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Golden Leathers vs Deputy Commercial Tax Officer on 13 December, 1993

Madras High Court
Golden Leathers vs Deputy Commercial Tax Officer on 13 December, 1993
Author: Janarthanam
Bench: M Janarthanam


JUDGMENT

Janarthanam, J.

1. M/s. Golden Leathers, Tannery, 4A/137, Salem Road, Athiyur, Tirupathur (petitioner) is a registered dealer under the provisions of the Tamil Nadu General Sales Tax Act, 1959 (Tamil Nadu Act 1 of 1959) (for short “the TNGST Act”). It was dealing in raw hides and skins and dressed hides and skins – declared goods, besides other goods. It was a rule 18(3) assessee paying necessary and requisite tax therefor on the actual turnover reported. Its taxable turnover for the year previous to the assessment year 1989-90, that is to say, 1988-89, exceeded Rs. 10 lakhs and the taxable turnover for the subsequent assessment years till up to now, it is said, did not at all fall below Rs. 10 lakhs.

2. While, so, it filed W.P. No. 9880 of 1988 before this Court challenging the constitutional vires of entries 7(a) and 7(b) of the Second Schedule to the TNGST Act, purporting to levy sales tax both on raw hides and skins and dressed hides and skins. There was a stay, it is said, of further proceedings, pending disposal of the writ petition, which event happened on April 23, 1993. Subsequent to the dismissal of the writ petition, it appears that there was no further agitation by way of appeal before this Court.

3. Consequently, the Deputy Commercial Tax Officer, Tirupathur, North Arcot Ambedkar District (respondent), in his proceedings N. Dis. No. A2/5069/85 dated October 18, 1993, demanded from the petitioner a sum of Rs. 10,91,498 representing the amounts due by way of additional sales tax on the monthly turnover reported in respect of raw hides and skins and dressed hides and skins for the assessment years 1989-90 to 1992-93 and part of the current assessment year 1993-94 (up to September, 1993) forthwith or otherwise proceedings for recovery of the said amounts would be initiated under the Revenue Recovery Act. Aggrieved by the said proceedings, the petitioner resorted to the present action praying for issue of a writ of certiorari to quash the same, contending that hides and skins dealt with by it, being declared goods, are not at all liable to additional sales tax and a demand made therefor is without jurisdiction; that even otherwise, the demand so made, without making a provisional or final assessment and issuance of a demand notice therefor is not in conformity with the statutory provisions adumbrated under the TNGST Act and that making a composite demand by the proceedings impugned for so many years is also not permissible in law.

4. The petitioner also filed W.M.P. No. 30916 of 1993 praying for stay of all further proceedings, pending disposal of the writ petition.

5. When the writ petition, along with W.M.P., came up for admission, this Court directed Mr. T. Ayyasamy, learned Government Advocate (Taxes) to take notice and he accordingly did so and produced the relevant file. Arguments of either learned counsel were heard.

6. There is no pale of controversy and there cannot be anything like that, inasmuch as the records produced reveal, in unmistakable terms, that the taxable turnover of the petitioner never fell below Rs. 10 lakhs on and from the assessment year 1988-89 till up to now. Section 2 of the Tamil Nadu Additional Sales Tax Act, 1970 (Act 14 of 1970) provides for levy of additional tax at prescribed rate of tax at the slabs mentioned therein, if the taxable turnover exceeds Rs. 10 lakhs. Where the taxable turnover exceeds Rs. 10 lakhs, but does not exceed Rs. 40 lakhs, then the rate prescribed for levy of additional tax is 1.25 per cent of the taxable turnover. According to proviso appended to section 2(1)(a) thereof, additional tax leviable in respect of declared goods should be such that the cumulative effect of the tax burden on such goods should not exceed 4 per cent of the sale or purchase price thereof.

7. In the case on hand, the taxable turnover for all those years, never fell below Rs. 10 lakhs and does not also exceed Rs. 40 lakhs, thereby making it liable to pay additional sales tax at the rate of 1.25 per cent of the taxable turnover. The rates prescribed by way of levy of sales tax for raw hides and skins and dressed hides and skins under the relevant item or entry in the Second Schedule vary year after year and therefore, it becomes necessary to notice such variations as detailed thus :

————————————————————————

S. No.         Assessment year                        Rate of tax
                                                     (in percentage)
                                                     Hides and skins
                                                     Raw     Dressed
------------------------------------------------------------------------
  1     1989-90                                       2         1
  2     1990-91                                       2         2
  3     1991-92 (up to September, 1991)               2         2
        (From October, 1991 to February,
        1992 for five months)                         4         4
  4     1992-93                                       4         1
  5     1993-94 (up to September, 1993)               4         1
------------------------------------------------------------------------
  
 

8. The petitioner-assessee, though paid sales tax in respect of such declared goods on the monthly turnover reported in form A-1, did not, however, pay the additional sales tax at the prescribed rates for those years. It is not as if, the prescribed rate of 1.25 per cent if added to the rate of levy of sales tax, to which those declared goods had been subjected to, the cumulative effect of tax burden, exceeds 4 per cent in all those years. In respect of assessment years 1989-90 to 1991-92 (up to September, 1991), the tax effect does not exceed 4 per cent. As respects the rest of the five months for the assessment year 1991-92 commencing from October, 1991 to February, 1992, the prescribed levy of sales tax in respect of those goods under the TNGST Act itself is 4 per cent and the addition of 1.25 per cent by way of additional tax, would be exceeding 4 per cent and consequently, in respect of such period, addition of additional sales tax at 1.25 per cent is not permissible. For the assessment year 1992-93, the prescribed levy under the TNGST Act in respect of raw hides and skins is 4 per cent and consequently, addition of additional sales tax at 1.25 per cent is not permissible and so far as the dressed hides and skins are concerned, the prescribed levy under the TNGST Act in respect of the said assessment year is only 1 per cent and addition of 1.25 per cent by way of additional tax is within the permissible limit of 4 per cent. All those aspects of the matter had been taken into account in giving consolidated figure for the various years mentioned in the impugned proceedings.

9. Worthwhile it is at this juncture to mention that the petitioner questions the jurisdiction of the authorities to levy and collect additional sales tax in respect of those goods for those years and it does not raise any dispute as to the extent or the quantum of liability by way of additional sales tax. Once there is liability for payment of additional sales tax in respect of those declared goods dealt with by it during those years, it cannot at all avoid the same. The factual as well as legal position, as stated above, make it crystal clear that in respect of the declared goods, namely, raw hides and skins and dressed hides and skins dealt with by it in respect of those years, it is liable to pay additional tax. As adverted to earlier, it is after all a rule 18(3) assessee. Once it is a rule 18(3) assessee and when the turnover in respect of goods, inclusive of the declared goods had been correctly reported, a duty is cast upon it to pay the tax accordingly within the prescribed period under the Rules. The factual position is that notwithstanding the fact that it had not paid such additional tax, the department was rather handicapped in recovering the additional sales tax, quantified in a specified sum, as mentioned in the impugned proceedings, as a consequence of stay obtained by the petitioner, pursuant to writ proceedings initiated in this Court and the stay so obtained got actually vacated on April 23, 1993, by the dismissal of the writ petition itself. Such being the case, necessity arose for issuance of the impugned proceedings demanding payment of such tax in one lump sum payable for all the months of the assessment years aforesaid. The petitioner, being a rule 18(3) assessee, tax for the concerned month within the prescribed date must have to be paid without any provisional or final assessment. The returns so submitted cannot at all be stated to be either incomplete as there is only deficiency in payment of tax alone.

10. The moot question, in such circumstances, is whether any notice of demand is necessary. Such a question is very well answered by the salient provisions adumbrated under rule 4(2) of the Tamil Nadu Additional Sales Tax Rules, 1970, which prescribes, “Every dealer, whose taxable turnover under the Tamil Nadu General Sales Tax Act, 1959 (Tamil Nadu Act 1 of 1959), exceeded rupees ten lakhs in the previous year and who has opted to pay tax on the basis of his monthly returns under rule 18 of the Tamil Nadu General Sales Tax Rules, 1959, shall pay additional tax on the basis of such monthly returns failing which it shall be recovered in accordance with the provisions of the Act without any notice of demand to the dealer.”

11. It is thus clear that there is a duty cast upon the assessee, like the petitioner, to pay additional sales tax even without issuance of a notice of demand and the position here is that notwithstanding the disposal of the writ petition vacating the stay, the petitioner-assessee failed to pay the legitimate additional tax due for those years. It would have been legitimately permissible for the department to straightway take recovery proceedings under the Revenue Recovery Act for the realisation of the said arrears. But without resorting to such a course, the departmental officials were rather courteous in issuing the impugned proceedings to the petitioner-assessee demanding payment of the additional sales tax arrears payable within the prescribed time on each of the months of the period of assessment, of course, by way of one composite notice, about which there is no prohibition at all intimating it that the non-payment of the same is likely to result in coercive proceedings for recovery of arrears of such tax, by resorting to the provisions of the Revenue Recovery Act. In such a situation, I am unable to see anything wrong in the issuance of such proceedings.

12. For the above reasons, it goes without saying that the writ petition deserves to be dismissed, even at the admission stage and the same is accordingly dismissed. Consequently, W.M.P. is also dismissed. There shall, however, be no order as to costs, in the circumstances.

13. Writ petition dismissed.

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