RAJAN TEXTILES Vs. STATE OF TAMIL NADU

JUDGEMENT

(1.) THIS is a batch of cases in which the facts are similar and the points arising also are the same, except that they related to different assessment years and different parties. The assessees in all these cases were doing business in the manufacure and sale and handloom cloth goods. Under the Export promotion scheme, they became entitled and were given certain import licences for various amounts for the import of ark silk yarn. The condition of the licences is that such art silk yarn imported was to be used by them in the manufacture of handloom cloth and the manufactures were prohibited from selling the art silk yarn so imported or transferring the licences themselves. The sales of handloom cloth are exempt from the payment of sales-tax. In the accounts maintained by them, the assessee had shown the import of the art silk yarn and the accounts were written, as if they were used by them in the manufacture of handloom cloth. Some of the assesses submitted their returns and claimed exemption on the ground that the imported art silk yarns were utilised by them in the course of manufacture of handloom cloth and this was accepted by the assessing authorities and they were not assessed. The others did not submit any return in Form A1. But on the basis of the routing check of the accounts made during the year, and on the basis that the assessees had written that the imported art silk yarn were utilised in the manufacture of handloom, no action was taken by the AO. But later on, on certain information gathered from the Special Police Establishment, which had raided the assessees' premises for contravention of the conditions of the import license and the statement given by the assessees before the officials to the IT Department, the AO initiated proceedings under the ST Act and issued notices to all the assessees to produce their accounts and prove that they have actually used the imported goods for manufacture of handloom cloth and that they actually sold such manufactured handloom cloth. Though sufficient opportunity was given to the petitioners, they did not produce the records or any proof to show that the imported gods were used in the manufacture of handloom cloth and sold as such handloom cloth locally or by export. The AO accordingly assessed them to pay Sales-tax, In determing the turnover in each of these cases, the AO had taken the face value of the import licences and added 1 1/2 times that value towards the excise duty, commission, freight charges etc., and profit and determined the total taxable turnover and levied tax at 1 per cent. In all these assessment orders, the AO also levied penalty for not having reported the sales turnover; but quoted the provision under which the penalty is levied as s. 12(3) in all the cases.

(2.) THE assessees preferred appeals to the AAC. Pending these appeals, they also filed writ petition in this Court under Art. 226 of the Constitution. Various contentions were raised in this Court including a point that the levy of penalty under s. 12(3) was not valid and that the assessing authority had no jurisdiction to levy the penalty under that provision. A Division Bench of this Court in the decision reported in Ovekee Textile vs. The Dy. CTO, Tiruchengode (1971) 27 STC 439), while overruling all the other objection, held that in cases where assessments could only be under s. 16 by reason of an earlier order of assessment under s. 12 or otherwise, that portion of the order levying penalty was liable to be set aside on the ground that there was no finding in the assessment order and that the escarpment of the turnover was the result of an over culpable act on the part of the assessee as required under s. 16(2). But in all cases where the proceedings were initiated under s. 12(2), the Division Bench held that the penalty levied was valid and had to be sustained. When the assessee questioned the quantum of penalty levied, this Court declined to interfere with the quantum of penalty imposed under s. 12(3), on the ground that could not be done in exercise of our jurisdiction under Art. 226 of the Constitution. The result of it was the penalty order made in the proceedings be initiated or shall be deemed to have been initiated under s. 16 were set aside and in the appeals before the AAC, which were pending, only the merits of the assessment and the quantum of penalty under s. 12(3) was left to be decided by the AAC.

(3.) THE assessees preferred appeals before the ST Tribunal. The Tribunal dismissed the appeals, confirming the order of the AAC.