LUCKY MILLS Vs. STATE OF TAMIL NADU

JUDGEMENT

(1.) THE appellant herein is a dealer in groundnut oil, oil-cakes, etc. It was finally assessed for the year 1977-78 on a total and taxable turnover of Rs. 28,49,581 and Rs. 16,39,230 respectively. On verification of the assessment records of the dealers for the year 1977-78 it was found that exemption was allowed on the alleged second purchase of 151 bags and 64 kgs. of groundnut kernel effected from Parameswari & Co. , Pudukottai for Rs. 41,056. 28. It was later found that the above persons were decorticators acting as mediators between agriculturists who brought groundnut to their mills for decortication and the purchasers. Inasmuch as Parameswari & Co. , were not dealers the next buyers-the appellants were considered as first sellers (?) in the State and were assessed to tax at 3 per cent. THE Joint Commissioner of Commercial Taxes II, examined the above case with reference to the available records. It is seen from the records that collection of tax by the decorticators who is not a dealer is contrary to section 22 (1) of the Tamil Nadu General Sales Tax Act. Hence the Joint Commissioner held that provisions of section 22 (1) are attracted. Parameswari & Co. from whom the assessee had purchased was factually found to be a decorticator and mediators. THE assessee was the first purchaser and therefore it is liable to pay tax. THErefore the Joint Commissioner held that exemption granted was not in order. Hence he upheld the revocation made by the assessing officer. THE order of the Appellate Assistant Commissioner granting exemption was set aside and the order of the assessing officer was restored. It is against that order the present appeal has been preferred by the assessee-Lucky Mills.

(2.) LEARNED counsel appearing for the appellant submitted as under : The tax leviable on the sale of groundnut is only single point tax. The Joint Commissioner failed to note that the appellant is only a second seller (?) in the State and, therefore, the appellant is entitled to claim exemption. Parameswari & Co. is a registered dealer from whom the appellant has purchased 141 bags of groundnut kernel for the value of Rs. 41,056. The said Parameswari & Co. is not a decorticator or a mediator between agriculturists and purchasers. The appellant produced the bills to show that Parameswari & Co. collected tax and paid the same to the Revenue. Without initiating penalty proceeding against Parameswari & Co. the tax paid by it cannot be converted as payment towards penalty in the proceedings initiated against the present assessee. In the case of Parameswari & Co. tax was paid since it happened to be the first seller and that the assessment made in the case of Parameswari & Co. was not disturbed and the assessment has become final. While so, in the suo motu proceeding initiated by the Joint Commissioner, it is not possible to hold that the said Parameswari & Co. is not a registered dealer and, therefore, the tax collected by it is illegal and the tax paid by it would be treated as penalty payable to the State. The Joint Commissioner was not correct in holding that the purchase by Lucky Mills is the first purchase and therefore Parameswari & Co. , is liable to pay tax. Penalty under section 22 (1) and (2) of the Act was not levied by the authorities below, and the Joint Commissioner who is not the assessing authority cannot levy penalty on Parameswari & Co. , who is not a party to the present proceeding. Without giving opportunity of being beard to the said Parameswari & Co. The tax paid by it cannot be treated as payment towards penalty in the proceedings initiated against Lucky Mills. For all these reasons, it was submitted that the Joint Commissioner was not correct in reversing the order passed by the Appellate Assistant Commissioner, in granting exemption.

(3.) SO also in Govindan & Co. v. State of Tamil Nadu [1975] 35 STC 50 (Mad.) it was held that "to claim the benefit of tax on the ground that the sales effected by the assessees are second sales, the assessees need not show that their sellers have in fact paid tax. It is enough for them to show that the tax is really payable by their sellers". This decision got the approval of the Supreme Court, as can be seen in [1994] 93 STC 185 (State of Tamil Nadu v. Raman & Co. ).