W.S. TELESYSTEMS LTD. (EARLIER W.S. ELECTRONICS LTD.) Vs. ADDITIONAL COMMISSIONER OF COMMERCIAL TAXES, ZONE-II AND ANOTHER

JUDGEMENT

(1.) THIS is an appeal directed against a revisional order passed by the Additional Commissioner of Commercial Taxes, Zone -II, Bangalore dated 28.1.1997. The appeal raises a point of some interest and the brief facts giving raise to the controversy are that the appellants M/s. W.S. Telesystems Limited are aggrieved by an order imposing a penalty against them under Section 28A(4) of the Karnataka Sales Tax Act amounting to Rs. 1,24,463/ -. It is relevant for us to mention that this company, hereinafter referred to as the appellants, was earlier part of M/s. W.S. Industries Limited. In the year 1992 the parent company was bifurcated in so far as the electronics division was converted into a separate limited company by the name of M/s. W.S. Telesystems Ltd., the present appellants. The parent company had received a purchase order from the department of Telecommunications, New Delhi to supply electronic exchanges to the Assistant Engineer (P.E.S) Installation, Central Exchange, Bangalore. According to the appellants, the existing order from the D.O.T. was executed by them as there are on record documents whereby existing assets, liabilities etc., including business relating to the communications field was transferred from the parent company to the appellant's company. They have further clarified that this company was renamed in the year 1997. According to the records of the department, on 1.12.1992 a consignment which was to be supplied to the Telephone Department was on its way in a goods vehicle. The officer incharge of the Bellary Road check post, when he checked the relevant invoices and other documents took up the contention that the appellants had not correctly computed the sales tax which was shown as at 4% on the ground that this was a supply made by a registered trader to a government department, and the officer noticed that the name of the consignee on the relevant invoice was that of W.S. Industries. It is necessary to clarify that though the invoice was raised in the name of W.S. Industries that the consignee had been shown as the D.O.T. The relevant notice was issued to the appellants and ultimately, even though originally the show - cause notice proposed a penalty of 12% an order came to be passed whereby the appellants were penalised to the extent of the deficit of tax i.e. 2%. The appellants filed an appeal against this order and the appellate authority set aside the penalty order. Thereafter, the revisional authority set aside the appellate order and has restored the original penalty order and the present appeal is directed against this last order.

(2.) THE short point in controversy is as to whether in the facts and circumstances of the present case, the imposition of the penalty was justified. We do concede that the facts of this case are slightly unusual and Mr. Kamath, learned Counsel who represents the appellants submitted before us that admittedly this is not a case in which the goods in question were not accompanied by any of the relevant documents. His first submission is that the penalty order under Section 28A of the Act is totally misconceived because he was at pains to demonstrate to us that essentially, that Section takes care of situations in which there is either clandestine transfer of goods without documents or a situation in which the prescribed documents are not available when the goods in question are checked. His submission is that neither of the two situations arise in this case and that if at all there was some dispute or debate with regard to the correct rate of tax applicable that this was something which the department could have and should have only taken up at the stage of the assessment and that therefore, the exercise of jurisdiction under this Section is itself bad in law. While we do concede that though this Section prescribes penalties for non - production of any or all the requisite documents it is equally necessary to point out that it would not be outside the ambit and scope of this Section to envisage a situation in which the documents accompanying the goods are not in order. For example, if there is misdescription of the goods, as often happens, or if there is misdescription of material particulars or if any of the contents of the documents prima facie are established to be incorrect, then the officer at the check post would be within his rights to issue a show -cause notice and institute proper action. In the present instance, the case of the department was that even though the name of the D.O.T. was shown as the consignee that the invoice was drawn on M/s. W.S. Industries and that consequently, this effectively constitutes a misdescription. The second and more important aspect of the case was that in the facts and circumstances, the department contended that the documents clearly indicated a transfer of the property in question to M/s. W.S. Industries and that the name of the consignor was of no relevance for purposes of taxation.

(3.) THE learned Government Advocate has defended the action of the department. His straight forward submission was that on a plain reading of the contents of the invoice it will be very clear that the invoice has been drawn on M/s. W.S. Industries Ltd. which is not a government department. The learned Advocate submitted that merely because there is the mention of the D.O.T. as the consignee it will not take the appellants out of the applicability of the law. His submission is that for purposes of deciding the rate of taxation that unless it is demonstrated that it was a clear cut and direct sale to a government department that a lower rate of taxation would not apply and in this context, he has relied on the fact that the purchase order from the D.O.T. was on M/s. W.S. Industries Ltd., and not on the appellants and furthermore that it is very clear that even if the goods in question had been manufactured by the appellants that they had in turn transferred these to M/s. W.S. Industries who in turn was the party from whom the D.O.T. had purchased the same. His submission therefore was that the department was fully justified in holding that as far as the present appellants are concerned that it was a sale to a private party even if it was their own sister company and that consequently sales tax at the rate of 6% was applicable. Consequently, since the documents produced by the appellants did not reflect the correct rate of taxation, the penalty was more than fully justified. The learned Government Advocate has however brought one important fact to our notice, namely that after an examination of the facts, the department itself has taken a very lenient view of the case by dropping the 12% tax and imposing a penalty that was equivalent to the 20% short -fall or in other words, that the department has only collected the deficit of tax and that the appellants have really no cause for complaints.