Heard Mr.S.Rajasekar, learned counsel for the petitioner and Mr.K.Venkatesh, learned Government Advocate for the respondent. With consent of the learned counsel for both sides, the writ petition itself is taken up for final disposal.
2.The petitioner has impugned an order of assessment under the provision of the Tamil Nadu General Sales Tax Act, dated 28.02.2005 for the assessment year 2002-2003. The impugned assessment is a revision of assessment made pursuant to a verification done by the departmental officials with regard to the selling dealers who are stated to have had transaction with the petitioner.
3.It appears that there are 21 such dealers with whom the petitioner had transactions and the respondents would state that their registration certificate were cancelled and they are bogus dealers, in the sense they have never traded cotton yarn. The petitioner was issued with a revision notice dated 08.11.2004, for which, the petitioner submitted objections vide letter dated 22.11.2004. In the objection dated 22.11.2004, the petitioner furnished the details of payment made to their sellers in a separate sheet attached to the letter and in respect of movement of yarn, they have stated that the purchase of yarn was transported through the local lorries by their sellers for which they have paid freight. The details of the freight paid by them and the sales available in the ledger in pages 125 to 133 were furnished.
4.The objections given by the dealer on 12.01.2005 was considered and the respondent rejected the same on the ground that the selling dealers are not dealers in cotton yarn and the purchase bills relied on by the petitioner for claiming that their sales are second sales have been created. The petitioner has not furnished the connected transport records through which the goods were transported and through which the payments made for the purchases were transacted.
5.Therefore, in the absence of a material evidence to prove earlier sufferance of tax, the objections given by the petitioner were over ruled.
6.Before I test the correctness of the impugned order, it may be necessary to take note of the legal position with regard to the taxability at the point of sales and what would be the response of all the purchasing dealers, who claim that they had paid taxes while purchasing the goods. In the case of Lakshmi Steel Traders V. Board of Revenue (Commercial Taxes) reported in [1991]Volume 82 STC 409, this issue was considered and the Hon'ble Division Bench pointed out that if an assessee establishes that a particular turnover represents second sales of goods taxable at the point of sale at the first sale and the first sale was by a dealer liable to pay tax, then the Revenue cannot deny the exemption on the second sales merely on the ground that the registration certificate of the first seller was cancelled during the assessment year in question or immediately before the purchase by the assessee, namely, the second seller. We must, however, add that the assessee (second seller) must establish that the first sale was a taxable sale and whether the tax had been paid by the first seller or not is not the concern of the assessee (second seller). We would like to add that the Revenue cannot take advantage of the fact of cancellation of the registration certificate of the first seller either on his application or otherwise, without further investigation as to whether the bills issued by such dealers were real or bogus bill. In the event of the Revenue establishing that the bills produced by the assessee (second seller) are bogus and were not really issued by the first settler, then the assessee cannot claim exemption on the alleged second sales. In that situation, the assessee's sale will be the first sale.
7.If the above decision is applied to the facts of the present case, the duty cast upon the petitioner who claims himself to be a second seller is to establish that a first sale was a taxable sale. It may not be necessary for the petitioner to establish whether the tax has been paid by the first seller or not. Similarly, the respondent cannot take advantage of the cancellation of the registration certificate of the first seller, without investigating as to whether the bills issued by the such dealers were real or bogus bills.
8.In the instant case, the respondent has rejected the petitioner's objection on the ground that the alleged first sellers was not dealers in yarn. Simultaneously, the respondent has stated that the said dealer's registration certificate has been cancelled. Therefore, the respondent was bound to investigate as to whether the bills issued by those 21 dealers were real or bogus one and if the respondent is able to establish that the bills produced by the petitioner are bogus and are not really issued by the first seller, then, the petitioner cannot claim exemption on the alleged second sales.
9.However, such enquiry was not done by the respondent in this matter, though, there appears to be some material available with the respondent to state that the 21 dealers, whose names have been mentioned as bogus, are not dealers in cotton yarn and hence, the purchase bills by the dealers are bogus one. In other words, the respondent seeks to contend that the receipts produced by the petitioner are bogus. However, such findings cannot be rendered by the respondent without thoroughly investigating the matta. Thus, the reasons assigned in the assessment order are insufficient to hold that the petitioner is liable to pay the tax and penalty.
10.For the above reasons, the writ petition is allowed and the impugned order is quashed and the matter is remanded back to the respondent to conduct further investigation into the matters and if any material is established then it is open to the respondent to proceed in accordance with law. No costs. Consequently, connected miscellaneous petition is closed.
09.11.2017 Index: Yes/No Internet:Yes/No Speaking/Non-speaking order maya To Deputy Commercial Tax Officer, Palladam Office of the Deputy Commercial Tax Officer Palladam, Coimbatore District.
T.S.SIVAGNANAM, J.
maya W.P. No.16472 of 2005 Dated : 09.11.2017