Bombay High Court
M/S. Shiom Enterprises Through ... vs The State Of Maharashtra Through ... on 21 September, 2017
Bench: B.P. Dharmadhikari
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH
WRIT PETITION NO. 1531 OF 2014
1. M/s. Shiom Enterprises,
Telephone Exchange Square,
Nagpur through its Proprietor,
Umesh s/o Govindsingh Banaffar,
aged about 38 years, occupation -
Service, r/o Plot No. 50, Sonbaji
Nagar, Bhandara Road, Nagpur.
2. M/s. P.G. Sales Corporation,
126, Ashirvad Apartments,
Lakadganj Layout, Nagpur through
its Proprietor - Govindsingh s/o
Dalganjansingh Banaffar, (dead
through legal representatives)
2(i) Mr. Umesh s/o Govindsingh
Banaffar, aged about 40 years,
occupation - Service, r/o Plot No.
50, Sonbaji Nagar, Bhandara
Road, Nagpur.
2(ii)Mr. Dinesh s/o Govindsingh
Banaffar, aged about 40 years,
occupation - Service, r/o Plot No.
50, Sonbaji Nagar, Bhandara
Road, Nagpur.
3. M/s. Sweta Traders and Fabricators
Nehru Putala, Ward No. 34, Nagpur
through its Proprietor, Govindsingh
s/o Dalganjansingh Banaffar (since
dead through legal representatives)
3(i) Mr. Umesh s/o Govindsingh
Banaffar, aged about 40 years,
occupation - Service, r/o Plot No.
50, Sonbaji Nagar, Bhandara
Road, Nagpur.
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3(ii)Mr. Dinesh s/o Govindsingh
Banaffar, aged about 40 years,
occupation - Service, r/o Plot No.
50, Sonbaji Nagar, Bhandara
Road, Nagpur.
4. M/s. Pooja Sales, Zade Building,
Telephone Exchange Square,
Nagpur, through its Proprietor
Govindsingh s/o Dalganjansingh
Banaffar (since dead through
legal representatives)
4(i) Mr. Umesh s/o Govindsingh
Banaffar, aged about 40 years,
occupation - Service, r/o Plot No.
50, Sonbaji Nagar, Bhandara
Road, Nagpur.
4(ii)Mr. Dinesh s/o Govindsingh
Banaffar, aged about 40 years,
occupation - Service, r/o Plot No.
50, Sonbaji Nagar, Bhandara
Road, Nagpur.
5. M/s. Lalit Steel Traders, Pote
Building, Itwari Anaz Bazar,
Nagpur through its Proprietor
Govindsingh s/o Dalganjansingh
Banaffar (since dead through
legal representatives)
5(i) Mr. Umesh s/o Govindsingh
Banaffar, aged about 40 years,
occupation - Service, r/o Plot No.
50, Sonbaji Nagar, Bhandara
Road, Nagpur.
5(ii)Mr. Dinesh s/o Govindsingh
Banaffar, aged about 40 years,
occupation - Service, r/o Plot No.
50, Sonbaji Nagar, Bhandara
Road, Nagpur.
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6. M/s. Deep Sales Corporation,
126, Sibbal Niwas, Quetta Colony,
Nagpur, through its Proprietor,
Dinesh s/o Govindsingh Banaffar,
aged about 36 years, occupation -
business (xerox shop), r/o Plot No.
50, Sonbaji Nagar, Bhandara
Road, Nagpur.
7. M/s. Varun Screens, Telephone
Exchange Square, Nagpur through
its Proprietor, Dinesh s/o
Govindsingh Banaffar, aged about
36 years, occupation - Business
(xerox shop) r/o Plot No. 50,
Sonbaji Nagar, Bhandara Road,
Nagpur. ... PETITIONERS
Versus
1. The State of Maharashtra through
Secretary, Ministry of Finance,
Mantralaya, Mumbai 400 032.
2. The Assistant Commissioner of
Sales Tax (Investigation)
NAG-INV-D-002, Nagpur. ... RESPONDENTS
Shri M.G. Bhangde, Senior Advocate with Shri S.N. Tapadia,
Advocate for the petitioners.
Mrs. K.S. Joshi, Additional GP for the respondents.
.....
CORAM : B.P. DHARMADHIKARI &
ARUN D. UPADHYE, JJ.
DATE OF RESERVING : SEPTEMBER 08, 2017.
DATE OF PRONOUNCEMENT : SEPTEMBER 21, 2017.
JUDGMENT : (PER B.P. DHARMADHIKARI, J.)
Considering the nature of controversy and
developments mentioned in this judgment, we have heard the
matter finally by issuing Rule with consent of all and making it
returnable forthwith at the stage of admission itself.
Accordingly, we have heard the learned Shri M.G. Bhangde,
Senior Advocate with Shri S.N. Tapadia for the petitioners and
Mrs. K.S. Joshi, learned Additional GP for the respondents.
2. The members of Banaffar family are the petitioners
before this Court through their proprietory concerns. The
proprietor of petitioner No. 2, petitioner No. 3, petitioner No. 4
and petitioner No. 5 concerns Govindsingh, expired after filing
of petition and on 15.12.2016, his two sons are brought on
record as his heirs by the petitioners. Those two sons
independently are also parties before this Court as proprietor
of petitioner No. 1 concern and proprietors of Respondent Nos.
6 & 7 concerns.
3. The challenge in this writ petition is to omission by
respondent No. 2 to look into the requests made by the
petitioners respectively on 24.08.2012, 21.02.2013,
18.09.2013, 18.03.2014 and one application dated
07.02.2015. They pray that before proceeding further with the
proceedings for assessment in terms of notice dated
06.06.2012, these applications moved by them must be
decided.
4. Notice dated 06.06.2012 is issued by respondent No.
2 under sub-section (2), (3) or (4) of Section 23 of the
Maharashtra Value Added Tax Act, 2002, (hereinafter referred
to as 2002 Act) calling upon the petitioners to show cause as
to why they should not be assessed under sub-section (4) of
Section 23 of the 2002 Act. The petitioners have replied to
these notices and contended that subject Bank Accounts have
been opened by them at the instance of mediators to earn
commission and there was no movement of goods. As no
buying or selling of goods is involved, the provisions of
Bombay Sales Tax Act, 1959, or above mentioned 2002 Act,
are not attracted. They also pointed out that information was
demanded from Sales Tax department regarding set off
allowed to beneficiaries related to noticee firm and Sales Tax
office informed that the required information was not available
with it. They have maintained that in their case, there are no
sale/ purchase and sale invoices are not genuine. They have
requested respondent No. 2 to inquire whether invoices in
question are genuine, before acting upon them. The
application under Section 14 of 2002 Act has been moved to
summon Bank officials and to compel bank to produce the
documents and to examine bank officers on oath. In
application, they have stated that their bank namely
Wardhman Urban Co-operative Bank Limited, did not provide
information sought for from them. The application dated
18.03.2014 is on same lines with same grievance. They have
claimed certain informations in para 6 and to pass appropriate
orders on interim application/ prayers made by them. Vide
application moved on 18.09.2013, they have sought issuance
of notice to vendees who gave statement that they have
purchased goods from the petitioners and sought opportunity
to cross examine them. On the very same date, by moving
another application, they have pointed out that their bank did
not reply and provide details of unidentified persons/ firms,
depositing amount in the firms.
5. Notice issued on 14.03.2014 pointing out that non
cooperation of the petitioners will result in completion of
assessment proceedings is also assailed on the ground that the
petitioners' claim that they are not liable to tax as unregistered
dealers, has not been substantiated.
6. When this challenge came before this Court on
24.03.2014, after briefly taking note of contentions, this Court
issued notice, returnable on 05.04.2014 and restrained the
respondents from passing final orders in respect of assessment
till then. On 07.04.2014, the matter was adjourned at the
request of the learned AGP and interim orders were continued.
The matter was then being listed and adjourned at the request
of the respondents. On 04.08.2015, civil application for
amendment was allowed. On 02.12.2016, legal heirs were
permitted to be brought on record. On 17.01.2016, when the
matter was called out, the learned AGP sought time. On
27.06.2017, this Court recorded its prima facie finding that the
matter was being unnecessarily delayed by the respondents.
The matter was directed to be listed on 04.07.2017. Again,
there were two adjournments and on 01.08.2017, both parties
sought adjournment. It appears that thereafter reply was filed
by the respondents and the matter was taken up for hearing on
01.09.2017. It needs to be noted that the respondents were
given liberty to take suitable decision on pending applications
by very first order of this Court, however, that decision has not
been taken till date.
7. Inviting attention to these dates and events, Shri
Bhangde, learned Senior Advocate, submits that under Section
23(4), the petitioners can be subjected to assessment, if they
are found to be dealers. Inviting attention to definition of
"dealer" contained in Section 2(8), it is urged that the
respondents have to demonstrate that the petitioners are in
business of buying or selling goods. According to him, there is
no such material and mere entries in the statement of accounts
do not show the status of the petitioners as dealers. The
proceedings can be taken up only if the respondents have got
some material in their possession and hence the burden is
upon them to show that the petitioners are dealers. Inviting
attention to various applications/ communications submitted
by the petitioners, he states that such material is lacking and
the petitioners have sufficiently brought on record its absence.
Hence, their insistence on first deciding preliminary objection/
applications, is just and proper. Our attention is also invited to
one order in the case of M/s. Ravi Steel Industries for
assessment period 2005-06 to urge that as seen therefrom,
input credit is not given or allowed to be enjoyed blindly. This
is sought to be substantiated by inviting attention to similar
orders passed in the matter of M/s. Anuj Steel.
8. The learned Senior Advocate submits that in this
situation, to bring on record correct facts, the request was
made to summon Bank as the authorities which possess those
powers, are with oblique motive, refusing to decide it. He
claims that various such requests made by the petitioners, if
granted, would show harassment of the petitioners by
respondent No. 2. Respondent No. 2, therefore, must decide
though applications and thereafter only can proceed further.
9. He contends that without deciding it, respondent No.
2 has found it proper to treat the petitioners as unregistered
dealers and has served upon them notice for assessment on
14.03.2014. The contention is, without taking decision on
pending applications/ requests, such notice could not have
been issued. The communication sent in reply by the
petitioners, requesting the authorities to take decision on
pending applications, is pressed into service by them to urge
that despite these repeated requests or orders of this Court, no
decision has been taken and harassment of the petitioners
continues.
10. Our attention is invited to course of action followed
in the case of another industry on 12.02.2014. The Joint
Commissioner of Sales Tax, has on 12.02.2014, sent a
communication regarding investigation in the case of one M/s.
Karma Ispat Limited. It is mentioned therein that Sales Tax
Tribunal directed to proceed against other units on same lines.
Shri Bhangde, learned Senior Advocate, submits that thus,
when a dealer is found to be non genuine, he should not be
assessed. If he is found to be partly genuine, only genuine part
can be assessed. In this communication, it is pointed out that if
the Assessment Officer has assessed non genuine purchases, it
does not entitle the beneficiaries to claim set off. As in notice
dated 14.03.2014, the petitioners are treated as unregistered
dealers, submission is, they are not genuine dealers and,
therefore, cannot be assessed. It is pointed out that on
01.03.2014 itself Sale Tax Deputy Commissioner (Vigilance)
has asked all his subordinates to follow said guidelines. Even
on 07.02.2015, the application was moved inviting attention to
pending request/ application and sale tax authorities were
requested to decide the same.
11. For the Assessment year 2008-09, receipt of
intimation dated 15.10.2013 from the Sales Tax department, is
relied upon to urge that even Income-tax Department has
found that assessee - petitioner has not shown any sales or
turnover as against the total credits appearing in the Bank
accounts worth Rs.3,27,61,780/-. He contends that this order
of assessment, therefore, supports the contention of the
petitioners that they are not dealers and assessment
proceedings against them need to be dropped.
12. Mrs. Joshi, learned Additional GP, on the other hand,
has relied upon the provisions of Section 23 (3) of the 2002
Act, to urge that on 14.03.2014, only a show cause notice has
been given to the petitioners and all their contentions are still
open. The amount mentioned therein is probable/ provisional
and if during inquiry, the petitioners succeed in showing that
they are not dealers, no order of assessment can be passed.
She relies upon Section 2(4) defining "business", Section 2(8)
defining "dealer". She also points out that as per Section 3, if
the turnover is above Rs. Five lakh, scrutiny becomes
necessary. The words "reason to believe" employed in Section
23(4) are relied upon by her to urge that a composite inquiry
to find out status of the petitioners and thereafter to levy taxes,
if necessary, is legal and is going on. As the Bank accounts are
opened by the petitioners or operated by them, their demand
of details or particulars is unwarranted and an adverse
inference must be drawn against the petitioners.
13. In brief reply, Shri Bhangde, learned Senior Advocate,
reiterates his submissions and contends that the joint inquiry is
not possible as the petitioners are not shown to be "dealers" at
all. He claims that after appropriate decision is taken on show
cause notice issued on 06.06.2012 to the petitioners, action
under Section 23(4) can begin. He, however, argues that the
language of notice dated 14.03.2014 shows that the
respondents are only making a farce and showing compliance
with empty formalities and they have already decided to
decide against the petitioners.
14. Section 2(4) of 2002 Act contains inclusive definition
of "business". It includes any service or any trade, commerce or
manufacture. Section 2(8) defines "dealer" to mean any
person who, for the purposes of or consequential to his
engagement in or, in connection with or incidental to or in the
course of, his business buys or sells, goods in the State whether
for commission, remuneration or otherwise. Section 2(27)
defines "service" to mean any service as may be notified by the
State Government, from time to time, in the Official Gazette.
Section 3 is on incidence and levy of tax and if turnover of sales
or purchase in the year exceeds Rs. Five lakh, the liability to
pay tax, prima facie, arises. Section 23(4) permits the
Commissioner of Sales Tax to give the "dealer" a reasonable
opportunity of being heard and proceed to assess him where
the Commissioner has reason to believe that said dealer is
liable to pay tax and has failed to do so or has failed to apply
for registration.
15. It is in the backdrop of these provisions that this
controversy needs to be looked into.
16. Vide notice dated 06.06.2012, inquiry under Section
23(4) of the 2002 Act was taken up against the petitioners. In
reply to this notice, the petitioners have on 28.06.2012 claimed
that they cannot be treated as a dealers. The other reply given
on 24.08.2012 shows that burden of proving prejudice or sale
of goods by the petitioners is upon the department. It is
contended that mere statement in Bank account opening
forms, registration under Shops and Establishment Act and
entries in Bank accounts, cannot prove that the petitioners
bought or purchased goods. The specific defence raised is, the
petitioners opened bank account at the instance of mediators,
who promised to pay commission. They used to bring cheques
payable in the name of their account and withdrew the amount
thereof in cash immediately within an hour or so after
receiving credit. It is claimed that there was no actual
movement of goods and it was only on paper. It is also
claimed that the petitioners have not taken advantage of any
provision of Bombay Sales Tax Act or 2002 Act. The
petitioners also claim that to prove such sales or purchase of
goods, the department should summon those persons whose
names appear in the books of accounts or in Bank accounts,
record their statements and give the petitioners an opportunity
to cross examine them. In last para, it is submitted that sale
invoices are not genuine.
17. The petitioners have also produced on record one
communication dated 24.10.2011 sent by them to the Deputy
Commissioner of Sales Tax in reply to a letter of department
dated 15.10.2011. Their in first line, the petitioners stated that
they have not opened any of the firm and as such there was no
occasion for them to effect any transaction in relation to that
firm. It is to be noted that even in reply dated 24.03.2012
while affirming that they are not dealers, the petitioners have
unequivocally stated that they have not maintained any books
of accounts and, therefore, question of its production does not
arise. Petitioners have earned commission and hence, in these
circumstances, exact nature of deal is to be explained by them
and burden to substantiate is on them.
18. In application under Section 14, the petitioners state
that they have written to their Bank viz., Wardhman Urban Co-
operative Bank Limited on 21.06.2012, 26.07.2012 and
20.12.2012 and sought details of deposits in their accounts.
The Bank did not provide those details. Hence, Sales Tax
Department has been requested on 21.02.2013 to exercise
powers available to it under Section 14(b) and (c) of 2002 Act
and to summon bank officials and to examine them on oath.
19. These petitioners accept that at the instance of some
persons, they have opened bank accounts and permitted it to
be used to deposit cheques drawn in their names and to
withdraw cash after amount of cheque was received in that
account. Adverse circumstance is that they have not disclosed
names of these persons.
20. Considering the number of transactions and large
amounts received in the accounts, the situation becomes
difficult for them. Their contention that they have not
maintained accounts or then their bankers are not giving
necessary details, cannot be accepted.
21. The petitioners have produced an Income Tax
assessment order for the Assessment Year 2008-09 and in that
year total credits during the financial year 2007-08 in
proprietory concerns viz. Kunal Steel Enterprises, M/s. Shiom
Enterprises, M/s. Shree Sai Traders, M/s. Vishal Trading and
Umesh Singh G. Banaffar, are shown to be Rs.3,27,61,780/-.
Different bank account numbers are also given. The
assessment order shows that case was reopened under Section
148 of the Income Tax Act, 1961. This assessment order also
takes note of contention of the assessee that he was doing job
of book writing and indulged in giving accommodation entries
to mediators. In this order, information obtained from the
Shop and Establishment authorities in relation to nature of
business of these concerns reveals that it was as retail traders
in iron and steel, trading for hardware etc. The office of the
Labour Commissioner informed that no information regarding
these proprietory concerns was available in his office and on
further inquiries no such establishment was found. In this
backdrop, the Income-tax authorities have accepted that the
assessee indulged in giving accommodation entries and then
determined the income at Rs.2,46,423/-. Further action under
Section 274 read with Section 271(1)(c) of Income-tax Act,
1961, has also been ordered. It is apparent that the petitioners
have accepted this assessment order.
22. The facts noted by us above, the stance of the
petitioners in their letters to the respondents and this state of
affairs, therefore, clearly show that the burden is upon the
petitioners to demonstrate that they are not dealers and,
therefore, action under Section 23(4) of the 2002 Act cannot
be taken against them. They have to demonstrate that sales
invoices are not genuine. The guidelines issued by the
department in the matter of Karma Ispat are not attracted and
they are not meant to allow the petitioners to go without
verification or assessment.
23. The Income-tax authorities have, while recording the
reasons for reopening, arrived at finding that the assessee did
not show sales/ turnover against total credit appearing in his
bank accounts worth Rs.3,27,61,780/- and thus it suppressed
sales.
24. The material on record, therefore, is sufficient to
empower the respondents to proceed against the petitioners.
They have given sufficient opportunity to the petitioners and
the petitioners have continued to claim that their bankers were
not giving details or then burden was upon the respondents to
establish that the petitioners were dealers.
25. In this situation, only to proceed further, notice was
issued on 14.03.2014. Though it is on subject of imposing tax,
interest under Section 30(3) and penalty under Section 29(3)
of 2002 Act, defences available to the petitioners are not
eclipsed. But then the learned AGP has pointed out that it is
open to the petitioners to establish that they are not dealers.
26. When this Court issued notice on 24.03.2014 and
stayed passing of final order of assessment, liberty was given to
the respondents to pass suitable orders on pending
applications. Those orders have not been passed till date. The
Authorities also did not bother to file any reply till 03.08.2017
and the matter dragged on unnecessarily for more than three
years to the prejudice of public revenue and in favour of the
petitioners. In fact, the respondents ought to have shown their
interest and keeping in mind seriousness of the matter, filed
reply immediately. We, therefore, direct the respondents to
expedite the proceedings in public interest and respondents
shall complete the proceedings initiated under Section 23(4) of
2002 Act within next three months. We also hold t he Assistant
Commissioner of Sales Tax (Investigation) NAG-INV-D-002, Nagpur,
solely responsible for compliance of this direction.
27. In this situation, taking overall view of the matter, we
find that the grievance made in the present writ petition is
misconceived and erroneous. No case is made out warranting
intervention. Writ Petition is accordingly dismissed. Rule
discharged. However, in the facts and circumstances of the
case, there shall be no order as to costs.
JUDGE JUDGE
******
*GS.
