S.T.REV No. 196 of 2005 · Kerala High Court

H.L.DATTU, C.J. & A.K.BASHEER, J. ------------------------------------------- S.T.Rev. No.196 of 2005 ------------------------------------------ Dated, this the 26th day of June, 2008ORDERH.L.Dattu, C.J.Petitioner is a dealer in rice and other provisions. He isregistered under the provisions of the Kerala General Sales Tax Act, 1963('the KGST Act' for short) and the Central Sales Tax Act, 1956 ('the CSTAct' for short).

For the assessment year 1998-99, the assessee had filedhis annual returns conceding a particular turnover as total and taxableturnover. The assessing authority has rejected the annual returns and alsothe books of accounts produced by the dealer, on the ground that the SalesTax Officer had imposed a penalty against the petitioner for non-filing ofthe monthly returns and also had levied penalty on the ground that there isunaccounted purchases and sales of goods.

After rejection of the books of accounts, the assessingauthority by way of best judgment assessment has made certain additionsto both purchases and sales of the dealer. Aggrieved by the best judgmentassessment so passed, the assessee had filed appeal before the first S.T.Rev. No.196 of 20052appellate authority, who in turn has modified the orders passed by theassessing authority and has given some relief to the assessee.

The order passed by the first appellate authority had beenquestioned by the assessee by way of second appeal before the Tribunal. Aggrieved by the orders passed by the Tribunal in rejecting the assessee'sappeal, the assessee is before us in this revision petition.

The assessee has framed the following questions of lawfor our consideration and decision. They are as under:

1. The Tribunal found that defect No.2 in theassessment order does not establish any under valuation inthe sale bills issued by the assessee. After having held so, is the Tribunal justified in law in sustaining two timesestimated sale value of the purchase in question to theconceded turnover?2. Defect No.3 pointed out in the assessment orderwas that the petitioner transported goods using invoice inwhich the registration number noted was that of M/s.SakthiTrading Company. M/s.Sakthi Trading Company was thename of the petitioner's business before it was changed asM/s.Super Traders. Registration under the KGST Act isissued in the individual name of the petitioner irrespectiveof the trade name used by him. Therefore the registrationnumber of M/s.Sakthi Trading Company and M/s.SuperTraders is one and the same as the registration is issued to S.T.Rev. No.196 of 20053C.K.Asharaf, who is the proprietor of the business. Therefore is the Tribunal justified in law in holding thatthe petitioner transported the goods using the registrationnumber of another dealer and sustaining the addition madeto the conceded turnover by the assessing authority for thatreason?3. As regards defect No.5 relating to imposition ofpenalty of Rs.1,25,000.00 by the Intelligence Officer(IB), the Tribunal found that pursuant to the remand orderpassed by the Deputy Commissioner in Annexure IIrevisional order, no fresh orders was passed by the Intelligence Officer. In fact the Intelligence Officer hadpassed Annexure IV revised order dated 5.7.2004 reducingthe penalty to Rs.24,502.00 from Rs.1,25,000.00 passedearlier. The said revised order passed by the IntelligenceOfficer was again set aside by the Deputy Commissioner in Annexure VI revisional order. That being the factualposition, is the Tribunal justified in law in sustainingaddition of 3 times of the suppression estimated by theassessing authority to the conceded turnover.

At the time of hearing of the revision petition, Sri.V.P.Sukumar, the learned counsel appearing for the assessee, wouldsubmit, that, he is primarily aggrieved by defect Nos.2 and 5 pointed outby the assessing authority in the pre-assessment notice and theconfirmation of the proposal made therein by the assessing authority. S.T.Rev. No.196 of 200547. Defect No.2 pointed out in the pre-assessment noticepertains to imposition of penalty of Rs.3780/- by the Intelligence Officer, Kasaragod in exercise of his powers under Section 29A of the KGST Actfor under valuation of the purchase of groundnut cake. The IntelligenceOfficer had found that the value shown in Bill No.78 dated 19.7.1998issued by M/s.Narasimhaswamy, Marketers, Karnataka is Rs.4.50 per kg.whereas the prevailing market rate is Rs.7.50 per kg. The assessingauthority in his orders of assessment had estimated the suppression ofsales for this defect at Rs.54,340/- and added four times of the above beingthe probable sales suppression.

The Tribunal in the appeal filed by the assessee has foundthat the addition so made by the assessing authority is excessive andaccordingly has reduced it to two times of the estimated value.

Sri.V.P.Sukumar, learned counsel appearing for therevision petitioner would submit that it is not in the hands of the assesseewith regard to the purchase bill issued by the seller of the commodity. Ifanybody has committed any offence it is only the seller of the groundnutcake who is located in Karnataka and not the purchaser who is within the State of Kerala.

In our opinion, the submission of the learned counsel isdifficult to accept. Dealers under the Act can arrange their affairs in such S.T.Rev. No.196 of 20055a way that their tax liability can be reduced. In the instant case, when themarket value of the groundnut cake was Rs.7.50 per kg., in the purchasebill that was noticed by the Intelligence Officer it was shown only asRs.4.50 per kg. That only means that the bill that was produced by theassessee before the Intelligence Officer of the Department was defectiveand secondly the seller and the purchaser had arranged the affairs in such amanner that their tax liability could be reduced. Keeping this aspect ofthe matter in view, in our opinion, the assessing authority had made certainadditions to the taxable turnover of the dealer and this estimation on thesuppression is reduced by the Tribunal. In a petition filed under Section41 of the KGST Act, normally this Court would not interfere with theorders of best judgment assessment passed by the assessing authority andmodified by the Tribunal, unless those orders are erroneous in law.

In the instant case, as we have already stated, theassessing authority for the purpose of making the estimation of probableomission and suppression in the books of accounts was based on the reportof the Intelligence Officer. It is not the case of the assessee either beforethe assessing authority or before us, that the actual value of purchase ofgroundnut cake at the relevant time was only Rs.4.50 per kg. and notRs.7.50 per kg. which was the prevailing market rate at the relevant pointof time. In that view of the matter we cannot say that the guess work made S.T.Rev. No.196 of 20056by the assessing authority does not have any rational basis whatsoever.

Now we come to defect No.5 that was pointed out by theassessing authority in the pre-assessment notice issued by him.

The Sales Tax Officer in exercise of his powers under Section 45A(1)(b) of the KGST Act had imposed penalty of Rs.1,25,000/-for the offence of failure to maintain true and complete accounts foreffecting the purchase of groundnut oil cake worth Rs.16,04,700/-. In theorders of assessment passed, the assessing authority had found that fivebills amounting to Rs.2,35,600/- were not seen accounted. Accordingly itadded four times of the estimated value of sale of Rs.2,70,940/- towardsthe probable omission and suppression and accordingly added a sum ofRs.10, 83,760/- to the conceded turnover. The estimation made by theassessing authority has been found to be excessive and therefore, the Tribunal has reduced it to three times of the estimated sale value ofRs.2,70,940/-.

In the instant case, though the Sales Tax Officer whileimposing a penalty of Rs.1,25,000/- had observed in his order that theassessee is not maintaining true and complete accounts of the purchase ofgroundnut oil cake worth Rs.16,04,700/-, the assessing authority aftergoing through the bills produced by the assessee had not accepted theversion of the Sales Tax Officer who had imposed the penalty under S.T.Rev. No.196 of 20057Section 45A(1)(b) of the KGST Act. Since the assessee had notaccounted a sum of Rs.2,35,600/- which would reflect the purchase ofgroundnut oil cake in the five bills, an estimation is made by the assessingauthority not only by adding the gross profit but also the probable omissionand suppression of sales. Even this estimation is also modified by the Tribunal again on the ground that the addition so made is excessive. In arevision filed under Section 41 of the KGST Act this Court would notinterfere with the orders passed by the Tribunal, unless the Tribunal haseither decided erroneously or failed to decide any question of law. In thatview of the matter we cannot take any exception to the orders passed bythe appellate Tribunal.

In view of the above discussion, the questions of lawraised by the assessee requires to be answered against the assessee and infavour of the revenue. Accordingly we reject the revision petition.

I.A.No.1061 of 2005 also stands rejected. Ordered accordingly. (H.L.DATTU) CHIEF JUSTICE (A.K.BASHEER) JUDGE vns