M/S. Technoglobe Vs
State of Tamil Nadu & Ors.
JUDGMENT
D.K. JAIN, J.:
1.
Challenge,
in this civil appeal, is to the judgment and order dated 1st August 2000,
delivered by the High Court of Judicature at Madras in W.P. No. 12798 of 2000,
whereby the High Court has affirmed the levy of sales tax on the appellant on
sale of goods made by it to respondent No.2 herein, in the assessment years
1994-95 and 1995-96.
2.
Briefly
stated, the facts necessary for the disposal of this appeal, are as follows :
In the year 1992,
respondent No. 1, the State of Tamil Nadu sanctioned a "film city"
project, for which respondent No. 2 viz. the Tamil Nadu Film Development Corporation,
(for short "the Corporation") a public sector undertaking, was
designated as the nodal agency, responsible for administering and implementing
the said project. Pursuant thereto, a tender was floated by the Corporation for
supply of various equipments for the said film city project. After a successful
bid, the appellant was awarded the contract. In furtherance thereof, on 28th June,
1994, the Corporation issued various purchase orders to the appellant,
accompanied by Certificates of sale which, inter- alia, stated: "This is
to certify that the Sales Tax for the equipments purchased for the Film City
Project at Madras has been exempted by the Tamil Nadu Government."
3.
Vide
assessment order dated 31st January 1996, the Commercial Tax Officer (for short
"CTO") exempted the sales made by the appellant to the Corporation in
the assessment year 1994-95 from the levy of sales tax.
4.
However,
in relation to the assessment year 1995-96, the CTO, vide his order dated 26th
June 1997, rejected the appellant's claim of exemption on similar sales made by
them to the Corporation, holding that: "There is no exemption granted in
the G.O. cited as stated by the dealers for claiming exemption to the sales
turnover made to the Film Development Corporation. Hence the objection- filed
by the dealers are not accepted."
5.
Accordingly,
the CTO included the entire sales turnover made by the appellant to the
Corporation in the taxable turnover for the said year and subjected the same to
sales tax under Tamil Nadu General Sales Tax Act, 1959 (for short "the
Act"), thereby creating an additional tax demand of `26,57,388/-. In
addition the CTO also imposed a penalty of `39,86,082/- under Section
12(5)(b)(v) of the Act.
6.
Additionally,
vide order dated 29th August 1997, the CTO revised the assessment under the Act
in respect of the year 1994-95, thereby disallowing the exemption on the goods
sold by the appellant to the Corporation, which resulted in additional demand
of tax of `29,75,983/-. A penalty of `44,60,901/- was imposed together with a
penalty of `3,127/- under Section 12(3) read with Section 24(3) of the Act.
7.
Faced
with the threat of recovery of the a fore stated tax demands, the appellant
issued a legal notice to the three respondents herein on 1st February 1999,
requesting, inter alia, the Corporation to furnish the Government Order
granting sales tax exemption, as mentioned in their purchase orders and, in the
alternative to pay the sales tax, penalty and surcharge levied on the appellant
by the CTO. However, there was no response to the said notice from any of the
respondents.
8.
On
1st December 1999, the CTO served a legal notice on the appellant, stating that
since the arrears of sales tax had not been paid, the house property of the
proprietress was being attached, and would be brought to public auction.
9.
The
appellant, thereafter, approached the Tamil Nadu Taxation Special Tribunal (for
short "the Tribunal") praying that the Corporation be directed to pay
the arrears of sales tax, surcharge and penalty levied on them. The Tribunal,
vide its order dated 6th July 2000, rejected the petition of the appellant,
observing that: "As the petitioner themselves are not able to mention that
there is any Government order available granting exemption it appears that
there is no such exemption granted by the Government. Under those circumstances
there is no question of exemption."
10.
Being
aggrieved by the said order, the appellant preferred a writ petition before the
High Court. As afore-mentioned, the High Court has rejected the writ petition
of the appellant, inter alia, holding that: "On consideration, we find
that admittedly, no notification under Section 17 of the Tamil Nadu General
Sales Tax Act has been issued. Therefore, in the absence of any such
notification issued, the petitioner-firm being an assessee is liable to pay the
sales tax and it cannot take advantage of the alleged certificate issued by the
2nd respondent."
11.
Hence
the present appeal.
12.
Mr.
Rajiv Mehta, learned counsel appearing on behalf of the appellant, while
assailing the impugned judgment, strenuously contended that in view of G.O.M.
No. 169 dated 27th June 1994, issued by the Government of Tamil Nadu, the
appellant cannot be made liable for payment of Tax under the Act in respect of
sales to the Corporation. Learned counsel contended that if at all sales tax is
leviable under the Act, it is the Corporation which is liable to pay the same
as in the purchase order issued by them to the appellant it was clearly stated
that "Film City project has been exempted from the payment of Sales Tax by
issuing a separate G.O. (copy will be sent separately). The particulars to that
effect is enclosed with this purchase order." Relying on the said representation
which had been made by a public sector undertaking of the State Government, the
supplies were made by the appellant without charging any sales tax. It was also
urged that in light of Section 26(1) of the Act, the CTO was competent to
recover sales tax from the Corporation, notwithstanding the fact that it is a
public sector undertaking.
13.
Per
contra, Mr. TLV Iyer, learned senior counsel appearing for the respondents
contended that G.O.M. No. 169 Information and Tourism Department, dated 27th
June, 1994 was not issued by the Commercial Taxes Department, and therefore,
the dealer-appellant cannot claim exemption on the basis of the said G.O.M.
Learned counsel contended that under the Act, it is the dealer who is liable to
pay the sales tax, and if there is any contract or understanding between the
dealer and the purchaser regarding payment of tax dues, the Commercial Taxes Department
is not bound by it. If the appellant, so desires, it may recover the amount so
paid by them from the Corporation. Commending us to the decision of this Court
in American Remedies Pvt. Ltd. & Anr. Vs. Government of Andhra Pradesh
& Anr.1, learned counsel contended that it is a settled proposition of law
that the dealer is liable to pay sales tax, [1999] 113 STC 400 (SC)) and it is
immaterial whether or not, he has collected the same from the consumer. Learned
counsel, however, submitted that the Commercial Taxes Department will have no
objection if this Court, in exercise of its jurisdiction under Article 142 of
the Constitution, is inclined to pass an order, directing the Corporation to
discharge the sales tax liability under the Act on the purchases made from the
appellant during the years 1994-95 and 1995-96.
14.
Before
we advert to the rival submissions, it would be expedient to extract relevant
portions of G.O.M. No. 169 Information and Tourism Department dated 27th June
1994, filed before us by learned Counsel for the Corporation. The G.O.M. issued
under the order of the Governor of Tamil Nadu, declares the "Film City
Project" as a Tourism project and grants certain "incentives,
concessions and subsidies for Tourism promotion projects and activities."
It reads: "3. The Government after careful consideration of the proposal
submitted by Special Officer, Film City, declare the `Film City Project' as
`tourism project' for purpose of extending various concessions, incentives and
subsidies as applicable to other industries. The Government also direct that
the following concessions, incentives and subsidies shall be made available to
Film City Project :- ........................................................................
iii) Deferral of sales Tax for a period of 5 years wherever Sales Tax levy is
applicable. .......................................................................
6. This order issues with the concurrence of Industries Commercial Taxes and
Religious Endowments, Energy and Finance Departments vide their U.O. Nos. 12959A/MIG2/94-1
dt.2.5.94, 26/Secy/Per/94-1 dt.3.5.94, 4554/A2/94-1 dt.9.5.94 and 2677/FS/P/94
dt. 2.6.94." (Emphasis supplied by us)
15.
It
is manifest that the said G.O.M. defers payment of sales tax by the proposed
"Film City Project" for a period of five years. It is also plain that
the Government of Tamil Nadu had acceded to the request of the "Film
City" for granting it various concessions, incentives etc. with the concurrence
of different departments, which included the Department of Commercial Taxes as
well.
16.
At
this juncture itself, it will be useful to refer to Section 17-A of the Act,
which empowers the State Government to notify deferred payment of tax for new
industries etc. The Section reads as under:
"17-A. Power of
Government to notify deferred payment of tax for new industries, etc: (1) The Government
may, in such circumstances and subject to such conditions as may be prescribed,
by notification issued whether prospectively or retrospectively, defer the payment
by any new industrial unit or sick unit or sick textile mill of the whole or
any part of the tax payable in respect of any period: Provided that such
retrospective effect shall not be earlier than the 9th May, 1988. 8 (1-A) The
Government may, by general or special order, authorize the Territorial
Assistant Commissioner to exercise such of their powers specified in
sub-section (1). (2) Notwithstanding anything contained in this Act, the
deferred payment of tax under sub-section (1) or sub-section (1-A) shall not
attract interest under sub- section (3) of section 24 provided the conditions
laid down for payment of the tax deferred are satisfied." Thus, it is
clear that under certain circumstances the State Government has the power to
issue notification for deferment of payment of the whole or any part of the tax
payable in respect of any period. It bears repetition that the State Government
in exercise of its jurisdiction under Section 17-A of the Act was competent to
issue G.O.M. No.169 dated 27th June, 1994. It is also evident from the notification
that it was issued with the "concurrence" of Commercial Taxes and
Finance Departments, besides others.
17.
Section
3 of the Act provides for the levy of sales tax on sales or purchase of goods
by a dealer. The relevant part thereof reads as under: "3. Levy of taxes
on sales or purchases of goods.- (1)(a)(i) Every dealer, other than the dealer,
casual trader or agent of a non-resident dealer referred to in clause (ii), whose
total turnover for a year exceeds three lakhs of rupees ; and 9 (ii) every
dealer in bullion, gold, silver and platinum jewellery including articles
thereof and worn-out or beaten jewellery and precious stones and every casual
trader or agent of a non-resident dealer, whatever be his turnover for the
year, shall pay tax for each year in accordance with the provisions of this Act
; (1)(b) Notwithstanding anything contained in clause (a), every dealer (other
than a dealer in bullion, gold, silver, platinum jewellery including articles
thereof and worn-out or beaten jewellery and precious stones and a casual
trader or agent of a non-resident dealer) whose total turnover for a year
exceeds three lakhs of rupees but does not exceed ten lakhs of rupees shall not
be liable to pay tax on the first three lakhs of rupees of his total turnover,
provided that no amount by way of tax or purporting to be by way of tax has
been collected by him under this Act in respect of that first three lakhs of
rupees."
18.
It
is abundantly clear that under Section 3 of the Act, the liability to pay sales
tax in accordance with the provisions of the Act is cast on the dealer,
irrespective of the fact whether he has collected it from the consumer or not.
Therefore, the plea of the appellant that they had not charged and collected
any sales tax from the Corporation is of no consequence. However, the issue for
consideration in the present case relates to the effect of the deferral scheme
envisaged in G.O.M. No. 169 on the liability of the appellant to pay sales tax
on the sales made by them to the Corporation for the assessment years 1994-95
and 1995-96.
19.
It
is evident from the afore-extracted orders that all the authorities below,
particularly the Tribunal, have proceeded on the premise that no notification
under Section 17 of the Act, which clothes the State Government with the power
to notify exemptions and reductions of tax in respect of any tax payable under
the Act, had been issued. Therefore, according to the Tribunal, in the absence
of such a notification, the appellant could not take advantage of the
Certificate allegedly issued by the Corporation, certifying that sales tax on
the equipment purchased for the film city project had been exempted by the
Tamil Nadu Government and avoid payment of sales tax on the sales made to them
in the years 1994 and 1995. It is quite intriguing as to why, in response to
the legal notice issued by the appellant to the three respondents, the
Corporation, in particular, did not furnish a copy of the said notification to
them or produce it before the Tribunal where it was represented by a Government
pleader. At the same time, it is equally surprising as to why the appellant did
not make any effort to produce a copy of the notification, a public document
when they were visited with huge sales tax demands and were threatened with
auction of their immovable property. Be that as it may, we are of the opinion
that notification dated 27th June, 1994, placed on record by the respondents
has a significant bearing on the a forestated issue before us. As noticed
above, the notification contemplates deferment of sales tax for a period of 5
years wherever sales tax levy is applicable on the purchases for the film city
project. Prima facie, there is some force in the stand of the appellant that
the notification would cover the sales made by them to the Corporation in the
years 1994-95 and 1995-96 which fall in the stipulated period of five years. We
are conscious that ordinarily this Court would be loathe to examine contentions
of facts based on evidence, advanced for the first time before this Court
without there being any adjudication by the High Court on the same. (See:
Sardar Govindrao Mahadik & Anr. Vs. Devi Sahai & Ors.2). However, in
the present case, the said notification being a public document, produced by
one of the contesting respondents, it would be travesty of justice if the said
document is not taken into consideration for determining the issue, which
admittedly surrounded the same notification.
20.
In
light of the aforestated factual scenario, we are of the opinion that since
none of the authorities below had examined the scope and implication of the
said notification, it would be expedient and just to remand the case back to
the Tribunal, to examine all the aspects of levy (1982) 1 SCC 237 of sales tax
on the subject sales, in the said two years, keeping in view the scope and
ambit of the said notification as also the fact that the period for which the
payment of sales tax was deferred has also expired.
21.
For
the foregoing reasons, the appeal is allowed; the impugned judgment is set
aside and the matter is remitted back to the Tribunal for fresh consideration,
particularly in light of the notification dated 27th June, 1994. The parties
are left to bear their respective costs.
.................................................
J (D.K. JAIN, J.)
.................................................J
(DR. MUKUNDAKAM SHARMA, J.)
................................................J
(R.M. LODHA, J.)
NEW
DELHI;
NOVEMBER
16, 2010.
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