(Prayer: TC No. 61 of 2017

Tax Case Revision filed under Section 38 of the TNGST Act, 1959, to set aside the order of Sales Tax Appellate Tribunal, Additional Bench, bench Coimbatore dt.09/07/2012 and passed in Coimbatore Tribunal Appeal No.260/2004.

CMP No. 20390 of 2017

To stay all further proceedings pursuant to the passing of the impugned order by the Appellate tribunal in Coimbatore tribunal appeal No.260/04 dt.09/07/2012 pending disposal of the above TA.)

Dr. G. Jayachandran, J.

(1) The assessee, being aggrieved by the order of the Tribunal dated 09.07.2012, passed in CTA.No.260/2004, confirming the order of the Appellate Authority, dated 21.03.2003, made in A.P.No.234/2002, has filed the above Tax Case Revision under Section 38 of the TNGST Act, 1959.

(2) The learned counsel appearing for the petitioner/assessee contended that during the TNGST regime, the Assessing Officer cannot go by the report of the Inspection Officer and the Inspection Officer should make a physical verification of the stock before proceeding to levy tax. In the instant case, the petitioner, dealer in Marbles, tiles and granites etc., is properly maintaining the stock and other accounts and regularly filing the monthly returns. While so, for the Assessment Year 1998-99, based on the Inspection Report, the Assessment Order was passed, based on the visual inspection of the stock without physical verification. The Assessment order, challenged before the Appellate Authority, was partly allowed insofar as ceramic tiles, by accepting the explanation given by the assessee that the freight charges paid, was only to gain commission from the other dealers outside the State and there was no transaction of goods as reflected in document D7, seized during inspection. However, the Appellate Authority, failed to apply the same logic to cuddapah stones and granites. Hence, an appeal before the Tribunal was preferred. But the Tribunal failed to appreciate the grounds of appeal raised and dismissed the same. Hence, the second appeal by way of Tax Case Revision before this Court.

(3) At the time of admission, this Court has formulated the following substantial questions of law:-

                    [a]Whether, on the facts and in the circumstances of the case, the Tribunal was right in having merely endorsed the findings of the Enforcement Wing with regard to the alleged stock variation when it was humanly impossible to measure huge stock of goods nearly 97,000 sq.ft., taken by eye estimation in a span of just about 7 hours?

                    [b]Whether, on the facts and in the circumstances of the case, the Tribunal erred in having overlooked the fact that the same 1st Appellate Authority had deleted the stock variation in respect of Ceramic Tiles but sustained the stock variation in respect of Marbles, Cuddapah and Granites which are culled out from the same inspection conducted on 07.12.1998 by the Enforcement Wing Officials?

                    [c]Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in having upheld the contention of the 1st Appellate Authority in applying a different yardstick for different commodities with regard to the alleged stock variation arising out of the inspection conducted on the same day?

(4) The learned counsel for the revision petitioner/assessee contended that a huge stock piled up in the godown of the assessee cannot be physically verified within six hours and it will take at least three days. While so, the inspection report, admittedly, pursuant to the inspection of the stock within six hours, is being relied on by the Assessing Officer, even without he making the stock verification personally to satisfy the veracity of the Inspection Officer’s report. The Appellate Authority, while accepting the explanation given by the assessee in respect of the slips recovered during the inspection, particularly, the document D7, ought to have applied the same logic in respect of marbles, cuddapah and granites. Omission to apply the logic uniformly to all the products, has rendered the finding of the Tribunal, erroneous.

(5) The learned counsel appearing for the Department, on the other hand submitted that the Appellate Authority, being satisfied with the explanation of the assessee considering the manufacturer of the ceramic tiles and dealers throughout the country, that the transfer of goods on payment of freight charges was only for the sake of commission, was accepted and the Appellate Authority excluded the tax additionals and penalty, in respect of ceramic tiles. However, in the case of Cuddapah stones and granites, since the verification was made physically and the actual suppression being identified to the tune of Rs.4,61,860/-, the consequential order of additions and penalties were imposed.

(6) On a perusal of the impugned order of the Appellate Authority, we find that the break-up of the alleged suppression in respect of marble, Cuddapah stones, ceramic tiles and granites, at the time of inspection and stock verification, is found to be as below:-