G.O.Jacob, Jose Coffee Works & Liz Food Products, Kalady v. State of Kerala

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMAN & THE HONOURABLE MR. JUSTICE P.S.GOPINATHAN THURSDAY, THE 8TH APRIL 2010 / 18TH CHAITHRA 1932 ST.Rev..No. 133 of 2009() ------------------------TA.72/2008 OF KERALA SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, ERNAKULAM. .................... PETITIONER/APPELLANT IN TA ----------------- G.O.JACOB, JOSE COFFEE WORKS & LIZ FOOD PRODUCTS, KALADY, REPRESENTED BY ITS PROPRIETOR, MR.G.O.JACOB. BY ADV. SRI.E.K.NANDAKUMAR SRI.A.K.JAYASANKAR NAMBIAR SRI.K.JOHN MATHAI SRI.P.BENNY THOMAS SRI.ANIL D. NAIR RESPONDENT(S): RESPONDENT IN T A -------------------------------- STATE OF KERALA, REPRESENTED BY THE SECRETARY TAXES DEPARTMENT, THIRUVANANTHAPURAM BY GOVT. PLEADER SRI.MOHAMMED RAFIQ THIS SALES TAX REVISION HAVING COME UP FOR ADMISSION ON 08/04/2010, ALONG WITH STRV NO. 135 OF 2009, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: ## **P.R.RAMAN & P.S.GOPINATHAN, JJ.** ------------------------------- ## **Sales Tax Revision Nos.133 & 135 of 2009** ------------------------------- Dated this the 8[th] day of April, 2010 ## **O R D E R** ## **Raman, J.** These two revisions arise out of a common order passed by the Deputy Commissiner (Appeals), Ernakulam, in T.A.Nos.72/2008 and 73/2008. Along with said appeals, T.A.No. 108/2008 filed by the State was also considered and disposed of. The matter relates to assessment years 2003-2004 and 20042005. The appeal filed by the State however relates only to the assessment year 2004-2005. The assessee raised common grounds challenging the order of the first appellate authority before the Tribunal. It was contended that the order was vitiated by error of judgment and predetermined decision to tax on the turnover returned. The revision petitioner is running an SSI unit making curry powder and coffee powder, eligible for SSI exemption, the period of which expired on 8.6.2004. The assessment for the years 2003-2004 & 2004-2005 were completed only after making a huge addition to the total 2 Sales Tax Revision Nos.133 & 135 of 2009 turnover. One of the reasons for addition was non-maintenance of production cum stock register. The other reason pointed out by the assessing authority was variation in direct expenses such as wages, electricity bill, packing materials, transporting charges and loading & unloading. According to the revision petitioner, there is no relationship between sales and direct and indirect expenses, and the expenses booked in the accounts are based on accounting policies adopted in the accounts. Another reason for addition to sales by the assessing officer is non-accounting of transporting charges in the books of accounts. The revision petitioner did not pay separately transporting charges, but the rate is inclusive of transporting charges up to his godown. According to him, he is not doing well the coffee powder business and he had been paying transporting charges for the occasional purchases effected. The major business of the revision petitioner is curry powder and the purchase prices of raw materials are inclusive of transporting charges. 3 Sales Tax Revision Nos.133 & 135 of 2009 2. For the year 2004-2005, yet another ground was raised contending that during the year under assessment, the Intelligence Officer had inspected the business premises of the assessee, but did not detect any serious defects at the time of inspection and the irregularity detected was minor in nature, i.e., difference in the stock of chilly coriander and masala powders. Hence, additions were made to the total turnover based on declaration from the check post. The Tribunal after considering the various contentions raised found that there was huge variation, as found by the assessing officer, on the turnover as per the returns and books of accounts which were not satisfactorily explained. 3. Admittedly, the revision petitioner is a dealer in coffee powder, curry powder, chilli powder etc. For the assessment year 2003-2004, the assessing authority after verification of books of accounts had found that there was discrepancy in the accounts; that no manufacturing account was Sales Tax Revision Nos.133 & 135 of 2009 **==> picture [7 x 9] intentionally omitted <==** maintained; that transporting charges accounted was disproportionate etc. The first appellate authority, however, reduced the additions made from Rs.5 lakhs to Rs.2 lakhs. The Tribunal, in such circumstances, found no reason to grant further deduction in the estimation. It was found that assessee did not prove that there was no variation as found by the assessing authority and admittedly no manufacturing account was maintained which is mandatory as per law. For the year 2004-2005, inspection was conducted on the business premises of the assessee. Some additional defects were also found. After considering those defects, the first appellate authority give reasonable deduction in the estimation of turnover. Despite reconsideration of the matter, the Tribunal did not find any reason to grant further deduction in the matter of estimation and additions made. The Tribunal also found that no further additions under Section 5A is necessary though such a contention was raised by the State. In other words, the order passed by the first appellate authority was confirmed in appeal Sales Tax Revision Nos.133 & 135 of 2009 **==> picture [7 x 10] intentionally omitted <==** by the Tribunal. Aggrieved thereby, these two revisions are filed. 4. The main contentions raised in the revision petition is that maintenance of a manufacturing account is not mandatory. But the said point is squarely covered against the revision petitioner, as per the decision of this Court in T.R.C.No.155 of 1999, wherein reference was also made to the decision of the Apex Court reported in Commissioner of Sales Tax v. Girija Shanker Awanish Kumar (1997 (104) STC 130), and it was decided that accounts can be rejected for failure to maintain stock register. The Rules also provided for maintenance of manufacturing account and the rejection of accounts for the failure to maintain the manufacturing account also came up for consideration in Thamarappally Bros. v. State of Kerala (1996 (103) STC 504) and a Division Bench of this Court upheld the rejection of accounts of the assessee and the estimation of the turnover for non-maintenance of Sales Tax Revision Nos.133 & 135 of 2009 **==> picture [7 x 10] intentionally omitted <==** manufacturing account. In view of the above authoritative pronouncements, we do not find any force in the contention of the revision petitioner that accounts cannot be rejected for nonmaintenance of manufacturing account. 5. It was then contended by the learned counsel for the revision petitioner-assessee that the estimation and the additions made is on the higher side. According to him, the grounds for making the estimation is not as such made out by the department. 6. We have considered the said contention also. Since the rejection of the account books is justified, necessarily, turnover has to be based on estimation only, and hence such estimation will have some element of arbitrariness. But the first appellate authority, having taken into consideration all such vagaries, reduced the additions made from Rs.5 lakhs to Rs.2 lakhs, and thus granted considerable relief. Appellate Tribunal also re-appreciated the materials available on record, but did 7 Sales Tax Revision Nos.133 & 135 of 2009 not find any reason to grant further deduction in the matter. We have considered the matter and find that the order passed by the Tribunal does not call for any interference in the revisional jurisdiction. In such circumstances, we find no merit in these revisions. Accordingly, these revisions are dismissed. ## **P.R.RAMAN, JUDGE.** **P.S. GOPINATHAN, JUDGE** ## **nj.**