M. Thrivikrama Prabhu v. State of Kerala

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT:- THE HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE A.K.BASHEER THURSDAY, THE 6TH NOVEMBER 2008 / 15TH KARTHIKA 1930 S.T.Rev.No.251 of 2005 --------------------------------------- (ORDER DATED 30.11.2004, IN T.A.317/1997 OF KERALA SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, KOZHIKODE) (ASSESSMENT YEAR 1988-1989) .................... ## REVISION PETITIONER/RESPONDENT/ASSESSEE:- ------------------------------------------------------------------------- M.THRIVIKRAMA PRABHU, GAJANANA OIL AND FLOUR MILLS, NILESHWAR. BY ADV. SRI.N.MURALEEDHARAN NAIR SRI.V.K.SHAMSUDHEEN. SRI.MANOJ KUMAR.M RESPONDENT/APPELLANT/REVENUE:- -------------------------------------------------------- STATE OF KERALA. BY SENIOR GOVERNMENT PLEADER SRI.MUHAMMED RAFIQ. THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 06/11/2008, ALONG WITH S.T.REV.NOS. 258 OF 2005 & 273 OF 2005, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:- ## **H.L.Dattu,C.J. & A.K.Basheer,J.** ------------------------------------------------------------------- **S.T. Rev.Nos.251, 258 & 273 of 2005** -------------------------------------------------------------------Dated, this the 6[th] November, 2008 ## **ORDER** ## **H.L.Dattu, C.J.** These revision petitions are filed against the orders passed by the Sales Tax Appellate Tribunal, Additional Bench, Kozhikode in T.A.Nos.317/1997, 318/1997 and 319/1997 dated 30[th] November, 2004. (2) The relevant assessment years are 1988-89, 1989-90 and 1990-91. (3) The assessing authority has completed the assessment under the provisions of the Kerala General Sales Tax Act, 1963 (“Act” for short). (4) Petitioner is a dealer in copra. Copra is taxable at the point of last purchase. Petitioner purchases copra from registered and unregistered dealers. After such purchases, effects intra and inter-State sales. For inter-State sales, the petitioner has to pay tax on the purchase turnover. For intra-State sales, there is exemption from payment of tax, provided Form 25 declarations are produced before the assessing authority. The assessing authority has estimated the purchase turnover of both intra and inter-State sales, solely on the ground that the petitioner has not maintained the separate purchase accounts of the copra purchased and sold locally as well as inter-State sales and, therefore, has proceeded to pass the best judgment S.T.Rev.251/2005, etc. - 2 - assessment and has quantified the tax liability. (5) The orders so passed by the assessing authority was the subject matter of appeals before the first appellate authority in S.T.A.Nos.304/2007, 305/2007 and 306/2007. The first appellate authority, by its order dated 14[th] July, 1997, has granted some relief to the petitioner. While disposing of the appeals, the first appellate authority, in its order, has stated as under: _“The next serious contention raised in this appeal is with regard to the determination of the purchase turnover of copra sold interstate. It is not in dispute that the appellant has effected on interstate sale of 17827 qtls. on copra. The dispute arises in the determination of purchase value of copra sold interstate. The learned counsel has produced before me a statement showing the month vice split up of the purchase value of the copra sold interstate. According to that statement, the purchase turnover of copra sold interstate is Rs.32636034/-. He has also produced before me the relevant copra purchase sale bills to substantiate the purchase rate applied by him for preparing the statement. My perusal of the documents reveal that the purchase rate applied by the appellant, for preparing the aforesaid statement, compares well with the accounted copra purchase and is fairly identifiable to the interstate sales. For example._ _For the month of May 1988, the purchase rate applied in the preparation of the statement is at Rs.1825/- per qtls. The following copra purchases are seen effected in the month of May 1988._ S.T.Rev.251/2005, etc. - 3 - Name of Party Bill No. & Date Quantity Qtls Rate |Name of Party Bill No. & Date Quantity Qtls Rate|Name of Party Bill No. & Date Quantity Qtls Rate|Name of Party Bill No. & Date Quantity Qtls Rate|Name of Party Bill No. & Date Quantity Qtls Rate| |---|---|---|---| |---------------------------------------------------------------------------|||| |1. P.C.Mohammed|103/- 30.5.88|750 kgs.|1835/-| |Nileswar|||| |2. Trade Links<br>|619/- “|1550 “|1815/-| |Nileshwar|||| |3. Rahaath Traders|310/- “|14 Qtls|1825/-| |Kanhangad.|||| _Likewise for the month of March 1989 the purchases rate applied in the preparation of the statement is at Rs.1583/- per qtls. The following copra purchases are seen effected in the month of March 1989._ |_1. Poultry sons_|||| |---|---|---|---| |_Calicut_|_1243/13.3.89_|_37Qtls_|_1590/-_| |_2. Subida Traders_|_257/22.3.89_|_71.50 Qtls_|_1465/-_| |_Calicut._|||| |_3. Ekarool Produce_|||| |_Traders, Calicut _|_2113/30.3.89_|_47.50”_|_1565/-_| |_4. Sree Mookambika_|||| |_Traders, Calicut _|_256/30.3.89_|_23.50”_|_1570/-_| _The assessing authority has no case that the purchase rates as revealed in the purchase bills are fabricated. Therefore the purchase turnover of interstate sales of copra as per the statement prepared and filed by the learned counsel appears fair and reasonable._ _While fixing the average purchase value of copra sold locally and interstate, the assessing authority has also put to consideration the value of copra lost due to driage. The_ S.T.Rev.251/2005, etc. - 4 - _reasoning given by the assessing authority is as follows:-_ _“As regard to the loss on account of driage, the dealer's contention is against all logic. What is lost during driage of copra is nothing but water content, which has no purchase value. Therefore the quantity left after driage contain the full purchase value of the quantum of copra purchased before driage. This principles is adopted in computing the purchase value of copra sold interstate and locally.”_ _The logic applied by the assessing authority does not appear correct. The appellant cannot be said to have purchased water along with copra. What the appellant purchased was a certain quantity of copra, at the prevailing market rate for copra. When the purchase of copra is effected, water content is also considered by the purchaser. Suitable modifications are effected in the weight and purchase price to take care of the water content. Any loss there after, has to be considered as a trading loss. The quantity loss that occurred on account of driage is also not available for sale. Therefore the purchase turnover of the same cannot be brought to levy of tax._ _The entire exercise of applying on average purchase rate arose for the only reason the books of account do not disclose separately the purchase turnover of copra sold interstate. By itself this is not sufficient or adequate reason to apply the average annual purchase value. Where a scrutiny of the accounts and other corroborating evidences give a fair indication the purchase value of copra sold interstate then the necessity of applying an average rate is not warranted or desirable. In this case, the application of the average rate_ S.T.Rev.251/2005, etc. - 5 - _imposes an onerous burden on the appellant. While arriving at this conclusion I have also put to consideration the contention of the appellant that generally, lower quality of copra is sold interstate. It is submitted that good quality copra is only in demand in the local market. A scrutiny of the records substantiate this view. On this ground also the application of the average purchase rate is found not appropriate in this case._ _For the aforesaid reasons the purchase value of copra sold interstate, fixed by the assessing authority is found excessive. In the light of the aforesaid discussions, the purchase of 17827 qtls. of copra sold interstate is fixed at Rs.3,26,36,034/- as revealed by the statement filed before me which I find would be a just, fair and equitable, estimate.”_ (6) The State, being aggrieved by the orders passed by the first appellate authority, had filed appeals before the Sales Tax Appellate Tribunal in T.A.Nos.317/1997, 318/1997 and 319/1997. The assessee had also filed Cross Objections in Nos.43/2003, 44/2003 and 45/2003. The Appellate Tribunal, by its order dated 30[th] November, 2004, has allowed the State's appeals and, accordingly, has rejected the assessee's Cross Objections. While doing so, the Tribunal, in its cryptic order, has stated as under: _“We have examined the contentions raised and perused the records. The main objection raised by the SR is with regard to the purchase price determined for the purpose of allowing exemption. It is seen that the dealer has not maintained separate purchase account for copra sold locally and that sold interstate. The statements filed by him will not help the authorities to_ S.T.Rev.251/2005, etc. - 6 - _ascertain the purchase value of copra sold locally and interstate for the whole year. Under this circumstances the only way to arrive at a conclusion is the method adopted by the assessing authority in estimating the purchase turnover based on average purchase price. It is found legal and proper and following the accepted principles and norms. We therefore uphold the average price fixed by the assessing authority. The direction of the DC(A) to accept the purchase value as per the statement filed by the dealer is incorrect and is therefore deleted”._ (7) Being aggrieved by the orders so passed by the Tribunal, the assessee is before us in these revision petitions. (8) The assessee has framed the following questions of law for our consideration and decision. They are as under: _“1. Whether on the facts and in the circumstances of the case the Appellate Tribunal has erred in law in confirming the purchase value of copra sold interstate estimated by the Assessing Authority considering the fact that the statement filed by the petitioner clearly shows the actual purchase value of the copra sold interstate?_ _2. Whether on the facts and circumstances of the case the Appellate Tribunal was correct in law in reversing the Annexure B order in the light of the law laid down by this Hon'ble Court reported in 193 KLJ (TC) 371?_ _3. Whether on the facts and circumstances of the case the additions sustained by the Appellate Tribunal has any nexus to the alleged irregularities”._ (9) Apart from arguing the matter on merits, Sri.V.K.Shamsudheen, S.T.Rev.251/2005, etc. - 7 - learned counsel appearing for the assessee, would submit, that, the first appellate authority, after going through the entire statement of accounts, the purchase bills and sales bills, etc., had given some relief to the assessee and that relief could not have been taken away by the Tribunal by passing a non-speaking order. Therefore, the learned counsel is of the opinion, that, the orders passed by the Tribunal requires to be set aside and the matter requires to be remitted back to the Tribunal for passing fresh order in accordance with law. (10) In support of his contention, the learned counsel has relied upon the observations made by this Court in the case of _P.P.Raju_ v. _State of Kerala_ [(1999) 116 STC 93]. In the said decision, the Court has observed as under: _“In a case where the first appellate authority has, for reasons of its own, set aside the quantum of estimate made by the assessing authority, a duty is cast on the second appellate authority - the Appellate Tribunal - to demonstrate as to how or in what manner the first appellate authority erred in interfering with the estimate made by the assessing authority before substituting its own figure of estimate or restoring the estimate made by the assessing authority. It is true that the Appellate Tribunal is the final fact-finding authority. It is an appellate forum on the facts as well as in law. It is the duty of the appellant before the Appellate Tribunal to demonstrate that the order appealed against is wrong. Before reversing a decision of the lower appellate authority a duty is cast on the Appellate Tribunal_ S.T.Rev.251/2005, etc. - 8 - _to meet the reasonings of the first appellate authority and indicate its own reasons for the conclusion to be reached. The order of the Appellate Tribunal should show that it is for valid and cogent reasons the decision of the first appellate authority is being interfered with. It is not sufficient if the Appellate Tribunal at its ipso dixit states that it disagrees with the decision of the first appellate authority. This Bench had occasion to state the duty of the Appellate Tribunal in cases of reversing the decision of the lower authority and laid down the guidelines on the matter, in Commissioner of Income-tax v. Nirmal Liquors [1991] 190 ITR 636 (Ker)”._ (11) We have carefully perused the orders passed by the first appellate authority. The first appellate authority, while granting some relief to the assessee, has passed a reasoned order and that order has been upset by the Appellate Tribunal, by its cryptic order. While allowing the State's appeals, it was expected of by the Tribunal to have assigned appropriate reasons by stating the area where the first appellate authority has committed a mistake. In the orders passed by the Tribunal, except affirming the orders passed by the assessing authority, they have not stated, for what reasons they are taking exception to the orders passed by the first appellate authority. In a case where some relief has been given by the first appellate authority, the Tribunal, while upsetting the said orders, is expected to assign cogent reasons. Since that is not forthcoming in the orders passed by the Tribunal, we are of the opinion, that, the orders passed by the Appellate Tribunal requires to be set aside and S.T.Rev.251/2005, etc. - 9 - the matter requires to be remanded to the Tribunal for disposal in accordance with law. (12) Accordingly, we pass the following: ## Order - (i) These revision petitions are disposed of. - (ii) The order passed by the Tribunal in T.A.Nos.317/1997, - 318/1997 and 319/1997 dated 30[th] November, 2004 is set aside. (iii) The matter is remitted to the Tribunal, and the Tribunal is directed to restore T.A.Nos.317/1997, 318/1997 and 319/1997 to its file and then pass a reasoned order. - (iv) All the contentions of the parties are left open. Ordered accordingly. H.L.Dattu Chief Justice A.K.Basheer Judge vku/dk