Tvl.J.K.Fashions Pvt. Ltd vs The Assistant Commissioner (Ct)
2021 Latest Caselaw 4164 Mad

                                                                             WA.Nos.362 of 2021
                                                                                  etc. cases

                                        In the High Court of Judicature at Madras

                                                   Dated : 18.2.2021

                                                        Coram :

                                      The Honourable Mr.Justice T.S.SIVAGNANAM

                                                          and

                                        The Honourable Ms.Justice R.N.MANJULA

                                      Writ Appeal Nos.362 and 663 to 668 of 2021


                     Tvl.J.K.Fashions Pvt. Ltd.,
                     rep.by its Managing Director
                     Ranjit Jacob                                             ...Appellant
                                                           Vs

                     The Assistant Commissioner (CT),
                     Villivakkam Assessment Circle,
                     Kolathur, Chennai-99.                                    ...Respondent

APPEALS under Clause 15 of the Letters Patent against the

common order dated 26.7.2019 made in W.P.Nos.8461, 8462, 8464,

9239, 9242, 9247 and 9248 of 2019.

For Appellant : Mr.Arvind P.Datar, SC for Mr.Adithya Reddy

For Respondent : Mr.Mohammed Shaffiq, SGP assisted by Mrs.G.Dhanamadhri, GA

https://www.mhc.tn.gov.in/judis/ WA.Nos.362 of 2021 etc. cases

COMMON JUDGMENT (Judgment was deliveredy by T.S.SIVAGNANAM,J)

We have elaborately heard Mr.Arvind P.Datar, learned Senior

Counsel appearing on behalf of Mr.Aditya Reddy, learned counsel on

record for the appellant and Mr.Mohammed Shaffiq, learned Special

Government Pleader assisted by Mrs.G.Dhanamadhri, learned

Government Advocate accepting notice for the respondent.

2. These appeals have been filed by the writ petitioner - dealer

challenging the common order dated 27.6.2019 passed by the learned

Single Judge in W.P.Nos.8461, 8462, 8464, 9239, 9242, 9247 and

9248 of 2019. By the impugned common order, the learned Single

Judge refused to exercise writ jurisdiction on the teeth of the alternate

remedy available to the dealer against the orders impugned in the said

writ petitions, which were nothing but assessment orders passed under

the provisions of the Tamil Nadu Value Added Tax Act, 2006 (for short,

the Act).

3. The first issue would be as to whether the the Court can

exercise jurisdiction under Article 226 of The Constitution of India and

as to whether, in all cases where there is an alternate remedy

available under the provisions of the Act, the dealer should be

https://www.mhc.tn.gov.in/judis/ WA.Nos.362 of 2021 etc. cases

relegated to avail such a remedy.

4. As rightly noted by the learned Single Judge, the exercise of

discretion by this Court is by imposing a self restraint where the Court

will be slow in exercising its jurisdiction when a statutory appeal

remedy is available and especially in matters arising under Taxation

Statute. The self restraint imposed by the Court in exercise of its

discretion has certain exceptions. One such exception would be in

cases where there is a violation of the principles of natural justice or

where there is total lack of jurisdiction on the part of the authorities in

taking action against the dealer.

5. In our considered view, the cases before us would fall under

both these exceptions. Firstly, we find that the dealer has not been

granted adequate opportunity to put forth their submissions. Apart

from that, whatever documents, which were placed before the

Assessing Officer, were not properly looked into. Hence, this would be

a good ground to exercise discretion. The second reason, which

prompts us to exercise jurisdiction is as to the manner, in which, the

Assessing Officer levied sales tax on the ground that there is a huge

difference between the purchase and the sales turnover.

https://www.mhc.tn.gov.in/judis/ WA.Nos.362 of 2021 etc. cases

6. Before we go into the merits of the matter, we need to

mention that there are five issues arising for consideration in these

cases. The major issue being levy of sales tax on the ground that there

is abnormally low reporting of purchases when compared to the sale.

This issue arises for all the assessments except for the assessment

years 2012-13 and 2016-17.

7. The second issue is with regard to 'mismatch'. This issue

arises for all the assessment years involved except for the assessment

year 2016-17. However, it is seen that this has been kept in abeyance

by the Department, as they evolved a procedure for verification by

issue of internal guidelines.

8. The third issue is with regard to the check post movement

where the Assessing Officer wanted to verify the transactions and

called for documents relating to check post movements. This issue

arises for all the assessment years involved except for the assessment

years 2010-11, 2011-12 and 2016-17.

9. The fourth issue is with regard to short payment of tax, which

arises for all the assessment years except for the assessment year

2016-17 and the final issue is with regard to stock difference, which

arises only for the assessment year 2016-17.

https://www.mhc.tn.gov.in/judis/ WA.Nos.362 of 2021 etc. cases

10. As mentioned above, the 'mismatch' issue is with regard to

cross verification of the buyers' and the sellers' returns as per the web

report and verification of the purchase details from other dealers'

Annexure II and the purchase details from the petitioner-dealer's

Annexure I has been kept in abeyance by the Department on account

of verification, which is being done.

11. So far as the issue pertaining to the check post movement

details is concerned, we find from the assessment orders that the

dealer produced necessary documents namely Form F declarations,

which, according to the Assessing Officer, were insufficient and

therefore, the proposal made in the revision notices was confirmed.

We are of the view that adequate opportunity should be given to the

dealer to place all the records on account of the submission made

before us that all records are available with the dealer. Hence, the levy

of tax as a result of verification of the check post movement details

has to be redone by the Assessing Officer.

12. With regard to the issues pertaining to (i) short payment of

tax, which arises for all the assessment years involved except for the

assessment year 2016-16 and (ii) levy of tax on account of stock

difference, which arises for the assessment year 2016-17 alone, the

https://www.mhc.tn.gov.in/judis/ WA.Nos.362 of 2021 etc. cases

dealer has agreed to go before the Assessing Officer by producing

details.

13. Therefore, the finding rendered in that regard by the

Assessing Officer on (i) levy of tax upon verification of the check post

movement details, (ii) short payment of tax and (iii) stock difference

are set aside and the matters are remanded to the Assessing Officer

for a fresh consideration after affording an opportunity of personal

hearing to the authorized representative of the dealer.

14. With regard to levy of sales tax on account of huge

difference between the purchase and the sales turnover, we have

elaborately heard the learned counsel for the parties and various

decisions were referred to explain the scope of Section 12 of the Act,

which deals with levy of purchase tax.

15. The question would be as to whether, in the understanding

of the Assessing Officer, did he propose to levy purchase tax. A

reading of the relevant assessment orders, which contained the basis,

on which, re-assessment proceedings were initiated, shows that the

Assessing Officer, on verification of the books of accounts, noticed that

the dealer reported their purchases during the relevant years and in

the opinion of the Assessing Officer, there is abnormally low reporting

https://www.mhc.tn.gov.in/judis/ WA.Nos.362 of 2021 etc. cases

of purchases when compared to the sale. Hence, he proposed to treat

it as a purchase suppression and issued revision notices.

16. The dealer submitted their reply explaining that they

reported the purchase turnover and by way of illustration, we took

note of the following reply given for the assessment year 2013-14,

which has been extracted in the relevant assessment order dated

19.2.2019 :

“Local purchases at 5% : Rs. 40,19,149.00 Local purchases at 14.5% : Rs. 63,31,605.00 Exempted purchases : Rs. 1,13,11,790.00 CST purchases : Rs. 1,86,45,221.00 Stock Transfer Inward : Rs. 72,85,152.00 Total : Rs. 4,75,92,917.00”

17. In the said reply, the dealer stated that they reported the

above purchase turnover and the percentage of tax has also been

mentioned therein. The dealer further stated as follows :

“You have not considered the opening stock as on 1.4.2013. Our opening stock as per balance sheet is Rs.4,57,36,085.00, out of which, 75% of the value constitutes stock on Chennai unit amounting to Rs.3,43,02,963.00 and amount of Rs.88,12,889.00 being stitching and job work charges was also not considered

https://www.mhc.tn.gov.in/judis/ WA.Nos.362 of 2021 etc. cases

which is under direct expenses reported in balance sheet which is to be added to purchase. Valuation of closing stock as per consolidated balance sheet is Rs.5,21,41,736.00 out of which, Rs.3,33,98,729.00 constitutes stock of Chennai unit. Thus, the total purchases amounting to Rs.9,07,07,869.00. There is no suppression of purchases.

We have reported the following sales turnover during the year :

                                    Local sales at 5%           : Rs.2,78,34,814.00
                                    Local sales at 14.5%        : Rs.       48,11,633.00
                                    Exempted sales              : Rs.       16,22,903.00
                                    Stock outward               : Rs.6,27,26,660.00
                                    CST sales                   : Rs.          78,603.00
                                    Total                       : Rs.9,70,74,613.00

We are providing purchase and sales invoices sample for verification.”

18. In terms of the above stand, the dealer would state that for

the relevant assessment year, their opening stock as per the balance

sheet was Rs.4,57,36,085/-, out of which, 75% of the value

constituted stock of Chennai unit and the amounts spent for stitching

and job work charges were not considered, which came under direct

expenses reported in the balance sheet, which were to be added to the

https://www.mhc.tn.gov.in/judis/ WA.Nos.362 of 2021 etc. cases

purchase. Further, the dealer would contend that valuation of the

closing balance as per the consolidated balance sheet was

Rs.5,21,41,736/-, out of which, Rs.3,33,98,729/- constituted stock of

Chennai unit and the total purchases amounted to Rs.9,70,07,869/-

and there was no suppression of purchases.

19. The dealer had also given details of their sales turnover

stating that they paid sales tax at 5% on local sales for the value of

Rs.2,78,34,814/- and at 14.5% again on local sales for the value of

Rs.48,11,633/-. It was not in dispute that the sales tax was paid on

the total sum of Rs.9,70,74,613/-. The dealer also provided purchase

and sales invoice samples for verification.

20. The Assessing Officer rejected the said stand taken by the

dealer stating that reconciliation was not properly done nor was

supported by documentary evidence.

21. It was not clear as to whether there was any direction to

produce documentary evidence. However, the fundamental issue is as

to whether there could have been a revision of assessment on the

grounds mentioned by the Assessing Officer solely due to the reason

that the purchases reported by the dealer, in the opinion of the

Assessing Officer, were abnormally low.

https://www.mhc.tn.gov.in/judis/ WA.Nos.362 of 2021 etc. cases

22. It is the settled legal position that revision of assessment

cannot be done on surmises and conjectures, but should have

foundational facts. Though the Assessing Officer used the term

'purchase suppression', what has been levied by the Assessing Officer

is essentially sales tax on Rs.9,70,74,613/-, on which, the dealer

already paid sales tax at 14.5%. Though elaborate submissions were

made by the learned Special Government Pleader as to under what

circumstances purchase tax can be levied under Section 12 of the Act,

the said issue does not arise in the instant case on account of the fact

that the show cause notice issued by the Assessing Officer for revision

of assessment was not with a proposal to levy purchase tax.

23. The argument of the learned Special Government Pleader

appearing for the respondent that the matter should be remanded to

the Assessing Officer so that he shall have a deeper probe into the

matter is impermissible as the Assessing Officer cannot improve upon

the case than what was originally proposed while issuing the revision

notices to the dealer. Thus, we are of the considered view that there

was no basis for revision of turnover on the said ground. The sales tax,

which has been levied on the alleged ground that the purchases were

abnormally low calls for interference.

https://www.mhc.tn.gov.in/judis/ WA.Nos.362 of 2021 etc. cases

24. Accordingly, the writ appeals are partly allowed and the levy

of sales tax for all the assessment years except for the assessment

years 2012-13 and 2016-17 on the ground that the purchases were

abnormally low is set aside. With regard to levy of tax under the

heads (i) 'check post movement' for all the assessment years except

for 2010-11, 2011-12 and 2016-17 and (ii) 'short payment of tax' for

all the assessment years involved except for the assessment year

2016-17 and (iii) 'stock difference' for the assessment year 2016-17

alone, the matters are remanded to the Assessing Officer for a fresh

consideration after affording an opportunity to the dealer. With regard

to the issue pertaining to 'mismatch', reconciliation shall be done

departmentally and if details are required from the dealer, then notice

may be issued to the dealer to take a decision on merits and in

accordance with law. No costs.

18.2.2021 To The Assistant Commissioner (CT), Villivakkam Assessment Circle, Kolathur, Chennai-99.

RS

https://www.mhc.tn.gov.in/judis/ WA.Nos.362 of 2021 etc. cases

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

RS

WA.No.362 of 2021 etc. cases

18.2.2021

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