G. PUSHPALATHA v. STATE OF KERALA

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** **THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE** **WEDNESDAY, THE 11TH DAY OF DECEMBER 2013/20TH AGRAHAYANA, 1935** ## **ST.Rev.No. 94 of 2012 ()** **-------------------------(AGAINST THE ORDER IN TA.NO. 79/2011 OF KERALA SALES TAX APPELLATE TRIBUNAL, KOTTAYAM DATED 31-05-2012)** **------------------------------** ## **REVISION PETITIONER :** **------------------------------------** **G.PUSHPALATHA, HOTEL MAHARAJA, ERUMELY, KOTTAYAM DISTRICT.** **BY ADVS.SRI.HARISANKAR V. MENON SRI.MAHESH V.MENON SMT.MEERA V.MENON** **RESPONDENT :** **----------------------------** **STATE OF KERALA, REP. BY ITS SECRETARY, TAXES DEPT, THIRUVANANTHAPURAM .** ## **BY GOVERNMENT PLEADER SRI.BOBBY JOHN PULIKKAPARAMBIL** **THIS SALES TAX REVISION HAVING COME UP FOR ADMISSION ON 11-12-2013, ALONG WITH STRV. 96 OF 2012 AND CONNECTED CASES, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** **sts** **ST.Rev..No. 94 of 2012** ## **APPENDIX** ## **PETITIONER'S ANNEXURES:** **ANNEX A COPY OF THE ORDER ISSUED BY THE COMMERCIAL TAX OFFICER, MAVELIKKARA FOR THE YEAR 2006-07, DATED 25/03/2011 ANNEX B COPY OF THE APPELLATE ORDER PASSED BY THE DY. COMMISSIONER (APPEALS), KOLLAM, DATED 17/09/2011 ANNEX -AC COPY OF THE ORDER OF THE SALES TAX APPELLATE TRIBUNAL, KOTTAYAM, DATED 31/05/2012** ## **RESPONDENT'S ANNEXURES: NIL** ## **/TRUE COPY/** ## **P.A.TO.JUDGE** **sts** **MANJULA CHELLUR, C.J. & A.M.SHAFFIQUE, J. -------------------------------------S.T.REV. Nos. 94, 96, 97 & 99 OF 2012 ------------------------------------Dated this the 11[th] day of December, 2013** ## **O R D E R ~~~~~~~** ## **Manjula Chellur, C.J.** The above Revision Petitions pertain to assessment years 2006-2007 to 2009-2010. The facts that led to the filing of the above Revision Petitions are as under: 2. Revision petitioner was running a bar attached hotel at Erumeli. She was on the roles of Commercial Tax Officer, so far as payment of sales tax. She opted for compounding of tax as provided under Section 7 of Kerala General Sales Tax Act, 1963 (for short, 'KGST Act') with reference to the sales turn over of foreign liquor. The same came to be accepted and as per the procedure, a demand notice was sent to the revision petitioner. In terms of demand notice, tax was also paid by the revision petitioner for the above assessment years. Later on, assessing officer S.T.Rev. Nos. 94/2012 & connected cases 2 proceeded to pass orders at Annexure-A opining that opening stock was not taken into consideration while permitting the application of the assessee to compound under Section 7 of the KGST Act. 3. Though assessee raised protest regarding issue of non-consideration of opening stock, the first appellate authority and the second appellate authority did not accept the same placing reliance on the latest judgment of this Court reported in **Sannidhan Bar and Restaurant v. State of Kerala** [2011 (42) VST 352 (Kerala)]. The question is whether such second order at Annexure-A is barred by limitation as contemplated under Section 43. Though such a challenge was raised by the assessee before the Tribunal, though referred to in the orders by the Tribunal, surprisingly, no finding, whatsoever, was given on the said ground of limitation. Aggrieved by the orders of the Tribunal, the present revision petitions are filed. S.T.Rev. Nos. 94/2012 & connected cases 3 4. Learned counsel appearing for the revision petitioner fairly submits, in the light of **Sannidhan Bar and Restaurant's** case, so far as consideration of opening stock even for the purpose of compounding rate of tax, he has no challenge on the said issue, but, so far as limitation question, according to him, Annexure-A is barred by limitation in the light of provisions of period of three years as contemplated under Section 43. 5. As against this, learned Government Pleader brings to our notice Sections 7, 17 and 19 of the Act. According to learned Government Pleader, unless it is a rectification order, period of limitation contemplated under Section 43 would not come to the aid of assessee. Therefore, in the present case, the order under challenge cannot be considered as an order under Section 43 of the Act as no assessment order, whatsoever, would be made like regular assessment. So far as compounding provisions S.T.Rev. Nos. 94/2012 & connected cases 4 are concerned, he took us through Sections 17 and 19 with reference to procedure of compounding rate at Section 7. He also relies upon the last paragraph in the judgment of **Sannidhan Bar and Restaurant's** case which reads as under: “Before proceeding to examine whether the officer has really rectified a mistake in the original assessment while exercising powers under section 43, we have to consider whether the original assessment is incorrect and if so whether it has happened on account of mistake committed by the assessing officer which could be rectified in exercise of powers under section 43. A plain reading of the above section makes it clear that the scheme of payment of tax at compounded rate under the said provision is a substitute for payment of turnover tax under section 5(2) of the Act. While the turnover tax payable under the normal provision, that is charging section 5(2) is at the compounded rate on the actual sales turnover, the tax payable under the compounded scheme in lieu thereof under section 7 is based on the purchase turnover. Obviously both the provisions provide for payment of turnover tax on the very same liquor sold in the relevant year because under S.T.Rev. Nos. 94/2012 & connected cases 5 the normal scheme tax is payable on the sales turnover and under the compounding scheme tax is payable based on the purchase price of the very same liquor. Therefore purchase price referred to in the section above extracted is the purchase price of the entire liquor sold during the relevant year, that is 2005-06 which includes the value of the opening stock of liquor with the purchases made in the year after excluding the value of closing stock. In any case, the purchase price referred to in section 7 is the purchase price of the entire liquor sold during the relevant year, which includes opening stock as well. So much so, the original assessment completed without taking into account the purchase value of the opening stock is a patent mistake which could be rectified under Section 43. We are of the view that where the assessment is made patently against the mandatory provisions, it could be corrected in rectification proceedings under Section 43. In our view, this is a fit case for rectifying the assessment originally done wrongly. We therefore uphold the order of the Tribunal on the jurisdiction aspect as well as on the merits. Consequently S.T.Revision is dismissed.” S.T.Rev. Nos. 94/2012 & connected cases 6 6. As a matter of fact, the Bench was considering the assessment with reference to payment of turn over tax under Section 5(2) of the KGST Act. The original assessment was completed without taking into account the purchase value of opening stock. This was considered as patent error apparent on the face of record falling under Section 43. In other words, their Lordships held that such a mistake could be rectified by taking recourse to Section 43 of the Act. According to learned Government Pleader, only if it is a regular assessment, such rectification order under Section 43 is possible. Therefore, in the present case, such rectification is not possible and the order cannot be considered as an order under Section 43 in the absence of any procedure adopted as contemplated under Section 17 of the Act. 7. As against this, learned counsel appearing for the revision petitioner took us through two judgments: ## (i) **State of Kerala v. Builders Association of India** S.T.Rev. Nos. 94/2012 & connected cases 7 [1997(1) KLT 88 (SC)] which reads as under: “It is only an alternative method of ascertaining the tax payable, which may be availed of by a contractor if he thinks it advantageous to him. It must be remembered that the analogous system of alternate method of taxation evolved by certain Stage Legislatures in the matter of levy of entertainment tax has been upheld by this Court in Venkateswara Theatre v. State of Andhra Pradesh JT 1993(3) SC 270 = 1993(3) SCC 677. The rough and ready method evolved by the impugned sub-ss for ascertaining the tax payable under S.5(1)(iv) of the Act cannot be said to be beyond the legislative competence of the State or violative of clause (29A) of Art. 366 either. The Constitution does not preclude the legislature from evolving such alternate, simplified and hassle-free method of assessment of tax payable, making it optional for the assessee. The object of sub-ss. (7) and (7A) is the same as that of S.5(1)(iv); it is only that they follow a different route to arrive at the same destination. Several taxing enactments contain provisions for composition of tax liability which may sometimes be in the interest of both the Revenue and the assessees. It must also be remembered that in the field of taxation, the legislature must be allowed greater 'play in the joints', S.T.Rev. Nos. 94/2012 & connected cases 8 as it is called. Allowance must also be made for “trial and error” by the legislature, as has been held in R.K.Garg v. Union of India [1981(4) SCC 675”. ii) and **Parkkattil Aleyamma v. S.T.O.** [1993 (vol.91) STC 518] which reads as under: “6. What sub-section (14) does is to obviate the necessity for determination of taxable turnover by examination of the accounts and the records, and the completion of assessment on that basis. The amount paid at 20 per cent of the kist is in lieu of the tax payable on the turnover determined for the purposes of clause (v) of sub-section (1) of section 5. The effect of section 7(14) is to fictionally fix the turnover, as also the tax payable, without the assessee being put to the difficulty of going through the process of assessment. It provides only for payment of the lump sum of 20 per cent, less the purchase tax paid, in lieu of what is payable under section 5(1). It is not a complete discharge of all the liabilities which the State may impose under the powers vested in it under entry 54 of List II of the Seventh Schedule to the Constitution. Surcharge and additional tax are payable under separate enactments and turnover tax is payable under a different section, namely, subsection (2A) of section 5, all referable to S.T.Rev. Nos. 94/2012 & connected cases 9 the said entry 54. No intention is discernible in sub-section (14) to do away with these other levies in case compounding is opted for under it. That is limited to the tax payable under section 5(1)(v) and not for anything else. Demand for surcharge, turnover tax or additional tax is not therefore hit by the compounding under section 7(14).” Reading of the above two judgments clearly indicates how under Section 7 so far as compounding rate of tax, option is to be exercised by the assessee, whether it has to be considered as a replacement of regular assessment or in lieu of regular assessment. 8. Having regard to the principles laid down by the Apex Court as stated above, rectification of assessment, especially, non-consideration of purchase value of opening stock also can fall under the category of error apparent on face of record. In the light of the above observation, the Tribunal has to consider the issue with reference to factual situation and then decide whether the claim made under Annexure-A is S.T.Rev. Nos. 94/2012 & connected cases 10 barred by limitation as contemplated under Section 43 or not. With these observations, the orders of the Tribunal are set aside and matters are remanded back to the Tribunal for fresh consideration. Sd/- **MANJULA CHELLUR, CHIEF JUSTICE.** ## **Sd/** **A.M.SHAFFIQUE, JUDGE.** ps/12/12