not furnished the relevant TNGST RC No.to prove that the goods in question had already suffered single point tax at earlier stages. But on verification of the connected assessment records, it is seen that Tvl.Mc.Coy Silicone Pvt.Ltd., are dealer of New Delhi and as such these purchase are interstate purchases and hence the deemed sales of these items are liable to tax. Hence the Assessing Officer again assessed the same to tax at 12% on Rs.8,26,029/- in his order dated 10.10.2002. Aggrieved over that order, the dealer have preferred appeal again before the Appellate Assistant Commissioner, who by his order dated 18.11.2003 in A.P.No.271 of 2002 has confirmed the order of the Assessing Officer by dismissing the appeal against which appeal filed by the assessee before the Tamil Nadu Sales Tax Appellate Tribunal and the Tribunal has allowed the appeal on the terms that the turnover of Rs.9,71,799/- representing the works contract receipts shall be assessed to tax at 4% under 7-C(1)(ii) of the TNGST Act, 1959.
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3. The Tribunal while allowing the appeal filed by the assessee held that the assessee though has not exercised their option as per Setion 7-C of the Act, filed Return for the month of March 2000 and remitted the tax @ 2% and 4% as per Section 7-C(1) of the TNGST Act 1959. As there was no specific format was prescribed to exercise such option, choosing the rate of tax and determining the taxable turnover is only a procedure and hence it is only directory and not mandatory. By holding so the Tribunal allowed the appeal, against which the Revenue has filed the present Revision.
4. The appeal filed mainly challenging the order of the Tribunal relating to the levy of tax on a turnover of Rs.8,22,029/- mainly on the ground that the earlier order has reached finality, it is the second round of appeal, the Tribunal ought not to have gone into the above issue. For exemption under Section 7-C of the Act, the assesssee ought to have exercised the option to pay tax under compound rate of tax.
5. The learned counsel appearing for the Revenue vehemently contended that to avail the benefit under Section 7-C http://www.judis.nic.in 6 of the Act, option should have been exercised by the assessee as stipulated in the Section. When the assessee failed to exercise such option, the Tribunal ought not to have allowed the appeal. Hence, submitted that the order of the Tribunal required interference.
6. The learned counsel appearing for the Respondent submitted that admittedly, he has entered into the work contract only at the end of the financial year. He has rightly filed Return and paid tax. In the absence of any specific format for exercising option the contention of the Revenue that he should have exercised options in the first month of the financial year cannot be accepted. Further the contention of the learned counsel for the Respondent that merely because remand has not been challenged previously and the same will not bar for the Tribunal to go into the facts when the order was ultimately challenged before the Tribunal. In support of the same has has also relied upon a Judgment of the Kerala High Court in M.Syed Alavi and others v. State of Kerala, [1981] 48 STC 150 (Ker). and also the Judgement of the Karnataka High Court in Ashok Gramodyoga Sahakara Sangha Ltd., v. Commissioner of Commercial http://www.judis.nic.in 7 Taxes in Karnataka, [1993] 90 STC 491 (Kar).
7. We have perused the materials. Originally Assessment Order dated 29.5.2009 was put in challenge before the Commercial Tax Officer (Appeal). He has ordered remanding the matter relating to the assessment on the turnover of Rs.8,26,029/-, after setting aside the order of the Assessing Officer. In other aspects the appeal was modified and dismissed. After remand, the Assessment Order was again passed on 10.10.2002, which was again challenged by way of appeal before the Appellate Assistant Commissioner CT-VI, Chennai. By his order dated 18.11.2003 the Appellate Assistant Commissioner dismissed the appeal on the ground that the assesssee has not challenged the order of remand and against which the Appeal was filed before the Tamil Nadu Sales Tax Appellate Tribunal, Chennai. The Appellate Tribunal considered the judgment of the Kerala High Court referred above, held that the docrtine of res judicata normally would not be attracted to statutory proceedings to entertain the appeal and allowed the appeal and held that merely because the option was not exercised by the assessee within a stipulated time same cannot be the ground for denial for http://www.judis.nic.in 8 concession in the rate of tax conferred in the statue on the assessee. As against which the present revision came to be filed.
8. It is useful to refer the Kerala High Court Judgement in M.Syed Alavi's case (supra), in which it is held as follows:
"16. The learned Advocate-General referred to a number of passages from "The doctrine of res judicata" by Spencer Bower and Turner. None of them, however, deals with the issue involved in the case. We do not therefore propose to refer to them in extenso. Suffice to say that finality is an essential condition for a decision to be res judicata both under the Indian law and under the English law. A finding on an issue at a preliminary stage is not final if it is liable to be challenged in an appeal against the ultimate decision of the case. , To adopt the language of the Supreme Court it is only provisionally final. It will become really final only if no appeal is filed against the ultimate decision of the case or if an appeal is filed, it is confirmed in such appeal.
17. In the instant case, it is true that no appeal was filed against the decision dated 12th April, 1976, of the Appellate Assistant Commissioner. The effect of non-filing of an appeal is that the finding is binding on the assessing authority when the case went back to that authority and also on the Appellate Assistant Commissioner while disposing of the appeal from the revised decision of the assessing authority. It is not binding on the Appellate Tribunal in the http://www.judis.nic.in 9 appeal filed under Section 39 against the decision of the Appellate Assistant Commissioner. The Appellate Tribunal was free to arrive at its own decision on the question of liability of the petitioners to assessment to sales tax."
9. Similarly, the High Court of Karnataka in Ashok Gramodyoga Sahakara Sangha Ltd., case (supra) has held as follows:
"11. Technical rules governing the doctrine of res judicata normally would not be attracted to statutory proceedings, when the statutory proceedings pertain to tax liability. Technically, the assessee would be aggrieved only when there is an enforceable assessment order by the authority. If such an order is made, all other orders made earlier could be treated as orders made at intermediary stages. If so, certainly the higher authority before whom the matter comes up at a subsequent stage could examine the correctness of the order made by the earlier appellate authority who was subordinate to the second appellate authority. In these circumstances, we are of the view that the Appellate Tribunal was not justified in rejecting the appeals of the petitioner before us."
10. Having regard to the above judgments we are in full agreement with the finding of the Tribunal, entertaining the appeal on the ground that principles of res judicata normally would not be attracted in the tax matters. Accordingly, the first http://www.judis.nic.in 10 Substantial Question of Law is answered against the Revenue.
11. As far as the second Substantial Question of law is concerned the appeal itself relate to tax on a turnover of Rs.8,26,029/-. The contention of the Revenue is that the assessee is a works contractor, he ought to have been exercised option as per Section 7-C(1)(ii) of the Act. In the absence of exercising option, the exemption provided under the Act cannot be extended to the assessee. Whereas it is the contention of the assessee's counsel that the assessee is a works contractor, he obtained such contract during the fag end of the financial year. It is useful to refer Section 7 of the TNGST Act, 1959:
"7. Payment of tax at compounded rates:-
(1) Notwithstanding anything contained in sub- section (1) of Section 3 but subject to sub Section (4) every dealer (other than a casual trader or an agent of a non-resident dealer) whose total turnover is not less than one lakh of rupees but not more than two lakhs of rupees, may at his option instead of paying the tax in accordance with the provisions of that sub-
section, pay tax (2) Any dealer (other than a casual trader or an agent of a non-resident dealer) who estimates his total turnover for a year to be not more than two lakhs of rupees may apply to the assessing authority to be http://www.judis.nic.in 11 permitted to pay the tax under this sectgion and on being so permitted, he shall pay the tax due in advance during the year in monthly or prescribed in monthly or prescribed instalments and for that purpose shall submit such returns in such manner as may be prescribed:
Provided that any dealer paying tax under sub- section (1) of Section 3 and desirous of paying tax for any year under this section may, any any time before final assessment for that year, exercise his option to be assessed under this section and for that purpose shall submit such returns in such manner as may be prescribed:
Provided further that any dealer paying tax under this section and desirous of paying tax under Sub-section (1) of Section 3 may, any any time before final assessment for that year, exercise his option to pay tax in accordance with that sub-section and for that purpose shall submit such returns in such manner as may be prescribed.
(2-A) The permission granted by the assessing authority under sub-section (2) shall continue in force so long as the dealer is eligible to be assessed under this Section and has not withdrawn his option to be so assessed.
(3) The tax paid under sub-section (2) shall be subject to such adjustment as may be prescribed on the completion of final assessment in the manner prescribed.
http://www.judis.nic.in 12 (4) The provisions of this section shall not apply in respect of any sale or purchase made on or after the 1st day of April 1990."
12. It is to be noted that when the assessee, works contractor was engaged at the fag end of the financial year, Revenue cannot contend that the tax to be paid as stipulated in the proviso to Section 7-C of the Act. It is not the case of the Revenue that the asssessee has engaged in work contracts much prior to the commencement of the financial year. That being the case, it cannot be contended by the Revenue that the option should have been exercised within the time stipulated in the proviso to Section 7-C. The main contention of the Revenue before this Court is that the option has not been exercised by the assessee. It is to be noted that the assessee filed Return and also paid Tax at the specified rate as per Section 7 of the Act. Once Return is filed by the assessee and accepted by the Revenue, it goes without saying that the assessee in fact, opted for availing the benefit under Section 7-C of the Act. Admittedly, there is no particular format was prescribed. Therefore, once the assessee has filed the Return, paid the relevant tax and the same has been accepted by the assessee, it is deemed that option has http://www.judis.nic.in 13 been exercised properly by the assessee. Therefore, we are of the view that the order of the Tribunal extending the benefit to the assessee does not require any interference. However, the observation of the Tribunal that provision of Rule 7-C is only a procedure and hence it is only directory and not mandatory is unwarranted. The same is without any basis. When the provision stipulated specific time the same cannot be held directory. From the the above factual narration, we find that the order of the Tribunal extending the benefit to the assessee does not require any interference. Accordingly, the Second Substantial Question of law is also answered against the Revenue. The Revision is liable to be dismissed.
13. Accordingly, the Tax Case Revision Petition is dismissed and the finding of the Tribunal is confirmed.