Madras High Court

Mr.Ra.Devaraju vs Tamil Nadu Sales Tax on 23 September, 2024

Author: Anita Sumanth

Bench: Anita Sumanth

W.P.No.23806 of 2008

IN THE HIGH COURT OF JUDICATURE AT MADRAS

RESERVED ON : 23.08.2024

PRONOUNCED ON : 23.09.2024

CORAM :

THE HONOURABLE DR. JUSTICE ANITA SUMANTH
and
THE HONOURABLE MR. JUSTICE G.ARUL MURUGAN

WP.No.23806 of 2008
and
M.P.No.01 of 2008

Mr.Ra.Devaraju ... Petitioner
Vs

1. Tamil Nadu Sales Tax
Appellate Tribunal,
Additional Bench,
Rep. By its Registrar,
Coimbatore -18.

2. State of Tamil Nadu,
Rep. By Deputy Commissioner (CT)
Coimbatore.

3. Deputy Commercial Tax Officer,
RG Street Circle,
Coimbatore. ... Respondents

PRAYER: Writ Petition filed under Article 226 of the Constitution of

India praying to issue a writ of Certiorari to call for the records of the

First Respondent order dated 03.03.2008 passed in Coimbatore Tribunal

State Appeal No186 of 2005 and quash the same.
https://www.mhc.tn.gov.in/judis

Page No.1/20
W.P.No.23806 of 2008

For Petitioner : Mr.V.Parthiban
for Mr. P.Haribabu

For R2 & R3 : Mr.V.Prashanth Kiran
Government Advocate

ORDER

(Order of the Court was made by G.ARUL MURUGAN,J.)

The petitioner /Assessee has preferred this writ petition

challenging the order of the Tamil Nadu Sales Tax Appellate Tribunal

dated 03.03.2008 passed in Coimbatore Tribunal State Appeal No.186 of

2005.

2. The petitioner is a registered dealer in Dyes and Chemicals and

an assessee under the 3rd respondent bearing Reg. No.1761961. During

the surprise inspections conducted on two occasions ie., on 22.10.2002

and 24.12.2002, it was noticed that the petitioner did not maintain the

day to day stock account or closing stock inventory for the goods dealt by

them and it was also noticed by the Enforcement Officer that there was a

stock variation. Petitioner had also, by a sworn statement, admitted that

they have not maintained the stock register, bills and stock variation.

Since the petitioner had declared the total turnover of Rs.35,02,441/- and

total taxable turnover of Rs.26,57,325/- respectively in the returns filed https://www.mhc.tn.gov.in/judis

for the year 2002- 2003 and as stock variations were noticed during the

inspection and there was a suppression, the Assessing Officer proceeded

to determine the total taxable turnover to the best of his judgement and by

an order dated 14.07.2004 assessed a total taxable turnover of

Rs.44,27,542/- and Rs.35,82,426/- as against the reported turnover filed

by the assessee. The Assessing Officer had assessed the suppression of

turnover at Rs.6,16,734/- and had made an addition towards the probable

suppression at 50% of the actual suppression for Rs.3,08,367/- and an

aggregate turnover of Rs.9,25,101/- was taxed on the asessee. Besides a

penalty of Rs.45, 695/- was imposed under Section 12(3)(b) of the Tamil

Nadu General Sales Tax Act,1959.

3. Petitioner had claimed before the Assessing Officer that there

was a stock transfer of Rs.5,80,000/- from Tvl Trisul Dyes and Chemicals

to petitioner's firm, where it was also a sole proprietary concern having

obtained registration certificate No.1761014 which was not renewed after

31.03.2001. As such, the Assessing Authority had determined the

corresponding taxable turnover of Dyes at Rs.7,79,978 by adding 10%

towards freight and gross profit upon the closing stock value of dyes as

Rs.7,08,253/- as on 31.03.2001. The turn over was taxed at 8% single

point in Assessment Proceedings dated 27.05.2002. Thus according to the https://www.mhc.tn.gov.in/judis

petitioner, from Tvl Trisul Dyes and Chemicals to petitioner's concern,

there was a stock transfer to the tune of Rs.5,80,000/- which had to be

deducted from the stocks assessed by the Assessing Officer. However, the

Assessing Officer had rejected the stand of the petitioner as they did not

come forward with such an explanation during the time of inspection and

having given the voluntary statement admitting the variation of stock,

only as an after thought they have come up with the claim of stock

transfer from the sister concern and therefore the petitioner cannot be

allowed to reprobate from the sworn statement voluntarily given by him.

4. In the appeal preferred by the Assessee before the Appellate

Assistant Commissioner, the stand of the petitioner was accepted. The

Appellate Authority found that as the Assessment Order of Tvl Trisul

Dyes and Chemicals filed by the petitioner relating to Assessment Year

200 – 2001 shows that taxable stock of dyes available in the business as

on 31.03.2001 at Rs.7,08,253/- has been taxed upon its corresponding

sales value determined by the very same Assessing Authority at

Rs.7,79,978/- at 8% single point, only for the reason that the petitioner

had not deposed about this at the time of inspection, the Assessment

Authority could not have overlooked the factual position which ought to

have been confirmed from the records. Therefore by an order dated https://www.mhc.tn.gov.in/judis

27.04.2005, the Appellate Authority modified the Assessment Order by

determining the actual suppression at Rs.14,213/- and granting relief to

the dealer for the remaining sum of Rs.6,02,521/-. Further the addition of

50% under the probable suppressions for a turnover of Rs.3,08,367/- and

taxed at 10% was deleted and so far as the penalty of Rs.45,695/-

imposed under Section 12(3)(b) of the Act, the Assessing Officer was

directed to re-quantify based on the orders passed thereon.

5. The Revenue had preferred appeal before the Sales Tax

Appellate Tribunal. The Tribunal by an order dated 03.03.2008 allowed

the appeal by placing reliance on the decision of this Hon'ble Court in the

case of Yousuf Radio Vs. Board of Revenue, Commercial Taxes,

Chepauk, Madras 5 reported in 43 SCC 525, wherein it is observed that

the Assessee cannot approbate and reprobate and once a voluntary act

results in a sworn statement, it should be given effect to and the

opportunity should not be given to the Assessee to retract therefrom,

unless there is some suspicion and circumstances available. Assailing the

orders passed by the Tribunal, the Assessee has preferred the above Writ

Petition.

6. Mr.V.Parthiban, the learned counsel appearing for the petitioner https://www.mhc.tn.gov.in/judis

contended that, when the petitioner was able to substantiate by filing

cancellation of the registration certificate, the assessment made upon the

closing stock and the ledger entries in respect of the Sister concern of the

petitioner Tvl Trisul Dyes and Chemicals including the assessment order

thereon, the Assessment Officer ought to have looked into all these

documents, but however simply by relying on the statement given during

inspection had proceeded to pass the assessment order by adding a sum of

Rs. 5,28,252/- towards the stock variations.

7.It is his further contention that the order of the Tribunal by

holding that there was a suppression of stock and evasion of payment of

duty on the escaped turnover is only based on the report of the

Enforcement Wing Officers and the stock transfer made from Tvl Trisul

Dyes and Chemicals, the petitioner's sister concern where the stock of

dyes available on 31.03.2001 has been taxed as determined by the

Assessing Authority and only thereafter the stocks had been transferred

by making proper entry in the records.

8. The learned counsel further contended that, when the Appellate

Authority having rightly found that the records submitted by the

petitioner concern in respect of the stock transfer made from Tvl Trisul https://www.mhc.tn.gov.in/judis

Dyes and Chemicals based on the available records and deleted the

amounts covered under the stock transfer, the Tribunal had erroneously

without adverting to the admitted documents available on record had

chosen to restore the Assessment order only based on the statements

recorded during inspection.

9. In support of his submissions, the learned counsel relied on the

decision of the Division Bench of this Court in the case of The State of

Tamil Nadu Vs. Tvl.Mangal Marbles dated 28.03.2018 in T.C.R. No.76

of 2018 and another decision of this Court in S.P.G.Ramasamy Nadar

and sons Vs. Commercial Tax Officer -III and Ors reported in [2004]

136 STC 606 (MAD) and sought for intervention of this Court.

10. Per contra, Mr.V.Prashanth Kiran, the learned Government

Advocate argued that, when the inspection was carried out in the

petitioner's premises on 22.10.2002 and 24.12.2002, the variations in the

stock were noticed and also the non-availability of the stock register was

admitted by the Assessee and when the Assessee had given a voluntary

statement admitting the variations in the stock and non-maintaining of

stock accounts and the bills by way of sworn statement, the Assessee

cannot be allowed to reprobate from the voluntary statement made only to https://www.mhc.tn.gov.in/judis

escape from the Assessment. It is his further contention that, when no

explanation was available with the petitioner on the date of inspection

which had been admitted, the Assessee has only as an afterthought has

brought in the claim of the stock transfer from the sister concern that too

by way of interpolation of records as rightly noticed by the Tribunal.

11. The learned Government Advocate by placing reliance on the

decision of this Hon'ble Court in the case Yousuf Radio Vs. Board of

Revenue, Commercial Taxes, Chepauk, Madras 5 reported in (1979)

43 STC 525, contended that the Assessee cannot approbate and reprobate

and contended that the Tribunal had rightly taken not of this legal position

and had set aside the order of the Appellate Authority restoring the

Assessment Order which is perfectly justified and needs no interference

and sought for dismissal of the Writ petition.

12. Heard the rival submissions and perused the materials available

on record.

13. The petitioner Assessee, who is a registered dealer in Dyes and

Chemicals had declared a total taxable turnover of Rs.35,02,441/- and Rs.

26,57,325/- respectively in the returns for the year 2002 and 2003. In the https://www.mhc.tn.gov.in/judis

returns, they had claimed exemption as 2nd sales of Dyes and Chemicals

which was found admissible. However, the place of business was

inspected by the Enforcement Wing on 22.10.2002 and also on

24.12.2002 and during inspection it was noticed that no stock book of

accounts were maintained and the sales bills have not been raised serially.

Further from the opening stock as on 01.04.2002 there was purchase of

dyes from 01.04.2002 to 22.10.2002 for a sum of Rs.17,31,898/- and the

corresponding sales was for a sum of Rs.18,92,120/- and there was an

excess of Rs. 1,60,222/- and further the actual stock held was for

Rs.3,68,030/- and therefore there was a stock variation for a sum of

Rs.5,28,252/-.

14. At the time of inspection, the petitioner had given a voluntary

statement on 22.10.2002, wherein he had clearly admitted that they have

not maintained the daily stock register and also the bills have not been

raised in serial and when the actual stock was verified with the sales from

the opening stock, there was a stock variation for a sum of Rs.5,28,252/-

and he has no explanation to give for the variation in stock found in the

premises. The sworn statement voluntarily given by the petitioner has

been recorded which forms part of the assessment file.

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

15. As there was stock variation to the tune of Rs.5,28,252/- found

in the place of business of the petitioner and since no proper records for

the day to day stocks has been maintained and the bills have not been

raised in a serial, the Assessing Officer proceeded to assess the turn over

to the best of his judgement and passed the Assessment Order on

14.07.2004 by determining the total turnover of Rs.44,27,542/- and total

taxable turnover of Rs.35,82,426/- for the assessment year 2002 -2003 as

against the reported total turnover of Rs.35,02,441/- and total taxable

turnover of Rs.26,57,325/- respectively.

16. The Assessing Officer had rejected the claim of the Assessee to

drop the addition made in the sales suppression and the 50% probable

omission only by making the claim that there was stock transfer for a sum

of Rs.5,80,000/- from Tvl Trisul Dyes and Chemicals to the petitioner's

concern. The Assessee has pleaded that for Tvl Trisul Dyes and

Chemicals, which is a sister concern, a separate registration was obtained

by the proprietor of the petitioner Mr. Ra.Devaraju in Registration

Certificate No.1761014 in the name of Tvl Trisul Dyes and Chemicals,

which was not renewed after 31.03.2001 and therefore the registration

certificate was cancelled on 19.10.2001 by the proceedings of the

Commercial Tax Officer, R.G.Street Assessment Circle. It is their claim https://www.mhc.tn.gov.in/judis

that there was a closing stock of dyes and chemical valued at Rs.

Rs.7,08,253/- with the Tvl Trisul Dyes and Chemicals as on 31.03.2001

and since the registration was cancelled from 01.04.2001, the Assessing

Officer had determined the corresponding taxable turnover of dyes at

Rs.7,79,978/- by adding 10% towards freight and gross profit upon the

closing stock value of dyes as on 31.03.2001 and turn over was taxed at

8% single point in Assessment Proceedings dated 27.05.2002 and only

out of this closing stock of tax suffered dyes available with Tvl Trisul

Dyes and Chemicals and the same was carried over to the petitioner's

concern and as such there was a stock transfer of dyes to the value of

Rs.5,80,000/- as on 01.04.2002.

17. The Assessing Officer had not accepted the claim made by the

Assessee since he found that, when the petitioner has not come up with

such a claim during the time of inspection and having voluntarily

admitted the stock variation and given a sworn statement, cannot as an

afterthought reprobate and retract from the statement only to escape from

the assessment by introducing a new stand. However, the claim of the

Assessee found favour with the Appellate Authority and the Appellate

Authority was of the view that when once the Assessee was able to justify

his claim based on the materials available on record by filing the stock https://www.mhc.tn.gov.in/judis

Order passed in respect of the sister concerned namely Tvl Trisul Dyes

and Chemicals, the Assessing Authority ought to have gone by the

documents rather than ignoring the claim of the Assessee which is

supported by documents, merely by relying on the statements given by

them during inspection. The Appellate Authority also by observing that

simply because the Assessee had earlier given a statement, that cannot be

put against them when the Assessee is able to substantiate his claim by

filing sufficient materials and thereby had partially allowed the appeal by

modifying the Assessment Order by granting relief to a sum of

Rs.6,02,521/- to the Assessee and assessing the actual suppression at

Rs.14,213/- and also deleting further addition of Rs. 3,08,367/- towards

the probable suppression.

18. The Tribunal in the appeal filed by the Revenue, by an order

dated 03.03.2008 had set aside the orders of the Appellate Authority and

restored the Assessment Order mainly on the ground that, once the

Assessee has admitted the stock variation and by voluntary act has given

a sworn statement admitting the discrepancies, the Assessee cannot be

allowed to approbate or reprobate at the later stage.

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

19. The Tribunal had analyzed the statement furnished by the

Assessee, which is the part of the assessment file. The statement of the

Assessee is as follows:

,d;W 22/10/02 fhiy 11/40 kzpf;F jh';fSk; j';fSld; te;j

cjtp tzpf thp mYtyh;fSk; v';fsJ filf;F te;jpUe;J

jzpf;iff;F te;Js;sij j';fis ,d;dbud bjhptpj;jPh;fs;/

jzpf;if rkak; filapy; vdJ fil CHpah; jpU/rk;gj;Fkhh;

kw;Wk; gpd;dh; ehBk; cld; ,Ue;njhk;/

1/ btspkhepyf; bfhs;Kjy; kw;Wk; cs; khepyf; bfhs;Kjy;fs;

cs;snghjpYk; jpdrhp ,Ug;g[f; fzf;F nghlg;gltpy;iy

2/ mf;nlhgh; khj;jpw;fhd gpy;fs; thpirahf nghlg;gltpy;iy/

tpLjy;fSld; nghlg;gl;Ls;sJ

3/ jzpf;ifapd; nghJ ,Ue;j ,Ug;g[f; fzf;F tptu';fis

Muk;g ,Ug;g[f;fzf;F tptu';fis Muk;g ,Ug;g[ bfhs;Kjy;

kw;Wk; tpw;gida[ld; rhpg;ghh;f;fgl;lnghJ jdpna fhl;lg;gl;Ls;s

ml;ltizpay; Rl;lpf; fhl;lg;glthW U:/5.28.252/-?f;F bfhs;Kjy;

tpLjy; fhzg;gl;lJ. ,jw;F jw;nghJ vd;dhy; tpsf;fk; mspf;f

,aytpy;iy/

20. Admittedly the petitioner's place of business was inspected by

the Authorities on 22.10.2002 and 24.12.2002 and it was noticed that the https://www.mhc.tn.gov.in/judis

Assessee had not maintained the day to day stock accounts or the closing

stock inventory for the goods dealt by them and the sales bills have not

been maintained in series. There was also a stock variation found in the

opening stock and the materials available in the place of business with the

corresponding sales to a tune of Rs.5,28,252/-. The Assessee did not offer

any explanation for the same but rather on his own had voluntarily given

a sworn statement admitting the above position. The Assessing Officer

had rightly proceeded to pass the Assessment Order to the best of his

judgement.

21. It is only the subsequent claim of the Assessee that in respect of

the business carried on by the sister concern in the name of Tvl Trisul

Dyes and Chemicals, for which separate registration certificate was taken

and the registration was cancelled there was a stock available as on

31.03.2001. As rightly observed by the Assessing Officer, the Assessee

could have offered that explanation during the time of inspection, but

however having admitted the discrepancies and having no plausible

explanation available at the time of inspection, the Assessee only as an

afterthought had introduced new claim that the stock already taxed at the

hands of Tvl Trisul Dyes and Chemicals due to their closure was

available and there was a stock transfer to the tune of Rs.5,80,000/- to the https://www.mhc.tn.gov.in/judis

petitioner's concern.

22. The assessee once having voluntarily given sworn statement in

respect of the discrepancies as he had no explanation, later he cannot be

allowed to approbate and reprobate only to escape from the Assessment

made against them. In fact, in the instant case, even though the petitioner

had claimed availability of stock and submitted records in respect of Tvl

Trisul Dyes and Chemicals, which had been closed before the Assessing

Officer, but the computerized list of purchases as available in the

assessment file had been verified and found that it does not contain the

value of stock transfer of goods to the petitioner but in the end of the

purchase list, Rs.5,80,000/- was found to be added in the ink which was

rejected as it amounted to a clear manipulation.

23. When the records submitted before the Authorities were found

to be with interpolation and admittedly this theory of stock transfer was

only introduced at the later stage by the Assessee who did not have any

explanation available at the time of inspection and as such had voluntarily

given a sworn statement admitting that there is difference in stock to the

value of Rs.5,28,252/- and he has no explanation to offer, the Assessee is

only making an attempt to retract from the sworn statement furnished https://www.mhc.tn.gov.in/judis

earlier which cannot be allowed to be done and the statement must be

given effect to.

24. As rightly contended by the learned Government Advocate, it is

useful to refer the decision of this Hon'ble Court in Yousuf Radio Vs.

Board of Revenue, Commercial Taxes, Chepauk, Madras 5 reported in

43 STC 525 and the relevant portions are extracted hereunder:

There is a fallacy in this argument. The courses of taxation under the Income-tax Act and the Sales Tax Act are entirely different. Whilst in the former, the income of a dealer is assessed to tax and is expected to be quantified by the Income-tax Officer under the Income-tax Act in accordance with the provisions of that Act, the Tamil Nadu General Sales Tax Act ordains the assessing authorities functioning thereunder to bring to tax sales as such either found in the books of account or agreed to be so by the assessee or otherwise proved to be so by circumstantial evidence. This is a case in which the assessee has admitted in a sworn statement that the two sums of Rs. 73,000 and Rs. 72,000 representing sales for the two assessment years in question represented unbilled cash sales. Excepting, as pointed out by the Board of Revenue, to avoid assessment proceedings made under the Tamil Nadu General Sales Tax Act, we see no particular bona fides in the gesture or the https://www.mhc.tn.gov.in/judis attitude of the appellant in having retracted from a sworn

statement, which was the result of a voluntary act on the part of the assessee. It is not even alleged that at the time when the sworn statement was made by him, he was compelled or coerced to make it. On the other hand, he wanted to escape the fangs of the Income-tax Act by suitably retracting from his sworn statement and stating that they were cash credits and not the total of unbilled cash sales. Obviously, it suited him to do so before the income-tax authorities. Having had the advantage, which we are not sure whether he did have, the retraction of the sworn statement is pressed into service before uf as was attempted before the Appellate Assistant Commissioner. An assessee cannot reprobate and approbate. If that could be done and if it is possible in law, then every assessee can escape at every possible inconvenient stage from the force of the taxing provisions because he could make suitable statements at opportune moments to help his cause and get out of the net of taxation. Once a voluntary overt act results in a sworn statement, it Should be given effect to and an opportunity ought not to be given to the assessee to retract therefrom unless there is some suspicion, proved and circumstantial, available at the time when such a statement was made. No such significant circumstance is present in the instant case. Therefore, we are of the view that for the simple reason that it suited the assessee to retract from his statement before the income-tax authorities, that situation should not prevail and cause the assessing authorities under the Tamil Nadu

https://www.mhc.tn.gov.in/judis General Sales Tax Act also to accept such retraction and the

result thereof. We agree with the Board of Revenue that such to retract from the sworn statement was made possibly to avoid the inclusion of the aforesaid amounts in the assessable turnover under the Tamil Nadu General Sales Tax Act and the Board of Revenue was right in having included the amounts as the turnovers for the relevant years. `

25. In the instant case, as the Assessee did not have any plausible

explanation to offer after inspection for the variation in stock, had

admitted the discrepancies in the stock available and had voluntarily

given sworn statement that there is no explanation available with them.

Therefore the voluntary sworn statement offered by the Assessee has to

be given effect to and the Assessee cannot be allowed to approbate and

reprobate at the later stage.

26. In view of the settled position, the view expressed by the

Appellate Authority that the materials submitted by the Assessee to

substantiate their claim has to be considered rather then relying on the

statement given by them during the inspection cannot be sustained and

the Tribunal by taking note of these aspects has rightly arrived at a

decision and set aside the order of the Appellate Authority by restoring

the Assessment Order, which in our considered opinion needs no

interference and thus sustained.

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

27. In such view of the matter, we find no merits in the Writ

Petition and accordingly dismissed. Consequently, connected

miscellaneous petition is closed. No costs.

                                                                (A.S.M.,J)         (G.A.M.,J)

                                                                             23.09.2024
                      Index: Yes/No
                      Neutral Citation : Yes/No
                      sma

                      To

                     1. Tamil Nadu Sales Tax
                        Appellate Tribunal,
                        Additional Bench,
                        Rep. By its Registrar,
                        Coimbatore -18.

                     2. State of Tamil Nadu,
                        Rep. By Deputy Commissioner (CT)
                        Coimbatore.

                     3. Deputy Commercial Tax Officer,
                        RG Street Circle,
                        Coimbatore.




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







                                     Dr.ANITA SUMANTH,J
                                                   AND
                                     G.ARUL MURUGAN,J.

                                                            sma




                                          Judgment made in





                                                  23.09.2024




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