Sri M/S. Stores & Spares ... vs The State Of Tripura
2021 Latest Caselaw 254 Tri

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                     HIGH COURT OF TRIPURA
                           AGARTALA
                           WP(C) No.286/2016
Sri M/s. Stores & Spares Corporation
having its office at 28, Office Lane, Agartala, P.O. Agartala,
P.S. West Agartala, District West Tripura, represented by its authorized
representative, Shri Susanta Satpathy, Son of late Bidyadhan Satpathy,
resident of 104 A/22T/ Karunamoyee Ghat Road, Kolkata-78800082, at
present residing at Master Para, Agartala, P.S West Agartala, District West
Tripura.
                                                     .............. Petitioner(s).

                                     Vs.

1. The State of Tripura,
   represented by the Principal Secretary, Department,
   Finance Department, Civil Secretariat, New Capital Complex,
   P.O. Kunjaban, Agartala, District - West Tripura, 799006.
2. The Commissioner of Taxes
   Government of Tripura, Gurkhabasti , PN Complex,
   P.S. Capital Complex, District - West Tripura, Pin- 799006
3. The Superintendent of Taxes, Charge-I, Agartala, West Tripura.

                                                 .............. Respondent(s).

                           _B_E_ F_O_R_E_
    HON'BLE THE CHIEF JUSTICE MR. AKIL KURESHI
     HON'BLE JUSTICE MR. S G CHATTOPADHYAY
    For Petitioner(s)                : Mr. T K Deb, Advocate.
    For Respondent(s)                : Mr. A Nandi, Advocate.
    Date of hearing & Judgment       : 1st March, 2021.
    Whether fit for reporting        : Yes/No.
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                         J U D G M E N T ( O R A L)

( Akil Kureshi, CJ ).

Petitioner has challenged an order of assessment dated 22nd

March, 2006 passed by the Superintendent of Taxes demanding additional

sales tax from the petitioner for the years 2001-2002 to 2004-2005 as also

the penalty of the said authority imposed under Section 13 of Tripura Sales

Tax Act, 1979 ("TST Act" for short). This order was confirmed by the

revisional authority by an order dated 23rd December, 2015.

[2] Brief facts are as under :

The petitioner is a C&F Agent and is engaged in sell of cement

and other goods for which the petitioner was registered as a dealer under

TST and Central Sales Tax Act, 1956 ("CST Act" for short). For the years

2001-2002 and 2004-2005 the petitioner had filed his returns under the

TST and CST Acts. During the period under consideration, the petitioner

had transported cement bags to railway wagons and claimed that in the

transportation, a portion of his cement was totally damaged which the

petitioner either had to throw away or sell at extremely low rates. The

Assessing Officer did not accept this version of the petitioner in its entirety

and, therefore, issued notice for assessment of his returns for the said

assessment periods in terms of Section 9 of the TST Act. Before the

Assessing officer, the petitioner appeared and produced accounts and Page - 3 of 12

documents including a delivery certificates issued from time to time by the

railway authorities which suggest that portion of his cement was damaged

in transit. For example, if one peruses a certificate at page 43 to the

petition, it would show that it is a certificate dated 21st May, 2005 issued by

the railway authority conveying that 4665 cement bags were received for

transportation and these bags were delivered at the destination point of

which 502 begs of cement had become stony (i.e. hardened).

[3] The Assessing Officer did not seriously dispute the petitioner‟s

contention that certain cement bags were damaged in transportation.

However, he did not accept the petitioner‟s version of the rates at which

such damaged cement was sold in a market. According to the petitioner, the

damaged goods were sold at very low rates. The Assessing Officer

observed that in connection of this claim, the petitioner had produced a

copy of the letter dated 2nd July, 2002 which refers to 67,863 cement bags

being damaged during the period between 1st February 2001 to 14th June

2002, but no verification report from the sales tax official was found on the

record. He, thereupon gave the petitioner an opportunity to justify the claim

of damage by producing further evidence of damaged cement, however, he

recorded that no such evidence was produced. He further observed that

large quantity of 29717 cement bags claimed to have been damaged, did Page - 4 of 12

not remain unsold but was sold in the market. He, therefore, believed that

this theory of serious damage to the cement in transportation was only a

device to conceal taxable turnover. His observations were under :

" ...........................

Sri Saha was given opportunity to justify the claimed of damage by producing proper evidence of damaged cement but no evidence where produced so that the undersigned can be satisfied in respect of damage of such a huge quantity of cement. It is interesting to know that such a huge quantity of cement i.e. 291717 bags so called hard stone were not remained as unsold which were sold @ Rs.1.50 to Rs.3.00 per bag. So there is reason to believe that the damage of cement as claimed by the dealer is nothing but a colourful device to conceal the actual sale of cement and to evade tax. Had it not been so the dealer could inform this office prior to sale the 29717 bags of cement @ Rs.150 to 3.00 per bag instead of Rs.161.00 to Rs.210.00 wherein State Govt. Revenue was involved.

In view of the above the damage of cement 29117 bags of cement during the year 2001-02 to 2004-05 as claimed by the dealer is not acceptable because it is considered that the dealer sold the 29717 bags of cement as cement not as hard stone. As such 29717 bags of cement in question shall put to tax at the average rate of cement. So reflected by the dealer in the respective year and quantity of bags also will be taken as reflected by the dealer as hard stone in the related year. However, the sale amount of 29717 bags of cement as hard stone so claimed by the dealer will be taken in the account at the time of arriving at the value of 29717 bags of cement.

However, in absence of any contrary evidence I accept of the return turnover in respect of 4% tax.

...................."

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[4] He thereupon proceeded to assess the payable tax by making

following further observations :

" .........

From the records in possession the total quantity of cement imported against Form XVIII & XVIII A in terms of Matric Ton (M.T.) being converted into bags by dividing 20 to total Matric Ton (M.T.) reveals the difference in question as under :

         Year       Office record     Dealer‟s record      Difference in bags
       2001-02      1299537 bags      1299457 bags                80 bags
                                                         (office record higher)
       2002-03      1442886 bags      1489639 bags               46753 bags
                                                        (dealer‟s record higher)
       2003-04       995032bags        994882 bags                150 bags
                                                         (office record higher)
       2004-05      1290534 bags      1243781 bags               46753 bags
                                                         (office record higher)

Sri Ranjit Kr. Saha, authorized representative is hereby given an opportunity as to why such differences arrive out of maintenance of books of accounts. But he did not give any satisfactory reply in this regard. I therefore, decided to accept the quantity whichever is higher in respect of the period 2001-2002, 2003-2004 & 2004-2005 and the said price is considered in average price of cement per bag in respective years.

However, considering the facts and circumstances and also considering the nature of volume of business I determined the dealer‟s turnover for the years 2001-02 to 2004-05 to the best of my judgment keeping the closing stock unchanged."

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He thereafter proceeded to impose penalty by making following

observations :

"In course of assessment proceeding it appears that the dealer has suppressed the actual sale of cement with a view to evading tax. So it is considered necessary to issue show cause notice asking the dealer as to why penal action shall not be taken but Sri Ranjit Kr. Saha authorized representative submits that a sizeable time has already passed in producing the necessary records and papers after the getting the notice of assessment and request not to issue separate showcause notice and date for hearing of penal proceeding which will take further time. So I being agreeable allow him time upto 3 p.m. today on 22.03.2006 to showcause as to why penal action u/s 13 of the TST Act‟ 1976 shall not be taken.

At 3 p.m. today on 22.03.2006 Sri Ranjit Kr. Singh appears but he failed to adduce any satisfactory reason against in position of penalty and admitted the offence as discussed in the above paragraph. So I impose penalty on the dealer @ 25% of the conceal tax amount u/s 13 of said Act. No interest is charge as dealer already deposited more than 90% of tax payable by him and thus complete the assessment as under :

......................."

[5] The petitioner challenged the said order before the Commissioner

by filing a revision petition. The revision petition was dismissed by the

order dated 23nd December, 2015. The revisional authority after recording

the contentions of the petitioner made following observations in order to

dismiss the revision petition.

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         "        ..........

4. On hearing the Ld. Advocate and on perusal of the case records the court observed the following :

"It is observed that though the Railway Authority has certified for 34225.21 bags of cement stony, the petitioner later found that 4508 bags were saleable and sold at full market price. This raises doubt about the authenticity of the damage certificates issued by the Railway Authority. Accordingly, on the previous date of hearing on 10.12.2015, the petitioner was directed to submit technical proof that 29717 bags of cement were actually damaged but the petitioner failed to submit any such proof. In absence of any conclusive proof, the claim for damage of 29717 bags cement cannot be considered.

Regarding the second point of agitation regarding excess quantity of 46753 bags of cement, the petitioner was asked to submit the relevant stock transfer notes, utilized permits and „F‟ forms but the petitioner failed to submit any of the required documents."

5. However, the petitioner was allowed one opportunity to produce evidence before the Assessing Authority that the excess quantity of 46753 bags of cement were actually received during 2005-06 and due taxes were also paid.

6. Therefore, the cases are remanded to the Superintendent of Taxes, Charge - II, Agartala for making re-assessment on the second point of agitation. The reassessment should be completed by 15th March, 2016 after giving the dealer reasonable opportunity of being heard.

7. With the above observations, the cases are disposed off. Inform all concerned accordingly."

[6] Appearing for the petitioner, learned counsel Mr. T K Deb

vehemently contended that the petitioner had produced a certificate of the Page - 8 of 12

railway authorities to demonstrate that substantial quantity of the cement

was damaged in transit. The Assessing Officer erred in rejecting the

accounts of the petitioner in this respect. He further submitted that the

Assessing Officer passed this order of assessment under Section 9(3) of

TST Act without proper justification. The petitioner had filed the return of

the turnover as well as responded to the notice issued by the Assessing

Officer under Section 9(2) of the TST Act and therefore, was no occasion

for the Assessing Officer to resort to the best judgment procedure. He lastly

contended that the penalty was imposed without affording an opportunity

of hearing to the petitioner which was clearly in breach of principles of

natural justice as well as sub-section (2) of Section 13 of the TST Act.

[7] On the other hand, learned counsel, Mr. A Nandi appearing for

the State as special counsel, opposed the petition contending that against

the revisional order of the Commissioner further appeal lies before the

Tripura Sales Tax Tribunal. The petitioner without availing the remedy had

approached the High Court in the writ petition. Further, the entire issue is

factual and no interference is called for.

[8] As noted, the petitioner had claimed that sizeable quantity of

cement was damaged in railway transportation which the petitioner was

forced to sell at a very low price. The Assessing Officer in absence of Page - 9 of 12

reliable evidence and documents did not accept this theory and after issuing

notice to the petitioner proceeded to pass the order of assessment, relevant

portion of which we have reproduced earlier. Perusal of the order of

Assessing Officer would show that entire issue is factual in nature and no

question of law would arise since the petitioner has not demonstrated any

perversity in the factual findings of the Assessing Officer. Even the

revisional authority has examined the issue all over again and found no

reason to set aside the assessment order.

[9] The question of penalty, however, stands on a different footing.

We are inclined to set aside the penalty with a liberty to the Assessing

Officer to pass a fresh order after hearing the petitioner. This is for two

reasons.

Firstly, perusal of the revisional order would show that the

Commissioner had interfered with the operation of the order of assessment,

nevertheless allowing the Assessing Officer to pass a fresh order. The

penalty was based on total additions and not only on a portion of the

addition which the Commissioner maintained. The entire penalty would,

therefore, fall. What further order the Assessing Officer has passed after the

Commissioner‟s revisional order is not known to us. In any case, the

penalty which was in relation to the entire additions made by the Assessing Page - 10 of 12

Officer, cannot survive when part of the addition is not done by the

Commissioner.

Second reason is that the Assessing Officer did not give adequate

opportunity to the petitioner to meet with the proposal of penalty. Section

13(2) of the TST Act provides that no penalty under sub-section (1) would

be imposed unless the dealer has been heard or has been given a reasonable

opportunity of being heard. The impugned order passed by the Assessing

Officer shows that he orally conveyed to the Accountant of the petitioner

that he proposes to impose penalty and recorded that at the suggestion of

the Accountant, he kept the further hearing of the case in the second

session when at 3.00 O‟clock he proceeded to pass the order. This is not the

manner in which a quasi judicial authority can pass a penalty order.

Requirement of hearing under sub-section (2) of Section 13 of the TST Act

is not an empty formality. In similar circumstances, in case of M/s Sun

Direct TV Private Ltd. Vs. The State of Tripura and Ors. CRP

No.13/2020 by judgment dated 5th January 2021, Division Bench of this

Court had struck down the order of penalty making following observations:

"4. The issue involved in the present petition is thus covered by the judgment in case of Bharti Telemedia Ltd.(supra). We have, therefore, no hesitation in confirming the revisional order insofar as it pertains to the liability of the petitioner to pay tax with interest.

However, in relation to penalty we find that the authorities have Page - 11 of 12

committed a serious error. Firstly, contrary to what the revisional authority has recorded in the impugned order, sufficient opportunity of hearing was not granted to the petitioner before imposing penalty by the Assessing Officer. We say so because in the assessment order itself the Assessing Officer has recorded that he was inclined to issue notice for penalty, however, the accountant of the petitioner company stated that issuance of penalty notice would further delay the proceedings. The Assessing Officer, therefore, issued an oral notice to the accountant who was present, thereafter kept the further hearing of the assessments and penalty proceedings and recently orally instituted penalty proceedings in the afternoon on the same day, heard the accountant on penalty as well and concluded that the assessee was deliberately in default.

5. For several reasons, such order of penalty cannot be upheld. Firstly, there was gross violation of principles of natural justice. Even if the accountant did not insist on a written notice for penalty, it is questionable whether the Assessing Officer could dispense with the same. More importantly, the penalty proceedings could not have been completed in a summary fashion after giving time from morning to afternoon to the accountant of the company to make his submissions. The penalty proceedings being quasi criminal in nature, strict requirement of procedural adherence is always insisted upon. Further even on merits, we do not find that the petitioner carried any mala fide intention in not offering the said transaction to tax. The decision of this Court in case of Bharti Telemedia Ltd.(supra) was rendered on 19.02.2015. The entire period in question with which we are concerned was prior to the decision of this Court. It was otherwise an arguable issue. The petitioner can be stated to have carried a bona fide belief that the transaction in question is not exigible to tax.

6. In the result, the orders passed by the Assessing Officer and Page - 12 of 12

revisional authority confirming penalty against the petitioner are set aside. The petition succeeds only to this extent. Petition is dismissed."

[10] In the present case, however, we are not inclined to terminate the

penalty proceedings permanently but will allow the Assessing Officer to

pass a fresh order after hearing the petitioner.

[11] In the result, while disposing of this petition, the order of

assessment so far as it relates to additional tax assessed by the Assessing

Officer is concerned, the same is confirmed. The order of penalty is set

aside with a liberty to the Assessing Officer to issue a fresh notice to the

petitioner and thereafter pass order in terms of Section 13 of the TST Act.

If such notice is issued latest by 31st March, 2021, there shall be no

question of such a notice being time barred since the notice would be

actuated on account of the order that the Court has passed and would thus

be seen as a continuation of the original proceedings.

[12] Petition is disposed of accordingly. Pending application(s), if any,

also stands disposed of.

       ( S G CHATTOPADHYAY, J )                       ( AKIL KURESHI, CJ )



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