STATE OF TAMIL NADU Vs. KIRAN INDIA TRADERS

JUDGEMENT

(1.) THE department is the petitioner herein. The assessee Kiran India Traders is a dealer in ball -bearings. For the assessment year 1980 -81 they disclosed a taxable turnover of Rs. 4, 12, 255.02 and Rs. 88, 753.04 under the Tamil Nadu General Sales Tax Act, 1959. The accounts were called for and checked by the assessing officer. The assessee collected tax and surcharge on second sales at the rate of 8.4 per cent. by adding the amount with the price without mentioning as tax. Details of such collections were not furnished. Such collection on the second sales turnover of Rs. 3, 04, 118 works out to Rs. 23, 566. Since it is an illegal collection of tax on the second sales, penalty under section22(2) of the Tamil Nadu General Sales Tax Act was levied. On appeal the Appellate Assistant Commissioner confirmed the levy of penalty under section22(2) of the Act. Aggrieved, the assessee filed an appeal before the Appellate Tribunal. The Tribunal deleted the penalty levied under section22(2) of the Tamil Nadu General Sales Tax Act. It is against that order the department is in revision before this Court.

(2.) THE learned Additional Government Pleader (Taxes) submitted as under : The assessee collected sales tax and surcharge, but did not show the same as such in the return. In the return it was shown that the sale turnover of the second sales is not liable to tax. The assessee has separate second sales cash bills and first sale cash bills and each second sale bills carries a printed caption as second sales. The bills verified by the assessing authority would go to show that the assessee used to add along with the price paid by it the tax and the surcharge due on the price fixed by the assessee. Even though the tax and surcharge were added with the price fixed by the assessee, it was not shown as such in the bills. According to the assessee what was collected by the assessee from its purchasers was not tax but as profits. What the assessee has done is along with the price at which the goods were purchased added the gross profit for the goods and fixed the higher price, which would also include the tax and surcharge on those amounts. Therefore, according to the learned Additional Government Pleader (Taxes) the assessee is collecting the safes tax and the surcharge under the camouflage of profit. It was further submitted that the assessee is not only collecting the tax and the surcharge paid by it to its sellers, but also added further amount by way of tax to its purchasers. Under section22(1) of the Act, no person who is not a registered dealer shall collect any amount by way of tax or purporting to be by way of tax under the Act and no registered dealer shall make any such collection except in accordance with the provisions of this Act and the Rules made thereunder. According to the learned Additional Government Pleader (Taxes), what was collected by the assessee is purporting to be by way of tax under this Act. Therefore, the assessee is liable to penalty under section22(2) of the Act. According to the learned Additional Government Pleader (Taxes) it is not correct on the part of the assessee to state that the amount collected by it by way of tax and surcharge is nothing but part of profit. According to the Additional Government Pleader (Taxes) virtually it amounts to exact tax and surcharge payable an the sale price fixed by the assessee. In order to support the abovesaid contention, the learned Additional Government Pleader (Taxes), relied upon a decision of this Court rendered in Steel Sales Organisation v. State of Tamil Nadu. The learned Additional Government Pleader (Taxes) further pointed out that even though the sales tax and surcharge were collected under different name, that would not absolve the assessee from paying penalty under section22(2) of the Act. The learned Additional Government Pleader (Taxes) further submitted that the decision reported in Metal Sales Corporation v. Joint Commercial Tax Officer, Harbour III Assessment Circlewould not be applicable to the facts of this case because, according to the facts arising in the present case, what was collected by the assessee was nothing but the sales tax and the surcharge payable on the price for the goods fixed by the assessee. For these reasons, it was submitted that the Tribunal was not correct in holding that what was collected by the assessee in the name of sales tax and surcharge are not the sales tax and surcharge, but only a part of profit. On verification, the assessing authority clearly found that the assessee collected 8.4 per cent. and 6.4 per cent by way of sales tax and surcharge respectively. The extra amount collected by the assessee over and above what was paid by the assessee is exactly the same as the amount equal to tax and surcharge at the rate of 8.4 per cent. and 6.4 per cent., hence it cannot be considered as a coincidence as alleged by the assessee. In view of the foregoing reasons the learned Additional Government Pleader (Taxes) submitted that the Tribunal was not correct in deleting the penalty levied under section22(2) of the Act.

(3.) WE have heard the rival submissions.