S.R.Raja Cements vs The State Of Tamil Nadu
2021 Latest Caselaw 2352 Mad

                                                                            TCR.Nos.11 to 15 of 2020


                                       IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                                     DATED : 03.2.2021

                                                           CORAM

                                       THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM

                                                             and

                                         THE HONOURABLE MS.JUSTICE R.N.MANJULA

                                           Tax Case Revision Nos.11 to 15 of 2020 &
                                            CMP.Nos.1757, 1762, 1765, 1777, 1778,
                                             1810, 1811, 1818 and 1821 of 2020


                     S.R.Raja Cements, rep.by
                     its Proprietor, Chennai-45                                    ...Petitioner
                                                             Vs

                     The State of Tamil Nadu, rep.by
                     the Joint Commissioner (CT),
                     Chennai (East) Division,
                     Chennai-6                                                     ...Respondent

REVISIONS under Section 60 of the Tamil Nadu Value Added Tax

Act, 2006 against the common order dated 07.1.2019 passed by the

Tamil Nadu Sales Tax Appellate Tribunal, Main Bench, Chennai made

respectively in STA.Nos.211, 212, 214, 213 and 215 of 2015.

                                        For Petitioner :   Mr.A.P.Srinivas
                                        For Respondent:    Mr.Mohammed Shaffiq, SGP





https://www.mhc.tn.gov.in/judis/
                                                                             TCR.Nos.11 to 15 of 2020


                                                COMMON JUDGMENT

(Judgment was delivered by T.S.SIVAGNANAM,J)

These revisions have been filed by the assessee under Section

60 of the Tamil Nadu Value Added Tax Act, 2006 ('the Act' for brevity)

challenging the common order dated 07.1.2019 made respectively in

STA.Nos.211, 212, 214, 213 and 215 of 2015 on the file of the Tamil

Nadu Sales Tax Appellate Tribunal, Main Bench, Chennai, ('the Tribunal'

for brevity).

2. The assessee has filed these revisions by raising the following

substantial questions of law:

of 2020 :

i. Whether the Appellate Tribunal is correct in reversing the order of the First Appellate Authority by applying Section 63 without considering the facts of the case when the Explanation appended to the said Section directly applies to the facts of the case ?

ii. Whether the Appellate Tribunal is right in sustaining the assessment of tax on other income relating to bank charges when the same is not relating to any sales and it is not liable to tax under the TNVAT Act? And iii. Whether the Appellate Tribunal is correct in reversing the order of the First

https://www.mhc.tn.gov.in/judis/ TCR.Nos.11 to 15 of 2020

Appellate Authority and sustaining penalty under Section 27(3) of the Act when there is no suppression much less willful suppression on the part of the assessee and when the Tribunal has not given any reasons for its decision?

Additional Common questions in TCR. Nos.12 and 14 of 2020:

iv. Whether the Appellate Tribunal is correct in reversing the order of the First Appellate Authority and sustaining penalty under Section 27(4) of the Act when ITC is reversed by the assessee/petitioner before the finalisation of assessment and when no excess ITC is claimed ? And v. Whether the Appellate Tribunal is correct in reversing the order of the First Appellate Authority and sustaining penalty under Section 27(4) of the Act on the issue of reversal of ITC when the said turnover itself is remanded for fresh consideration?

Questions in TCR.No.15 of 2020 :

vi. Whether the Appellate Tribunal is correct in reversing the order of the First Appellate Authority and sustaining the equal time addition in the absence of an actual sale?

vii. Whether the Appellate Tribunal is right in sustaining the assessment on equal

https://www.mhc.tn.gov.in/judis/ TCR.Nos.11 to 15 of 2020

time addition when the original turnover itself has been remanded for reconsideration?

viii. Whether the Appellate Tribunal is correct in reversing the order of the First Appellate Authority and sustaining penalty under Section 27(3) of the Act on the turnover of equal time addition when the turnover itself is not liable to tax ? And ix. Whether the Appellate Tribunal is correct in sustaining the penalty levied under Section 27(3) when the assessment order is passed under Section 22 of the Act?”

3. We have heard Mr.A.P.Srinivas, learned counsel appearing for

the petitioner/assessee and Mr.Mohammed Shaffiq, learned Special

Government Pleader appearing for the respondent/Department.

4. These revisions have been filed by the registered dealer under

the provisions of the Act challenging the common order dated

07.1.2019 passed by the Tamil Nadu Sales Tax Appellate Tribunal, Main

Bench, Chennai in STA.Nos.211 to 215 of 2015. The appeals before the

Tribunal were filed by the Department challenging the orders passed

by the Appellate Deputy Commissioner (CT), Chennai namely the First

Appellate Authority dated 31.12.2014 reversing the orders passed by

the Assessing Officer namely the Assistant Commissioner (CT),

Tambaram Assessment Circle respectively dated 10.10.2014,

https://www.mhc.tn.gov.in/judis/ TCR.Nos.11 to 15 of 2020

13.10.2014, 13.10.2014, 13.10.2014 and 13.10.2014 for the

assessment years 2008-09, 2009-10, 2010-11, 2012-13 and 2013-14.

5. The Tribunal framed two questions each for consideration for

the assessment years 2008-09, 2012-13 and 2013-14 and three

questions each for the assessment years 2009-10 and 2010-11. The

common question for all the assessment years was as to whether the

First Appellate Authority could have admitted documents for the first

time and as to whether there was an embargo under Section 63 of the

Act. The Tribunal, by a brief order, referred to Sub-Sections (1), (2)

and (3) of Section 63 of the Act and held that the First Appellate

Authority had not recorded any reason for the receipt of records on

account of failure of the dealer to produce the same before the

Assessing Officer and that the First Appellate Authority was not

justified in receiving the documents and instead of remanding the

cases, erred in dismissing the cases.

6. Unfortunately, the Tribunal failed to take note of the

Explanation to Section 63 of the Act, which states that nothing in this

Section shall apply to accounts, which are built up from the initial

accounts. Therefore, the Statute did not contemplate a complete

embargo on the First Appellate Authority from admitting documents at

the appellate stage. This issue was considered in several decisions as

https://www.mhc.tn.gov.in/judis/ TCR.Nos.11 to 15 of 2020

to how the matter has to be dealt with by the Appellate Authority and

we may refer to the following decisions to support the view that the

First Appellate Authority did have jurisdiction to admit documents.

7. In this regard, it would be beneficial to refer to the decision of

this Court in the case of DCCT, Coimbatore Division, Coimbatore

Vs. New Ajantha Wines [reported in (1979) 44 STC 327] wherein

the Hon'ble Division Bench considered the effect of Section 39B of the

Tamil Nadu General Sales Tax Act, 1959 and held that the approach of

the Department was a wooden approach and that admission of

evidence in the sense of substantiation of the contention already urged

by the assessee, for which, the necessary documents were already in

the court, would not amount to admission of evidence for the first time

before the Tribunal. The Court further held that the Appellate Tribunal

had requisite power to find out whether any register, record, account

book or document produced before it was genuine so as to find out as

to whether the assessee was entitled to certain concession or benefit

under the Act.

8. We may also refer to another decision of this Court in the case

of Controller of Estate Duty, Madras Vs. R.Saraswathi Ammal

[reported in (1977) 110 ITR 525]. While dealing with the case

under Section 58(4) of the Excise Duty Act, 1953, it was held that the

https://www.mhc.tn.gov.in/judis/ TCR.Nos.11 to 15 of 2020

Appellate Authority had jurisdiction to entertain the materials produced

by the accountable person and that the powers of the Appellate

Authority were co-extensive with that of the Original Authority.

9. A reference may be made to the decision of the Hon'ble Full

Bench of this Court in the case of State of Tamil Nadu Vs.

Arulmurugan & Company [reported in (1982) 51 STC 381]

wherein it was held that an Appellate Authority under the taxing

enactments sat in appeal only in a manner of speaking, that what it did

functionally was only to adjust the assessment of the appellant in

accordance with the facts on the record and in accordance with the law

laid down by the Legislature, that an appeal was a continuation of the

process of assessment and an assessment was but another name for

adjustment of the tax liability to accord with the taxable event in the

particular tax-payer's case and that there could be no analogy or

parallel between a tax appeal and an appeal, say, in civil cases.

10. In the light of the above decisions, we have to necessarily

hold that the finding recorded by the Tribunal that the documents

could not be taken into consideration at the appellate stage is

unsustainable. On facts, we find that the documents were not admitted

by the First Appellate Authority for the first time, but the documents

were already available on record. Upon perusal of the said documents,

https://www.mhc.tn.gov.in/judis/ TCR.Nos.11 to 15 of 2020

the First Appellate Authority found that the receipts did not relate to

any sale. Therefore, the Tribunal did not go into the factual position to

ascertain as to whether the First Appellate Authority admitted fresh

documents or were the documents available on record even when the

assessment was completed. This aspect has been clearly brought out

by the First Appellate Authority in his orders dated 31.12.2014, which

aspect has not been examined by the Tribunal. Hence, on the said

score also, the petitioner - assessee is bound to succeed.

11. In fine, the finding rendered by the Tribunal on the

first issue with regard to Section 63 of the Act is held to be not

sustainable and accordingly, the same is set aside.

12. The next issue is with regard to the levy of penalty under

Section 27(3) and (4) of the Act. The levy of penalty under Section

27(3) of the Act arises for all the five years. However, the levy of

penalty under Section 27(4) of the Act arises for the assessment years

2009-10 and 2010-11 alone.

13. From the memoranda of grounds of appeal filed by the

Department before the Tribunal, we find that no specific ground was

raised as to how the penalty was imposable. The First Appellate

Authority granted relief to the assessee by setting aside the penalty,

which was levied by the Assessing Officer. In doing so, the First

https://www.mhc.tn.gov.in/judis/ TCR.Nos.11 to 15 of 2020

Appellate Authority referred to Section 27(2) of the Act and held that

the levy of penalty was provided under the said provision on the actual

availing of input tax more than admissible input tax and found that the

petitioner – assessee reversed the input tax, which was availed owing

to Section 19(20) of the Act much before finalization of the

assessment. Therefore, the First Appellate Authority held that there

was no excess availing of input tax and also reversal of input tax was

not detected and not based on any suppression of fact or bogus claim.

Ultimately, the penalty levied under Section 27(3)/27(4) of the Act was

set aside.

14. The Tribunal did not assign any reasons as to why the finding

written by the First Appellate Authority setting aside the penalty was

not justified. The Tribunal proceeded on the basis that during the VAT

Audit, the assessment came to light and therefore, the willfulness on

the part of the assessee was established. Any alleged admission before

the Inspecting Authority cannot be put against the assessee because

the Assessing Officer is an independent Authority, who will deal with

the matter upon receipt of the report from the Inspecting Wing. Hence,

it hardly matters as to what stand was taken by the assessee when the

inspection was conducted. Accordingly, so far as the levy of penalty

under Section 27(4) of the Act for the assessment year 2009-10 is

https://www.mhc.tn.gov.in/judis/ TCR.Nos.11 to 15 of 2020

concerned, the same cannot be sustained.

15. Further, while upholding that the decision of the Division

Bench of this Court, to which, one of us (TSSJ) was a party, in the

case of Jayam and Company Vs. Assistant Commissioner

[W.P.No.25952 of 2010 etc. cases dated 17.7.2013] wherein the

Constitutional validity of Section 19(20) of the Act was upheld by this

Court, the Hon'ble Supreme Court, in the decision reported in (2016)

15 SCC 125, held that the amendment by insertion of Section 19(20)

of the Act was prospective. The said provision came into the Statute

Book on 19.8.2010 and the Department cannot give retrospective

effect to the said provision. Therefore, the penalty under Section 27(4)

of the Act is not leviable for the assessment year 2009-10.

16. For the assessment year 2010-11, the amendment, having

been brought into force with effect from 19.8.2010, has fallen in the

middle of the assessment year, which commenced from 01.4.2010.

This aspect should have been noted by the Assessing Officer. But,

there was no reference to the same nor the Revenue raised any issue

with regard to that before the Tribunal.

17. In any event, we are convinced with the finding rendered by

the First Appellate Authority deleting penalty, which was levied under

Section 27(4) of the Act and the said finding is upheld. In so far as the

https://www.mhc.tn.gov.in/judis/ TCR.Nos.11 to 15 of 2020

levy of penalty under Section 27(3) of the Act is concerned, we have

upheld the finding of the First Appellate Authority that the receipts did

not relate to any sale and hence, the question of levy of penalty under

Section 27(3) of the Act cannot be sustained.

18. Furthermore, we note that there was no allegation made by

the Department that the assessee had willfully not disclosed any

material nor produced false bills/vouchers or false declaration

certificates or false documents with a view to support their claim for

input tax credit. On facts, the First Appellate Authority found that the

input tax credit availed by the assessee was reversed much prior to

completion of the assessment, which was completed on 10.10.2014.

19. In addition to that, what was alleged was that the input tax

credit was wrongly availed. This finding of the Assessing Officer was

held to be factually incorrect as the receipts were not sale, but bank

charges and interest, where the cheques had bounced. The concern

expressed by the learned Special Government Pleader is with regard to

the effect of Section 27(2) qua Section 27(4) of the Act. In our

considered view, such an issue does not arise for consideration in

these revisions and since it being a legal question, it is left open to be

agitated before the appropriate forum.

https://www.mhc.tn.gov.in/judis/ TCR.Nos.11 to 15 of 2020

20. The above finding rendered will parallelly enure in favour of

the assessee in respect of equal time addition made for the

assessment year 2013-14, which was set aside by the First Appellate

Authority, which order we confirm in this common judgment.

21. In fine,

(i) the question, which arose for consideration namely as to

whether Section 63 of the Act contemplates a total embargo on the

First Appellate Authority or the Tribunal to admit documents is

answered in favour of the petitioner/assessee;

(ii) The other questions, which have been raised, are all factual

in nature and as we have upheld the orders passed by the First

Appellate Authority deleting penalty under Section 27(3)/27(4) of the

Act as well as equal time addition, those questions do not arise for

consideration.

22. For all the above reasons, we are inclined to interfere with

the common impugned order. Accordingly, the common impugned

order is set aside and the above tax case revisions are allowed in the

above terms.

03.2.2021 RS

https://www.mhc.tn.gov.in/judis/ TCR.Nos.11 to 15 of 2020

T.S.SIVAGNANAM,J AND R.N.MANJULA,J

RS

To

1.The Tamil Nadu Sales Tax Appellate Tribunal, Main Bench, Chennai

2.The Joint Commissioner (CT), Chennai (East) Division, Chennai-6

TCR.Nos.11 to 15 of 2020 & CMP.Nos.1757, 1762, 1765, 1777, 1778, 1810, 1811, 1818 and 1821 of 2020

03.2.2021

https://www.mhc.tn.gov.in/judis/