IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 05.08.2009 C O R A M: THE HONOURABLE MR.JUSTICE F.M.IBRAHIM KALIFULLA and THE HONOURABLE MR.JUSTICE B.RAJENDRAN Tax Case No.2026 of 2006 Tvl. Sri Balaji Chemical Company, 1/92, Alampalayam, Earipatti (Post), Pollachi. .. Petitioner -Vs.- The State of Tamil Nadu represented by the Deputy Commercial Tax Officer, Pollachi (Rural), Polachi. ... Respondent Tax Case Revision under Section 38 of the T.N.G.S.T. Act, 1959 against the order of the Sales Tax Appellate Tribunal (AB), Coimbatore, dated 25.11.1998 in C.T.A.No.456/95 relating to assessment year 1992-93. For Petitioner : Mr.S.Ramanathan For Respondent : Mr.Haja Nazaruddin Spl.G.P. (Taxes) - - - - - O R D E R
(Order of the Court was made by F.M.IBRAHIM KALIFULLA, J.)
The assessee has come forward with this revision wherein the following substantial question of law has been raised viz.,
“Whether the Tribunal was correct in sustaining the higher rate of tax on the sales of sulphate alumina made by the petitioner against Form-XVII for the manufacture of Benzoin which is not falling under the First Schedule and is liable to tax under Section 3(1) of the Act?”
2. The brief facts are that the petitioner is a dealer in chemicals viz., Sulphate of Alumina. The petitioner sold Sulphate of Alumina to the purchasers for the alleged manufacture of Benzion (Sambirani) against Form-XVII. The petitioner was originally assessed to tax on a total taxable turnover of Rs.10,95,130/- by the proceedings of the respondent dated 26.11.1993. The respondent subsequently revised the turnover and levied the tax at a higher rate viz., at 8% on the sales turnover of Rs.1,03,600/- and also levied a penalty of Rs.8,936/- under Section 23 of the TNGST Act. The said revision came to be made on the footing that the petitioner produced an invalid Form-XVII.
3. The petitioner went before the Appellate Assistant Commissioner and the Appellate Assistant Commissioner while confirming the revision of tax as ordered by the Assessing Authority, deleted the penalty of Rs.8,936/-. By the impugned order, the Tribunal also upheld the orders of the Assessing Authority as confirmed by the Appellate Assistant Commissioner. It is in the above stated background, the petitioner has come forward with this revision.
4. Assailing the orders of the lower authorities, Mr.S.Ramanathan, learned counsel appearing for the petitioner by relying upon the decision reported in (1993) 89 STC 438 (State of Tamil Nadu Vs. Madras Petro Chem Ltd.) which was subsequently affirmed by a recent decision of this Court reported in (2006) 148 STC 419 (Sree Murugan Engineering Products Vs. Commercial Tax Officer, Coimbatore) contended that even for the contravention of conditions of Form-XVII, tax and penalty can be imposed only against the purchasing dealer and not against the seller as per Section 3(3) of the Act.
5. The learned counsel’s other contention was that in the case on hand, the petitioner produced Form-XVII as furnished by the purchaser, that it was not the responsibility of the petitioner to verify whether the materials supplied by the petitioner was really used or usable by the purchaser and in the event of the authorities finding that the materials were not really usable for the manufacture of Benzion, at best the respondent can proceed against the petitioner and the revision ought not to have been made.
6. On the other hand, Mr.Haja Nazaruddin, learned Special Government Pleader in his submissions contended that though the position in law viz., that for any violation of the condition of Form-XVII, the tax and penalty can be imposed only against the purchasing dealer and not against the seller. When once it is found that the so called Form-XVII produced by the petitioner was not a valid Form-XVII in the sense that it does not satisfy the statutorily prescribed format for a duly filed in Form-XVII, the said settled principle will have no application.
7. Having heard the respective counsel, we find force in the submission of the learned Special Government Pleader. In this context, we refer to the recent decision of this Court reported in (2006) 148 STC 419 (Sree Murugan Engineering Products Vs. Commercial Tax Officer, Coimbatore) wherein all the earlier decisions have been duly followed. We cull out the principles which are to be followed while examining the correctness of the order like the one impugned in this revision.
8. In the said decision, two earlier decisions of this Court and a decision of the Hon’ble Supreme Court have been referred to. In paragraph No. 6, the Division Bench has relied upon the earlier decision of this Court reported in (1968) 22 STC 269 (Premier Electro-Mechanical Fabricators Vs. State of Madras). The principle set out in the said decision has been stated as under:
“6….The requisites are three fold: (1) The goods, which are the subject-matter of sale, should be those mentioned in the First Schedule, (2) the sale must be to another dealer, and (3) the goods sold should be for the use by the purchaser as component parts of any other goods mentioned in the First Schedule, which he intends to manufacture inside the State for sale. The manner in which the seller has to satisfy the third requisite is as provided in the proviso to the sub-section, namely, production of the declaration in the prescribed form. Once that is done, there is no further obligation on the part of the selling dealer and he will automatically be entitled to the concessional rate….”
Similarly, in another unreported decision rendered in W.P.No.10610 of 2000, decided on 04.12.2001, it has been quoted in paragraph 8 as under:
“8. This issue was again considered in State of Tamil Nadu Vs. Seema Udyog (Writ Petition No.10610 of 2000, decided on December 4, 2001Madras High Court) in the context of the amended provisions of Section 3(3) of the Act by the Bench, following the decision of a three-Judge Bench of the Supreme Court in State of Madras Vs. Radio and Electricals Ltd. (1966) 18 STC 222, held that the duty of the Seller who received such a declaration, therefore, is confined to make sure that the declaration has been duly filed in and signed by the purchaser/dealer and that the form given to the seller is the one prescribed and obtained from the prescribed authority. The duty of the seller ends there. He is under no further obligation to enquire into whether the buyer is engaged in a process or manufacture and if so, whether the articles purchased from the seller are to be put to use as the component part of the product manufactured by the buyer.”
In another decision of the Hon’ble Supreme Court in Chunni Lal Parshadi Lal Vs. Commissioner of Sales Tax, U.P. (1986) 62 STC 112 (SC), it was held as under at Page 120 and 121 :
“…..This court observed that indisputably the seller could have in these transactions no control over the purchaser. He had to rely upon the representation made to him. He must satisfy himself that the purchaser was a registered dealer, and the goods purchased were specified in his certificates but his duty extended no further. If he was satisfied on these two matters on a representation was recorded in the certificate in form-C, the selling dealer was under no further obligation to see to the application of the goods for the purpose for which it was represented that the goods were intended to be used……”
9. In so far as the case on hand is concerned, at the relevant point of time, the requirement of Section 3(3) was that the tax payable by any dealer in respect of sale of any goods other than consumer goods to another for use by the later in the manufacture inside the State, for sale by him of any goods mentioned in the First Schedule other than those falling under Section 70(c) and 107 of the first schedule could be taxed at 3%. The said situation was prevailing upto the end of 11.03.1993.
10. A conspectus consideration of the above provision which was existing and the decisions referred to above makes it abundantly clear that in order to avail the concessional rate of tax prescribed under Section 3(3) of the Act, the assessee is bound to produce Form-XVII duly filled-in in the prescribed format. Such Form-XVII should satisfy the requirements viz., that the goods sold should be for the use by the purchaser as component part of any other good mentioned in the First Schedule which the purchaser intends to manufacture inside the State for sale.
11. When we perused the required Form-XVII as prescribed under the Act, we find that there is a specific column in ‘column-b’ which is required to be filled in and the requirement is “description of the goods to be manufactured with serial number of first schedule”. In so far as the petitioner is concerned, admittedly the said column was not filled-in either by the purchaser or by the assessee at the time when the same was produced for availing the benefit under Section 3(3) of the Act. It was in those circumstances, the Assessing Authority was forced to revise the turnover and make the assessment for a sum of Rs.1,03,600/-. In fact it is also not in dispute that the ultimate product manufactured by the purchaser who supplied Form-XVII to the petitioner was Benzion (Sambirani) which is not one of the item mentioned in the First Schedule.
12. When Form-XVII relied upon by the petitioner did not furnish the details as to whether the products to be manufactured by the purchaser was not one of the items mentioned in the First Schedule, it will have to be held that the said Form-XVII produced by the petitioner cannot be construed as one which will satisfy the requirement as prescribed under Section 3(3) of the Act. In other words if Form-XVII produced by the petitioner did not satisfy the requirement prescribed under Section 3(3), as rightly held by the Appellate Assistant Commissioner it can only be construed as an invalid Form-XVII and in such circumstances there is no question of applying the ratio decidendi of the decisions relied upon by the learned counsel for the petitioner. The ratio of the decision reported in (1993) 89 STC 438 (State of Tamil Nadu Vs. Madras Petro Chem Ltd.) as well as in (2006) 148 STC 419 (Sree Murugan Engineering Products Vs. Commercial Tax Officer, Coimbatore) can be validly applied, if at all, the petitioner had produced a valid Form-XVII and in which event if the purchaser had committed any misfeasance in either using or not using the materials purchased from the assessee, it would be of no consequence in so far as the petitioner assessee is concerned.
13. In as much as Form-XVII relied upon by the petitioner having not satisfied the statutory prescription of fulfilling all the required particulars to be filled-in in the said format, the assessee cannot be heard to say irrespective of such defects in the production of Form-XVII, the assessee should be conferred with the concessional rate of tax as prescribed under Section 3(3) of the Act and that any other consequential liability should be fastened only on the purchaser.
14. The various principles set out in the decisions referred to above, can have no application to the case of the petitioner since the Form-XVII produced by the petitioner does not confirm to the one statutorily prescribed under the Act. We are not therefore in a position to countenance the stand of the petitioner in seeking to apply the principles that the contravention of the condition of Form-XVII, tax and penalty can only be levied against the purchasing dealer and not against the seller as per Section 3(3) of the Act.
15. In our considered opinion, since the alleged Form-XVII cannot be construed as Form-XVII at all, the said principle will have no application to the facts of this case. The revision therefore fails and the same is dismissed. The substantial question of law is answered against the petitioner.
(F.M.I.K.,J.) (B.R.,J)
05.08.2009
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kk
F.M.IBRAHIM KALIFULLA, J.
and
B.RAJENDRAN, J.
kk
To
The Sales Tax Appellate Tribunal (AB),
Coimbatore.
Tax Case No.2026 of 2006
05.08.2009