More Retail Pvt. Ltd. (Formerly Trinethra Super Retail Pvt. Ltd.) v. State of Kerala

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT** **THE HONOURABLE MR. JUSTICE A.MUHAMED MUSTAQUE** **&** **THE HONOURABLE MRS. JUSTICE SHOBA ANNAMMA EAPEN TUESDAY, THE 19[TH] DAY OF DECEMBER 2023 / 28TH AGRAHAYANA, 1945** **OT.REV NO. 49 OF 2022 ORDER IN TAVAT 591/2019 DATED 29.12.2021 OF KERALA VAT APPELLATE TRIBUNAL, ERNAKULAM** ## **REVISION PETITIONER/APPELLANT/ASSESSEE:** MORE RETAIL PVT. LTD. (FORMERLY TRINETHRA SUPER RETAIL PVT.LTD), 5/149/B ALAYKKAPPARAMBU, THURAVOOR P.O., CHERTHALA-688532, ALAPPUZHA DISTRICT,REPRESENTED BY ITS AUTHORISED SIGNATORY BY ADV JOSEPH JERARD SAMSON RODRIGUES ## **RESPONDENT/RESPONDENT/REVENUE:** STATE OF KERALA REPRESENTED BY THE PRINCIPAL SECRETARY AND COMMISSIONER OF STATE GOODS AND SERVICE TAXES, TAX TOWERS, KARAMANA, THIRUVANANTHAPURAM-695 002 SRI.V.K.SHAMSUDHEEN, SENIOR GP THIS OTHER TAX REVISION HAVING BEEN FINALLY HEARD ON 02.11.2023, THE COURT ON 19.12.2023 DELIVERED THE FOLLOWING: OT Rev. No.49/2022 **==> picture [31 x 8] intentionally omitted <==** ## **ORDER** ## SHOBA ANNAMMA EAPEN, J. This O.T.Rev. is filed challenging the order dated 29.12.2021 of the Kerala Value Added Tax Appellate Tribunal, Ernakulam (for short, “the Tribunal”). 2. Brief facts necessary for disposal of this revision petition are as follows; The revision petitioner, who is an assessee under the Kerala Value Added Tax Act, 2003 (for short, “the Act”) and a registered dealer on the rolls of the Assistant Commissioner, Special Circle-III, State Goods and Service Tax Department, Ernakulam, is engaged in the purchase and sale of various consumer products. The goods are purchased both locally and interstate. For the assessment year, 2012-13, the assessing authority reopened the assessment of the OT Rev. No.49/2022 **==> picture [31 x 8] intentionally omitted <==** petitioner under Section 25 of the Act on verification of annual return with Form 13 and 13A audited report/statement and Form 53 stock inventory. The following defects were noticed by the assessing authority; - 1)Difference in interstate movement of goods. - 2)Difference in the amount of closing stock, i.e., the amount of closing stock as per the audited statement is Rs.11,59,30,381/-, whereas, the closing stock value conceded in Form 53 filed along with annual return is Rs.11,44,58,554.75. Hence, there is a difference of Rs.14,71,826.25, which indicates escapement turnover. - 3)Difference in local sales turnover, i.e., turnover conceded in the annual return is lesser than the turnover shown in the audited statement. Hence, the assessee has suppressed local sales turnover of Rs.1,53,91,755.42. - 4)Difference in interstate purchase turnover, OT Rev. No.49/2022 **==> picture [31 x 8] intentionally omitted <==** i.e., assessee has conceded interstate purchase turnover of Rs.4,99,84,220.86 in the annual return, whereas, turnover of interstate purchase is Rs.16,03,54,279/- in the audited statement, which resulted in escaped turnover of interstate purchase of Rs.10,66,19,155.63. Hence, it is proposed to arrive sales turnover from the said suppressed interstate purchase. - 5)Assessee failed to prove purchase return of Rs.34,89,685/-. - 6)Difference in the turnover of purchase return to local registered dealer, i.e., in the audited statement, Rs.24,34,764/- is shown as purchase return to local registered dealer, but, no turnover of purchase return to local registered dealer is conceded in the return. Hence, ITC reversal to a tune of Rs.24,34,764/- is escaped. 7)Intelligence Officer detected suppression of OT Rev. No.49/2022 **==> picture [31 x 8] intentionally omitted <==** Rs.3,76,960/- and imposed penalty of Rs.37,696/-. On receipt of notice, the assessee failed to respond to the notice and accordingly, the assessment was completed as per Annex.V assessment order on the following grounds; - 1)Variation of interstate purchase in annual return and audited statement for Rs.10,66,19,156/- was assessed to tax. - 2)Difference in closing stock between From 53 and audited statement was assessed to tax. - 3)Sales turnover variation between annual return and audited statement was assessed. - 4)Assessment based on OR file in which Intelligence Officer unearthed suppression for Rs.3,76,960/-. Challenging the assessment order, the petitioner moved the first appellate authority, in which, only the addition of two times of suppression in the order of the Intelligence Officer was reduced OT Rev. No.49/2022 **==> picture [31 x 8] intentionally omitted <==** to equal amount of suppression. Aggrieved further, the assessee approached the Tribunal by filing second appeal, which was dismissed. Challenging the said order of the Tribunal, the petitioner has approached this Court in revision. 3. The following questions of law are raised by the revision petitioner for consideration before this Court; a)Whether the Tribunal is justified in dismissing the appeal filed by the petitioner against Annexure-VI order of the Dy.Commissioner (Appeals)-III, Ernakulam upholding Annexure-V order of the Assistant Commissioner, Special Circle-III, State Goods and Service Tax Department, Ernakulam? b)Is the Tribunal justified in overlooking the fact that the difference in the closing stock value between the value shown in the stock inventory in Form No.53 and the value shown in the audit report does not indicate any OT Rev. No.49/2022 **==> picture [31 x 8] intentionally omitted <==** suppression of turnover, instead, it is only due to the difference in valuation adopted by the Chartered Accountant following the accounting principles? c) Is the Tribunal justified in overlooking the fact that the difference in purchases between the purchases shown in the return and the audited statement represents the purchase of non-taxable items falling under the 1[st] Schedule to the Act and the turnover in respect of which cannot be taxed even if the purchases are not disclosed in the return, when the entire invoices are available with the petitioner and the details of which had been uploaded at the time of filing the monthly returns and as such are available in the Kerala Value Added Tax Information System (KVATIS)? d)Is the Tribunal justified in upholding the estimate of turnover on the ground that OT Rev. No.49/2022 **==> picture [31 x 8] intentionally omitted <==** penalty under Section 47(6) of the Act was imposed on the ground that the petitioner was not authorized as per the certificate of registration to purchase the item under transport, where the purchase had been duly accounted for by the petitioner and as such, the estimate was illegal in the light of the judgment of this Court in State of Kerala v. Thodupuzha Taluk Co-Operative Rubber Marketing Society Ltd. [OT. Rev. 40/13 dated 18-10-2013]? 4. Learned counsel for the revision petitioner submitted that the defect of variation of interstate purchase in annual return and audited statement for Rs.10,66,19,156/- is due to the error committed by the auditor, for which the auditor has issued a certificate dated 20.09.2021, explaining the difference between the annual return and the audit report in respect of interstate purchase. Moreover, a summary of OT Rev. No.49/2022 **==> picture [31 x 8] intentionally omitted <==** month-wise interstate purchase for the year 201213 was also submitted. Learned counsel further submitted that though the difference in the closing stock, as per audit statement, is Rs.11,59,30,381/-, the actual audit difference between the closing stock inventory in Form No.53 and audit report in Form No.13 and 13A was only Rs.14,71,827/- as per defect No.2 noted by the assessing authority. So, the difference in two defects is only Rs.21,57,881/-, whereas, the figure adopted by the assessing authority was Rs.1,53,91,755.42. According to the learned counsel, the Tribunal, without noticing the said error committed by the assessing authority, dismissed the second appeal filed by the petitioner. 5. Learned Government Pleader, on instructions, submitted that the scope of revisional power of this Court is limited; and in revision, this Court can only entertain the OT Rev. No.49/2022 **==> picture [37 x 8] intentionally omitted <==** questions of law, failed to decide or erroneously decided by the Tribunal. It is further submitted that the assessee did not file any reply to the assessment notice issued by the assessing authority raising objections and hence, the petitioner is precluded from raising such contentions at this juncture. 6. We have considered the rival submissions made on both sides and perused the documents. 7. The Tribunal, on elaborate consideration of the issue, found against the petitioner. As regards the first issue of variation of interstate purchase in annual return and audited statement for Rs.10,66,19,156/-, the appellate authority as well as the Tribunal found that no convincing explanation has been offered. The petitioner failed to convince this Court that there was no variation. The variation is not properly explained. Hence, the issue of variation is found against the revision petitioner. OT Rev. No.49/2022 **==> picture [37 x 8] intentionally omitted <==** 8. The next issue is that the closing stock conceded by the auditor is more than the closing stock inventory uploaded by the appellant. There is every possibility of purchase suppression and that the assessing authority is justified in resorting to best judgment assessment. Further, it was found that the appellant has not produced any document to explain as to the variation in the closing stock as per the audit statement and the closing stock value conceded in Form 53 filed along with annual return. The contention of the assessee that during finalization of the audit report, the auditor had incorrectly captured the CST purchase values, was also rejected by the Tribunal. Further, the Tribunal verified the certificate dated 20.09.2021 produced by the assessee, which was rejected stating that the explanation given by the auditor in the certificate is incomplete and does not give a clear picture as to the present variation. We OT Rev. No.49/2022 **==> picture [37 x 8] intentionally omitted <==** hold this issue also against the petitioner. 9. When there is a variation in the closing stock as per the audit statement and the closing stock value conceded in Form 53 filed along with annual return, there is every possibility of suppression of turnover. The assessee has not produced any document to substantiate the said contention other than a certificate dated 20.09.2021 from the Auditor. The certificate reads as follows: “We M/s.V.N.Shetty & Co. had done the Audit as per Requirement under KVAT Act for the Financial Year 2012-13 of m/s Trinethra Super Retail Private Limited bearing Tin No (32070482504). During the Course of Audit, we had verified all the relevant documents like Purchase / Sales / Inward and Outward and all other related transactions in the Books of M/s Trinethra Super Retail Private Limited. At the time of Finalization of the Audit Report, we have observed that there were not much difference in Output, Input and Sales in VAT Audit report VS Annual Return but in purchase side we have not received details of Tax Free purchase return of one F & V Location amounting of Rs.45,05,980/- due to old ERP System and Some Tax free purchase we have corrected from Intra State to Inter State Tax free purchase during VAT Audit amounting of Rs.10,21,13,175/-. Total of both the points are amounting of Rs.10,66,19,156/-. The Value of Total Purchase was captured as Rs.16,03.54,279/- instead of Rs.5,37,35,122/- OT Rev. No.49/2022 **==> picture [37 x 8] intentionally omitted <==** which was in excess by Rs.10,66,19,156/- which are pertains to Tax Free purchase of Fruits and Vegetable, Fresh Milk, Staples, Egg etc. We have taken utmost care considering no revenue loss while finalizing the VAT Audit Report. We are enclosing the following details for your perusal. 1) Purchase, Sales, Output and Input Comparison Statement 2) Reconciliation of CST Purchase Difference Turnover” **==> picture [381 x 12] intentionally omitted <==** detected by the Intelligence Officer also was not interfered with by the Tribunal finding that since the purchase of goods was without authorization, there is every possibility of further suppression of turnover. We do not find any reason to hold otherwise for want of any satisfactory evidence. All these are findings on facts and on the points aforementioned, we do not find any reason for interference in revision. **==> picture [381 x 12] intentionally omitted <==** Defect No.2 noted in Annex.A5 assessment order, is concerned, while passing the assessment order, the assessing authority has shown the figure as OT Rev. No.49/2022 **==> picture [37 x 8] intentionally omitted <==** Rs.1,53,91,755.42 towards local sales escaped from self assessment (Defect No.2) in the final computation table. It is noted that a factual numerical error crept in while entering the figures. Insofar as defect No.2 noted in Annex.A5 is concerned, it can be tabulated as follows; |Defect<br>No.2|Sales figure according<br>to Annual Return/Self<br>Assessment/Conceded<br>i) In computation table<br>ii) Return|Rs.1,11,77,72,818/-| |---|---|---| ||Sales figure according<br>to Audited Statement/<br>Form 13A|Rs.1,11,70,86,763/-| ||Numerical Difference<br>between annual return<br>and audited statement|**Rs.6,86,055/-**| ||Form 53 difference|**Rs.14,71,826/-**| ||**Total difference**|**Rs.7,85,771/-**| ||**Plus Gross Profit**|| 12. On a perusal of the table as above, it is seen that the total difference is only Rs.7,85,771/-, whereas, while passing the assessment order, the assessing authority has shown the figure as Rs.1,53,91,755.42/- in the final computation table. Hence, the assessing OT Rev. No.49/2022 **==> picture [37 x 8] intentionally omitted <==** authority have committed a serious error, while passing the assessment order as regards Defect No.2. We are aware of the fact that revisional jurisdiction of this Court is limited, but, in the present case, it is apparent that a grave mistake, erroneously entering Rs.1,53,91,755.42 instead of Rs.7,85,771/- in the assessment order, has been committed by the assessing officer and the mistake escaped notice of the appellate authorities under the statute. The mistake, if not rectified, will cause serious prejudice to the assessee. Hence, this Court finds it necessary to interfere with the orders passed, by exercising its revisional powers. The difference in computation occurred while computing the amount as regards local sales escaped from self assessment in the computation table of Annex.V assessment order is a factual numerical error. Hence, we are of the view that the revision has to be partly allowed and the assessing authority OT Rev. No.49/2022 **==> picture [37 x 8] intentionally omitted <==** has to be directed to redo the assessment in respect of Defect No.2. All findings on the other defects are upheld and we decline interference on those matters. Accordingly, the O.T.Rev. is partly allowed. The matter is remanded back to the assessing authority for recalculation of the figures shown in defect No.2 in the computation table of the assessment order. It is made clear that before any such recalculation is done, the assessee shall be afforded an opportunity of being heard. The petitioner is directed to produce a certified copy of this order before the assessing authority for compliance. ## **Sd/-** ## **A. MUHAMED MUSTAQUE** ## **JUDGE** ## **Sd/-** ## **SHOBA ANNAMMA EAPEN** ## **JUDGE** bka/- OT Rev. No.49/2022 ..17.. ## **APPENDIX OF OT.REV 49/2022** PETITIONER ANNEXURES Annexure I COPY OF THE MONTHLY RETURN FILED BY THE PETITIONER FOR THE MONTH OF AUGUST 2012 Annexure IA COPY OF THE PURCHASE INVOICES UPLOASED BY THE PETITIONER ALONG WITH ANNEXUREI Annexure II COPY OF THE ANNUAL RETURN FOR THE ASSESSMENT YEAR 2012-2013 Annexure III COPY OF THE STOCK IN FORM NO.53 Annexure IV COPY OF THE AUDIT REPORT IN FORM NO.13 & 13A Annexure V COPY OF THE ASSESSMENT ORDER DATED 14.09.2017 - Annexure VI COPY OF THE APPELLATE ORDER DATED 30.01.2019 - Annexure VII COPY OF THE CERTIFICATE DATED 20.09.2021, ISSUED BY THE CHARTERED ACCOUNTANT - Annexure VIII COPY OF THE SUMMARY OF MONTH-WISE INTERSTATE PURCHASE FOR THE YEAR 20122013 Annexure IX COPY OF THE ORDER DATED 29.12.2021, ISSUED BY THE HON'BLE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, ERNAKULAM