BHAVANI MILLS LIMITED Vs. STATE OF TAMIL NADU

JUDGEMENT

(1.) THE petitioners are dealers in cotton and cotton yarn. THEy had reported a total and taxable turnover of Rs. 4, 11, 55, 025.83 and Rs. 1, 90, 96, 778.10 respectively for the assessment year 1979-80. On verification of the account among other things it was found that the assessees had collected surcharge on cotton yarn and hosiery yarn (declared goods) amounting to Rs. 17, 661.29. THE cotton yarn and hosiery yarn were exempted from levy of surcharge. It was therefore found that the collection of surcharge was contrary to law and a penalty of Rs. 26, 492 at 1 1/2 times the surcharge collections was proposed to be levied. THE second escaped omission, with which we are concerned, related to a turnover of Rs. 4, 76.793.04 being the sales of cotton yarn, cotton, staple fibre and certain sundry sales. It was proposed by a notice served on the assessees on December 23, 1980 to levy a penalty under section22(2) of the Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as "the Act") to the tune of Rs. 26, 492 and a penalty of Rs. 5, 559 at the rate of 50 per cent of the tax due on the suppressed turnover of Rs. 4, 76, 793.04. THE explanation of the assessees regarding the penalty under section22(2) of the Act was that they had remitted the collections to the department and that they would refund the surcharge to the consumers provided the department refunded the amount to the assessees. On the question of the penalty levied under section12(5) of the Act to the tune of Rs. 5, 559 the assessees admitted the omission to report the turnover of Rs. 4, 76, 793.04 in their returns and contended that there were certain bona fide disputes about the supplies made by the assessees and the same were regularised and sale invoice raised only on March 30, 1980. Both the explanations were rejected by the assessing authority and the penalties were imposed as proposed in the notice. On appeal, the Deputy Commissioner (CT) cancelled the penalty under section22(2) of the Act on the ground that the collections had been paid over to the Government. THE appellate authority however, confirmed the penalty levied under section12(5) of the Act. On further appeal to the Tamil Nadu Sales Tax Appellate Tribunal, an enhancement petition was filed by the Revenue seeking restoration of penalty under section22(2) of the Act. THE Tribunal found only the minimum penalty of 50 per cent of the tax had been levied under section 12(5)(iii) of the Act and found that there was no cause for interfering with the same. So far as the enhancement petition relating to the levy of penalty under section22(2) of the Act, is concerned, the Tribunal referred to the undertaking of the assessees to refund the amount to the customers provided the department refunded the same to the assessees. Accordingly the Tribunal directed the department to refund the amount to the assessees, so that the assessees would in turn refund the same to the customers and provide proof of such refund. If no such proof was produced the department was permitted to impose penalty under section22(2) of the Act. THE assessees are in revision before us.

(2.) MR. N. Inbarajan, learned counsel for the petitioners, questioned the jurisdiction of the Tribunal to entertain and allow the enhancement petition. There was nothing to be enhanced inasmuch the appellate authority had deleted the entire penalty. The argument is apparently based on the judgment of this Court in State of Tamil Nadu v. Jakthi Veliyeetakam 1977 (6) CTR 496, 1977 (40) STC 466 . It is necessary to notice the facts of the said case in detail to understand the ratio laid down by the court. In that case the assessing officer had levied penalty under section12(3) of the Act. On appeal, the penalty was set aside in toto. The assessees had filed a second appeal before the Tribunal questioning the turnover. In that appeal Revenue filed a petition "to restore the penalty levied by the assessing officer and cancelled by the Appellate Assistant Commissioner" * . The Tribunal refused to restore the penalty. It is in this context that the Division Bench of this Court observed that the petition for restoration of the penalty was not competent and the Tribunal had no jurisdiction to restore the penalty. The reason for taking that decision was the words "confirm, reduce, enhance or annul" did not include a power to restore the penalty which had been set aside by the appellate authority. We feel that the other observations made in that judgment to the effect that there must be something to be increased for the application of the word "enhance" are more in the nature of obiter. This judgment was following in Doveton Cafe v. State of Tamil Nadu 1981 (47) STC 345 . While following the earlier judgment, the Division Bench in the later case relied more on the observations made in the nature of obiter and held that the Tribunal will have jurisdiction to entertain an enhancement petition only if there was something to be enhanced. They, however observed as follows : "............. Enhancing the penalty already imposed is different from restoring the penalty which was imposed by the original authority but set aside by the Appellate Assistant Commissioner since the subject-matter of the appeal before the Tribunal was the order of the appellate authority and not that of the original authority." *

(3.) IN support of the view taken by us we may refer to a few decisions. IN T. V. Sundaram Iyengar & Sons (P.) Ltd. v. State of Madras 1970 (25) STC 160 a Division Bench of this Court held that the word "enhance" should receive its full meaning and in relation to the assessment, the scope of the power to enhance should extend to the entire assessment. They proceed to say that there is no justification for the narrow view that the power of enhancing in appeals can only be exercised within the limits of the assessment that is objected to by the assessee in his appeals. It was laid down that the power of enhancement extended to the entire range of assessment in State of Tamil Nadu v. Kutty Flush Doors & Furniture Co. (P.) Ltd. 1984 (57) STC 217(Mad). The Division Bench has taken the view that the power of the Tribunal to make an enhancement of assessment under section 36(3) of the Act is not subject to any condition, limitation or restriction, so long as the appeal relates to an order of assessment. IN that case the enhancement petition was not filed at the first appellate stage but it was sought to be filed only at the time of second appellate stage and it was held that such an enhancement petition was maintainable.