Madras High Court
M/S.Eureka Systems And ... vs The Assistant Commissioner (St) on 22 October, 2021
W.P.No.22074 of 2021 and
WMP.No.23290 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 22.10.2021
CORAM
THE HONOURABLE Mr.JUSTICE M.SUNDAR
W.P.No.22074 of 2021
and
WMP.No.23290 of 2021
M/s.Eureka Systems and Electrodes (P) Ltd.,
rep. by its Managing Director K.Chandrashkar,
11/15A, Selvarajapuram, Chinthamanipudur,
Coimbatore-641 103.
... Petitioner
-Vs-
The Assistant Commissioner (ST)
Palladam-2 Assessment Circle,
Palladam.
... Respondent
Writ Petition filed under Article 226 of the Constitution of India to
issue a Writ of Certiorari, calling for the records of the respondent in his
proceedings in CST No.750340/2000-01 dated 02.09.2021 and quash the
same.
For Petitioner : Mr.S.Ramanathan
For Respondent : Ms.Amirta Dinakaran
Government Advocate
*****
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W.P.No.22074 of 2021 and
WMP.No.23290 of 2021
ORDER
Captioned main writ petition has been filed assailing an 'order
dated 02.09.2021 bearing reference No.CST No.750340/2000-01'
(hereinafter 'impugned order' for the sake of brevity).
2. Impugned order has been made inter alia under Section 16 of
'Tamil Nadu General Sales Tax Act, 1959 (Act 1 of 1959)' [hereinafter
'TNGST' Act for the sake of brevity, convenience and clarity]. To be
noted, Section 16 of TNGST Act deals with assessment of escaped
turnover.
3. Mr.S.Ramanathan, learned counsel for writ petitioner,
notwithstanding very many averments in the writ affidavit and several
grounds raised in the writ affidavit made focussed submissions in his
campaign against the impugned order and a summation of his
submissions are as follows:
a) Impugned order has given a go-by to the Ashok Leyland
principle i.e., ratio laid down by Hon'ble Supreme Court in
Ashok Leyland Ltd., Vs. State of Tamil Nadu and another
reported in 134 STC 473. Furthering his submission in this
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direction, learned counsel submitted that once declaration
under Section 6A of 'The Central Sales Tax Act, 1956'
[hereinafter 'CST Act' for the sake of convenience and clarity]
is made by a dealer and accepted by the department reopening
if at all can only be in cases of (i) collusion, (ii) fraud, (iii)
misrepresentation or (iv) suppression, but none of these facets
are present in the case on hand.
b) The same Assessing Officer has accepted Ashok Leyland
principle and dropped proceedings for another assessment year
i.e., 2001-2002 qua same writ petitioner-assessee vide order
dated 24.12.2019. To be noted, impugned order pertains to
2000-2001.
c) In the impugned order, penalty has been levied under
Section 12(3)(b) of TNGST Act though this is proceedings
under Section 16 of TNGST Act. Furthering his submission in
this direction, learned counsel placing reliance on Sri Ram
Packages case being judgment of a Hon'ble Division Bench of
this Court vide State of Tamil Nadu Vs. Sri Ram Packages
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reported in [2012] 47 VST 59 (Mad) submitted that penalty
under Section 16 proceedings can at best be only proceedings
under Sub-Section (2) and that too where best judgment
method is adopted.
4. Ms.Amirta Dinakaran, learned Revenue counsel accepted notice
on behalf of lone respondent.
5. Owing to the short points that arise in the case on hand,
captioned main writ petition was taken up with the consent of learned
counsel on both sides.
6. Responding to the aforementioned arguments of learned counsel
for writ petitioner, learned Revenue counsel made submissions, a
summation of which is as follows:
(i) It cannot be gainsaid that Ashok Leyland principle
has been given a go-by as the impugned order vide
paragraph 5 (i) (b) and (c) has clearly returned a
finding that sales invoices/proforma invoices for the
assessment year (2000-2001) have been found and
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this is suppression. In this regard, learned Revenue
counsel submitted that the respondent need not
accept the submission of department representative
as gospel truth as in this case the department
representative appears to have represented that no
direct purchase orders corresponding to 2000-2001
assessment year were recovered unlike other
assessment years.
(ii) The order dated 24.12.2019 made pertaining to
another assessment year 2001-2002, is a case where
no incriminating records were found during
inspection and therefore, Ashok Leyland principle
was followed. It was also pointed out that the
incumbents are different and it is not the same officer
as contended by learned counsel for writ petitioner.
(iii)Regarding penalty, it was submitted that penalty
with regard to assessment of escaped turnover if at
all and if that be so, should have been under Section
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16(2), but it may be a case of quoting the wrong
provision of law.
7. By way of reply submissions, learned counsel for writ petitioner
reiterated his opening submissions and pointed out that this case warrants
interference in writ jurisdiction, as this is a case of giving a go-by to
settled legal principle i.e., aforementioned Ashok Leyland principle.
8. This Court carefully considered the rival submissions. This
Court now proceeds to set out its discussion, give its dispositive
reasoning and arrive at a conclusion.
9. Regarding the first point turning on Ashok Leyland principle,
there can be no disputation that Ashok Leyland principle is to the effect
that assessment qua escaped turnover post Section 6A of CST Act returns
can only be in cases of collusion, fraud, misrepresentation or
suppression. In the case on hand, respondent has clearly returned a
finding after seeing the entire records, considering the rival submissions
in detail and after giving a personal hearing and the findings inter alia
are to the effect that certain incriminating material (alluded to supra)
were before Assessing Officer. This is captured in sub paragraphs (b)
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and (c) of paragraph 5(i) of the impugned order, which read as follows:
'5.FINDINGS:
DEFECT: Disallowance of Exemption on Stock
Transfer and Consignment sales
(i) The Proforma invoices and Sale Invoices recovered at the
time of inspection were carefully perused. On perusal of records
and dealer's reply, the following points are noted as reasons for
disallowance of stock transfer.
a. ......
b. Sale invoices are raised to different customers
exactly to the same value immediately after branch
transfer. For instance, as mentioned in the table above, 4
sale invoices have been raised on 14.11.2000, the very
next day against the same 4 quantity of goods.
c. Similarly, the proforma invoices raised by the
head office and the sale invoices raised by the branch
exactly correlate with each other. As seen from the
proforma invoices, the corresponding goods are sole at
same quantity through the sale invoice as referred in the
table above (page number:6-8).'
10. Therefore, the above will qualify as incriminating material and
suppression, but any disputation in this regard warrants examination of
records which can be done only in an appeal. This Court is not inclined
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to embark upon such a exercise in writ jurisdiction. It is made clear that
this Court is of the view that it cannot be gainsaid that the impugned
order has disregarded the Ashok Leyland principle, but whether the
material is incriminating is a fact examination which will be done by
Appellate Authority. There will be some discussion on alternate remedy
i.e., statutory appeal infra in the later portion of this order.
11. This takes us to the next point that turns on another order made
with regard to another assessment year namely 2001-2002 being order
dated 24.12.2019. Three paragraphs of the said order are of significance
and the same read as follows:
'Finally, the dealer requested in their objection letter dated
25.11.2019 to drop the proposed rejection of exemption already
allowed as per the original orders passed on 31.03.2003, and
follow the guidelines laid down by the Honourable Supreme Court
of India in the decision reported in 137 STC 437 in the case of
M/s.Ashok Leyland Ltd., and also requested to delete the proposed
levy of penalty.
The dealers objection and other records had been
considered in details carefully. They were met out as follows.
At the time of passing original orders passed under CST Act
1956, for the year 2001-02 by the Assessing Officer in CST
No.750340/2001-02 dated 31.03.2003. The Assessing officer had
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checked and verified their books of accounts and then allowed the
exemption on the branch transfer for Rs.71,75,188/- on the strength
of form 'F' declaration for and other supported documents.
Further, no incriminating records were found during the time of
inspection very particularly to the assessment year 2001-02. Based
on the judicial judgment reported in 134 STC 473 in the case of
M/s.Ashok Leyland Ltd., rendered by the Honourable Supreme
Court of india which was squarely applicable to the dealer's case,
and also the observation of the Honourable High Court, Madras in
dealer's own case in WP.No.39386 of 2004 dated 31.07.2019, the
dealers objections were found to be reasonable and acceptable
after considering facts of the case. Further, the entire branch
transfer value was covered by valid form 'F' which were already
verified by the Assessing officer while passing original orders on
31-03-2003 for the year 2001-02.'
12. As rightly pointed out by learned Revenue counsel, that was a
case where there was no incriminating material and therefore, it is clearly
distinguishable on facts. This Court has no difficulty in agreeing with
learned Revenue counsel that the incumbents who made the earlier order
and the impugned order are different as the names mentioned in the
orders make this position very clear. In any event, the argument that the
same officer took a different view is incorrect and the further factual
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submission that it is the same officer is also incorrect. This draws the
curtains on the second point that has been raised by learned counsel for
writ petitioner.
13. This takes us to the last point on penalty. This Court carefully
considered Section 16(2) of TNGST Act, in the light of the oft-quoted
Sri Ram Packages case law rendered by a Hon'ble Division Bench of
this Court. A careful perusal of this oft quoted case law makes it clear
that penalty can be imposed in cases of escaped turnover assessment also
but that will be limited to cases where best judgment method is adopted
and not in cases where Section 16 assessment is made by placing reliance
on the accounts furnished by the dealer. This is clearly not a case where
best judgment method has been adopted. The materials which according
to the impugned order are incriminating material have been relied on.
Therefore, the penalty levied definitely calls for interference in writ
jurisdiction on the ground that it is contrary to Sriram Packages
principle. Therefore, paragraph 7 of the impugned order is set aside.
14. This Court now reverts to the alternate remedy Rule.
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15. There is no disputation or disagreement before this Court that
statutory appeal qua impugned order is available to the writ petitioner
under Section 31 of TNGST Act. Alternate remedy Rule, no doubt is not
an absolute rule or in other words, it is a rule of discretion. It is a self
imposed restraint qua writ jurisdiction. Notwithstanding this position,
Hon'ble Supreme Court in a long line of authorities i.e., Dunlop India
case [Assistant Collector of Central Excise, Chandan Nagar, West
Bengal Vs. Dunlop India Ltd. and others reported in (1985) 1 SCC
260], Satyawati Tandon case [United Bank of India Vs. Satyawati
Tondon and others reported in (2010) 8 SCC 110] and K.C.Mathew
case [Authorized Officer, State Bank of Travancore Vs. Mathew K.C.
reported in (2018) 3 SCC 85] has repeatedly held that when it comes to
fiscal law statutes, alternate remedy rule has to be applied with utmost
rigour. To be noted, these three case laws do not constitute a exhaustive
list, but are only some amongst the several celebrated and oft quoted case
laws on this alternate remedy rule touching upon fiscal laws. In Dunlop
India case, relevant paragraph is paragraph 3 and the same reads as
follows:
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'3. ....... Article 226 is not meant to short-circuit or
circumvent statutory procedures. It is only where statutory
remedies are entirely ill-suited to meet the demands of
extraordinary situations, as for instance where the very vires
of the statute is in question or where private or public wrongs
are so inextricably mixed up and the prevention of public
injury and the vindication of public justice require it that
recourse may be had to Article 226 of the Constitution. But
then the Court must have good and sufficient reason to
bypass the alternative remedy provided by statute. Surely
matters involving the revenue where statutory remedies are
available are not such matters. We can also take judicial
notice of the fact that the vast majority of the petitions under
Article 226 of the Constitution are filed solely for the purpose
of obtaining interim orders and thereafter prolong the
proceedings by one device or the other. The practice certainly
needs to be strongly discouraged.'
(Underlining made by this Court
to supply emphasis and highlight)
16. In K.C.Mathew case, relevant paragraph is paragraph 10 and
the same reads as follows:
'10. In Satyawati Tondon the High Court had
restrained further proceedings under Section 13(4) of the Act.
Upon a detailed consideration of the statutory scheme under
the SARFAESI Act, the availability of remedy to the aggrieved
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under Section 17 before the Tribunal and the appellate remedy
under Section 18 before the Appellate Tribunal, the object and
purpose of the legislation, it was observed that a writ petition
ought not to be entertained in view of the alternate statutory
remedy available holding: (SCC pp.123 & 128, Paras 43 &
55)
“43. Unfortunately, the High Court overlooked the
settled law that the High Court will ordinarily not entertain a
petition under Article 226 of the Constitution if an effective
remedy is available to the aggrieved person and that this Rule
applies with greater rigour in matters involving recovery of
taxes, cess, fees, other types of public money and the dues of
banks and other financial institutions. In our view, while
dealing with the petitions involving challenge to the action
taken for recovery of the public dues, etc., the High Court
must keep in mind that the legislations enacted by Parliament
and State Legislatures for recovery of such dues are a code
unto themselves inasmuch as they not only contain
comprehensive procedure for recovery of the dues but also
envisage constitution of quasi-judicial bodies for redressal of
the grievance of any aggrieved person. Therefore, in all such
cases, the High Court must insist that before availing remedy
under Article 226 of the Constitution, a person must exhaust
the remedies available under the relevant statute.
55.It is a matter of serious concern that despite
repeated pronouncement of this Court, the High Courts
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continue to ignore the availability of statutory remedies under
the DRT Act and the SARFAESI Act and exercise jurisdiction
under Article 226 for passing orders which have serious
adverse impact on the right of banks and other financial
institutions to recover their dues. We hope and trust that in
future the High Courts will exercise their discretion in such
matters with greater caution, care and circumspection.'
(underlining made by this Court to supply
emphasis and highlight)
17. To be noted, in K.C.Mathew's case more particularly,
paragraph 10, which has been extracted and reproduced supra, Satyawati
Tondon principle has been captured. Therefore, this Court deems it
appropriate to not to burden this order with extracts from Satyawati
Tondon case law.
18. Be that as it may, very recently i.e., on 03.09.2021 a three
member Hon'ble Bench of Hon'ble Supreme Court speaking through
Hon'ble Dr.Dhananjaya Y Chandrachud in Commercial Steel case law
[The Assistant Commissioner of State Tax Appellant(s) and Others
Vs.M/s Commercial Steel Limited] set out the exceptions to alternate
remedy rule and held that interference qua writ jurisdiction should be by
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way of huge exceptions and the exceptions have been adumbrated in
Commercial Steel. Relevant paragraphs in Commercial Steel case law
are Paragraphs 11 and 12 and the same read as follows:
'11 The respondent had a statutory remedy under
section 107. Instead of availing of the remedy, the respondent
instituted a petition under Article 226. The existence of an
alternate remedy is not an absolute bar to the maintainability
of a writ petition under Article 226 of the Constitution. But a
writ petition can be entertained in exceptional circumstances
where there is: (i) a breach of fundamental rights; (ii) a
violation of the principles of natural justice; (iii) an excess of
jurisdiction; or (iv) a challenge to the vires of the statute or
delegated legislation.
12 In the present case, none of the above exceptions
was established. There was, in fact, no violation of the
principles of natural justice since a notice was served on the
person in charge of the conveyance. In this backdrop, it was
CA 5121/2021 7 not appropriate for the High Court to
entertain a writ petition. The assessment of facts would have
to be carried out by the appellate authority. As a matter of
fact, the High Court has while doing this exercise proceeded
on the basis of surmises. However, since we are inclined to
relegate the respondent to the pursuit of the alternate
statutory remedy under Section 107, this Court makes no
observation on the merits of the case of the respondent.'
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19. In the instant case, of the exceptions adumbrated in paragraph
11 of Commercial Steel case, excess of jurisdiction i.e., 11(iii) is
attracted but that is only with regard to penalty aspect of the impugned
order i.e., paragraph 7 of the impugned order as Sri Ram Packages
principle clearly forbids levy of penalty absent adoption of best judgment
method.
20. Therefore, this is a fit case for relegating the writ petitioner to
alternate remedy of statutory appeal under Section 31 (except penalty
which is set aside) i.e., tax due portion of impugned order subject of
course to pre deposit condition and limitation with regard to the tax due
part of the impugned order, if the writ petitioner chooses to do so.
21. Owing to all that have been set out supra, following order is
passed:
a) impugned order is partly set aside i.e., set aside with regard
to penalty alone. To state with specificity, paragraph 7 of the
impugned order captioned 'Penalty' is set aside;
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b) it is axiomatic to the previous limb that rest of the
impugned order i.e., impugned order other than paragraph 7
captioned 'PENALTY' is sustained;
c) regarding the sustained part of the impugned order, it is
open to the writ petitioner to file a statutory appeal inter alia
under Section 31 of TNGST Act subject of course to pre
deposit condition if any and limitation, if so desired. If the
writ petitioner chooses to file a statutory appeal, the
Appellate Authority shall deal with the appeal on its own
merits and in accordance with law uninfluenced by the
observations made in the instant case. In other words,
statutory appeal regarding the tax due portion, if there is one,
shall be dealt with on its own merits and in accordance with
law.
22. Ergo, the sequitur is, writ petition is partly allowed [to the
extent indicated above] and dismissed in all other aspects. To state with
specificity, writ petition is allowed with regard to the penalty levied in
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the impugned order [paragraph 7 of impugned order] and writ petition is
dismissed with regard to the remaining portion of the impugned order
[Paragraph 6 which deals with tax due]. Consequently, connected
WMP.No.23290 of 2021 is also dismissed. There shall be no order as to
costs.
22.10.2021
(2/2)
Index: Yes/ No
Speaking/Non-speaking Order
kmi
To
The Assistant Commissioner (ST),
Palladam-2 Assessment Circle,
Palladam.
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M.SUNDAR,J.
kmi
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and
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22.10.2021
(2/2)
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