M/S. SALONIA VANCHIYOOR P.O., THIRUVANANTHAPURAM v STATE OF KERALA

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON** **TUESDAY, THE 30TH DAY OF JANUARY 2018 / 10TH MAGHA, 1939** **OT.Rev.No. 10 of 2018** **AGAINST THE ORDER IN TA[VAT] NO.434/2013 OF THE AGRL. INCOME TAX ADDL. BENCH, THIRUVANANTHAPURAM DATED 03-11-2017** ## **REVISION PETITIONER:** **M/S. SALONIA VANCHIYOOR P.O., THIRUVANANTHAPURAM, REPRESENTED BY ITS MANAGING PARTNER, SINDHU.P.** **BY ADVS.SRI.HARISANKAR V. MENON SMT.MEERA V.MENON SMT.K.KRISHNA** ## **RESPONDENT:** **STATE OF KERALA REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT. GOVT. SECRETARIAT, THIRUVANANTHAPURAM- 695 001.** ## **BY SENIOR GOVERNMENT PLEADER SRI.MOHAMMED RAFEEQ** **THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR ADMISSION ON 30-01-2018, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** ## **OT.Rev.No. 10 of 2018** ## **APPENDIX** ## **PETITIONER'S EXHIBITS :-** ## **-----------------------------------** - **ANNEXURE A - COPY OF REGISTRATION CERTIFICATE ISSUED BY THE COMMERCIAL TAX OFFICER, THIRUVANANTHAPURAM.** - **ANNEXURE A1COPY OF REGISTRATION CERTIFICATE ISSUED BY THE COMMERCIAL TAX OFFICER, THIRUVANANTHAPURAM.** - **ANNEXURE B - COPY OF NOTICE IN FORM NO.17A ISSUED BY THE INTELLIGENCE INSPECTOR, MATTANCHERRY AT ALUVA.** - **ANNEXURE C - COPY OF ORDER ISSUED BY THE INTELLIGENCE OFFICER, [RAPID ACTION], THIRUVANANTHAPURAM.** - **ANNEXURE D - COPY OF APPELLATE ORDER ISSUED BY THE DEPUTY COMMISSIONER [APPEALS], THIRUVANANTHAPURAM.** - **ANNEXURE E - COPY OF ORDER ISSUED BY THE INTELLIGENCE OFFICER, [RAPID ACTION], THIRUVANANTHAPURAM.** - **ANNEXURE F - COPY OF APPELLATE ORDER ISSUED BY THE DEPUTY COMMISSIONER [APPEALS], THIRUVANANTHAPURAM.** - **ANNEXURE G - COPY OF ORDER ISSUED BY THE KERALA VALUD ADDED TAX/AGRL. INCOME TAX & SALES TAX APPELLATE TRIBUNAL, THIRUVANANTHAPURAM IN TA[VAT] NO.434 OF 2013.** ## **RESPONDENT'S EXHIBITS:- NIL** **---------------------------------------** **//TRUE COPY//** **P.A. TO JUDGE** **sp** ## **K. VINOD CHANDRAN & ASHOK MENON, JJ. ---------------------------------O.T. [Rev.] No.10 of 2018** ## **---------------------------------Dated this the 30[th] day of January, 2018** ## **JUDGMENT** ## K. Vinod Chandran, J. The assessee, the revision petitioner, is before this Court challenging the order of the Tribunal, in which a remand was made for consideration afresh. On facts, suffice it to notice that the assessee imported a consignment of furniture and was unloading; allegedly a portion of the consignment, at Aluva in a declared branch of the assessee, which had its Head Office at Thiruvananthapuram. 2. The Intelligence Wing of the Department, on noticing the unloading activities, sought for the document based on which the transport was made. Annexure-B notice was issued under the Kerala Value _O.T. [Rev.] No.10 of 2018_ **2** Added Tax Act, 2003 [for brevity, the KVAT Act] read with the Kerala Value Added Tax Rules, 2005 [for brevity, the Rules]. In the notice, the allegation was that on interception at Muttom between Ernakulam and Aluva, the document accompanying the consignment was the invoice with destination shown at Thiruvananthapuram. This did not support the transport from Cochin Port to Muttom at Aluva, which was in the opposite direction. 3. The assessee got release of the goods on payment of security deposit and adjudication proceedings were initiated, which culminated in Annexure-C order. In Annexure-C the Intelligence Officer found that the interception of the consignment, which was supported by an invoice to an address at Thiruvananthapuram, was unloaded at Aluva and no documents supported its transport from _O.T. [Rev.] No.10 of 2018_ **3** Cochin Port to Muttom, Aluva. Though the assessee had a contention that it had a Branch at Aluva, the bill of entry did not show the Branch address. The vehicle was intercepted at 10.30am and the dealer produced two Delivery Notes, which were seen affixed with the seal of the Deputy Commissioner, Mattancherry with a date after the consignment was intercepted. The documents so produced were not taken into consideration raising a suspicion on its authenticity. Penalty was imposed at twice the tax attempted to be evaded. An appeal was filed, in which a remand was made as per Annexure-D. 4. The First Appellate Authority in AnnexureD, held that the finding of the Intelligence Officer that the discrepancy in the Delivery Notes raised a suspicion of its authenticity was without any relevance. The First Appellate Authority went on to find that the Registration Certificate _O.T. [Rev.] No.10 of 2018_ **4** produced by the assessee showed a Branch Office at Aluva. The Delivery Notes produced, supported the transport was the finding. Hence there was a remand made to the Assessing Officer directing the assessee to produce the certificate of the local authority, regarding the exact premises in which the Branch Office was carried on and the Assessing Officer to verify the same with the Certificate of Registration. It was also directed that if the Certificate so produced tallies with the address shown in the Certificate of Registration of the Branch Office at Aluva, then the security deposit had to be refunded. 5. The Intelligence Officer on remand considered the matter afresh. It was found that the Certificate produced by the assessee, from the local authority, showed the address which tallied with the Certificate of Registration, in so far as _O.T. [Rev.] No.10 of 2018_ **5** the Branch Office at Aluva was concerned. However, on the ground that the dealer had not produced any documents to support the transport of the consignment from Cochin Port to Muttom, Aluva the penalty was reiterated at twice the amount of tax sought to be evaded. An appeal was filed, which was allowed again by the First Appellate Authority on the ground that the Deputy Commissioner [Appeals] had at the earlier stage specifically directed the Intelligence Officer to verify the address from the Certificate directed to be produced by the assessee and refund the security deposit, if the address tallies. The State filed an appeal, which was allowed and remanded as per Annexure-E. The assessee is in revision from the aforesaid order. 6. The learned counsel for the revision petitioner contended that the appeal itself was not maintainable, since the Department had not _O.T. [Rev.] No.10 of 2018_ **6** challenged the order of the First Appellate Authority produced at Annexure-D, in which the remand was only for verification of the address by the Intelligence Officer. It was also contended that even if the appeal was maintainable, the Tribunal found that the order of the Intelligence Officer imposing penalty on the respondent ignoring the directions issued by the Appellate Authority was illegal and liable to be set aside. Still, the Tribunal made sweeping statements as to the powers conferred on the Tribunal as the last fact finding authority and remanded the matter for fresh consideration. This could not have been done, is the specific ground taken by the petitioner. 7. The questions of law raised by the petitioner are the following: _“A. Whether on the facts and in the circumstances of the case, the finding of the appellate tribunal that the appeal by the revenue is maintainable, illegal and_ _O.T. [Rev.] No.10 of 2018_ **7** ## _arbitrary?_ _B. Has not the appellate tribunal erred in relying on the judgments of this Hon'ble Court in_ _**Syed Alavi v. State of Kerala [(1981) 48 STC 150]** and_ _**Joseph Michael v. State of Kerala [(1993) 1 KTR 476]** , which are distinguishable on facts?_ _C. Ought not the tribunal have rejected the appeal by the revenue when it found in paragraph 17 of the impugned order that the order of the penalty passed on the second ground was clearly ignoring the directions issued by the appellate authority?_ _D. Has not the appellate tribunal erred in finding that there is some justification in the detention in paragraphs 20 to 24 of its order, by finding a new ground which was not originally raised at the time of detention?_ _E. Ought not the tribunal have found that the difference regarding the address is properly explained by the petitioner as found in paragraph 24 of its order?”_ 8. The grounds at A & B can be considered together, since it is with respect to the right of the Department to challenge the second order of the First Appellate Authority, when there was no appeal against the findings of the First Appellate Authority at the first instance. In the present case, the First Appellate Authority at the first _O.T. [Rev.] No.10 of 2018_ **8** stage had remanded the matter for fresh consideration, as is seen from the operative portion, to verify the correctness of the address of the Branch Office as seen from the Certificate of Registration. There were also observations made on certain findings rendered by the Intelligence Officer, which had not been challenged in appeal. These observations, which are in the nature of the findings of the First Appellate Authority cannot be re-agitated in an appeal filed against the order passed in remand is the compelling argument of the assessee's Counsel. 9. We are of the opinion that the decision of the Full Court in _**Syed Alavi v. State of Kerala [(1981) 48 STC 150]**_ squarely covers the issue. On remand, there was a finding entered by the Intelligence Officer as to there being no supporting documents for the transport between _O.T. [Rev.] No.10 of 2018_ **9** Cochin Port and Muttom, on which ground penalty was imposed. This was the specific ground on which the detention was made and it was put to the assessee through the notice issued at Annexure-B. This was also the ground on which the Intelligence Officer at the first instance imposed the penalty by Annexure-C order. The First Appellate Authority at the first instance found that the Delivery Notes supported the transport. In fact the Delivery Notes were produced by the assessee at the time of enquiry and admittedly these documents were not accompanying the transport. The Intelligence Officer refused to place any reliance on these documents and the First Appellate Authority at the first instance wrongly presumed that the penalty was imposed on the basis of the discrepancy found in the Delivery Notes. Pertinent too is the fact that the First Appellate Authority at the first _O.T. [Rev.] No.10 of 2018_ **10** instance did not examine the crucial ground of the transport between Cochin Port and Muttom, Aluva, being not supported by any documents; especially when the transport was in the opposite direction of the destination of the goods as seen from the invoice and the bill of entry. No reliance could have been placed on the Delivery Notes, which admittedly did not accompany the transport. 10. The direction in the First Appellate Authority's order was complied with by the assessee by producing a Certificate from the local authority, which showed the same address as available in the Certificate of Registration, with respect to the Branch Office. We noticed that the First Appellate Authority had held that the findings of the Intelligence Officer with respect to the Delivery Notes produced by the assessee were not relevant. We reiterate that the Intelligence _O.T. [Rev.] No.10 of 2018_ **11** Officer, in the order produced at Annexure-C indicates that on noticing the discrepancies, there could be no reliance placed on the said documents. The First Appellate Authority never looked at when the Delivery Notes were produced. 11. In such circumstances, the First Appellate Authority's finding on that aspect is not at all significant. The First Appellate Authority did not enter into a specific finding on the absence of a document accompanying the goods for the transport between Cochin Port and Muttom, at the first instance. This un-disputedly was a ground taken in the notice issued at Annexure-B. The Intelligence Officer also, at the first instance, had imposed the penalty on the said ground. At the second instance, the Intelligence Officer, on remand, again complied with the directions of the First Appellate Authority in so far as verifying the _O.T. [Rev.] No.10 of 2018_ **12** address and found the Branch Office to be a genuine one as entered in the Certificate of Registration. However, on the question of there being no document available to support the transport between Cochin Port and Muttom, penalty was again imposed. The First Appellate Authority, at the second instance, relied on the findings of the earlier order at Annexure-D and set aside the order imposing penalty. 12. On the above facts, _**Syed Alavi**_ [supra] applies squarely and the Department was entitled to challenge the findings of the First Appellate Authority, at the first instance, before the Tribunal in an appeal from the first appellate order passed at the second instance. The findings of the First Appellate Authority at the first instance had not attained finality. We extract paragraphs 16 & 17 of the judgment of the Full _O.T. [Rev.] No.10 of 2018_ **13** ## Bench: _“16. The learned Advocate General referred to a number of passages from “The doctrine of res judicata” by Spencer Bower and Turner. None of them, however, deals with the issue involved in the case. We do not therefore propose to refer to them in extenso. Suffice to say that finality is an essential condition for a decision to be res judicata both under the Indian Law and under the English Law. A finding on an issue at a preliminary stage is not final if it is liable to be challenged in an appeal against the ultimate decision of the case. To adopt the language of the Supreme Court it is only provisionally final. It will become really final only if no appeal is filed against the ultimate decision of the case or if an appeal is filed, it is confirmed in such appeal._ _17. In the instant case, it is true that no appeal was filed against the decision dated 12[th] April, 1976, of the Appellate Assistant Commissioner. The effect of non-fling of an appeal is that the finding is binding on the assessing authority when the case went back to that authority and also on the Appellate Assistant Commissioner while disposing of the appeal from the revised decision of the assessing authority. It is not binding on the Appellate Tribunal in the appeal filed under Section 39 against the decision of the Appellate Assistant Commissioner. The Appellate Tribunal was free to arrive at its own decision on the question of liability of the petitioners to assessment to sales tax.”_ _O.T. [Rev.] No.10 of 2018_ **14** 13. The decision was also on the authoritative pronouncement that Section 105(2) of the Civil Procedure Code, 1908 would not apply to the proceedings under the Kerala General Sales Tax Act, 1963 (KGST Act for brevity). The provisions under consideration herein, is _in pari materia_ . 14. The learned counsel for the assessee would contend that the said decision was in the case of the assessee and that the Department cannot take a similar stand, since the Intelligence Officer, being subordinate to the First Appellate Authority has to necessarily comply with the directions issued by the First Appellate Authority. We are unable to accept the argument looking at the facts and the law as declared by the Full Bench. Therein also, the assessee under the KGST Act contested the liability on the ground that they are an association of persons, who had discontinued their _O.T. [Rev.] No.10 of 2018_ **15** business on the expiry of the period of contract. The Assessing Officer rejected the said contention and on appeal the First Appellate Authority confirmed the finding of the Assessing Officer. A remand was made on other grounds with certain observations, in which the Assessing Officer reiterated the earlier order. A first appeal filed by the assessee having been decided against the assessee, the assessee was before the Tribunal again taking up the very same contention with respect to the assessee's status as an association of persons. The contention taken before the High Court by the Department was that the assessee having not challenged the order of the First Appellate Authority at the first instance, there could be no challenge made to the Tribunal from the order passed on remand; which remand order affirmed the other findings of the Assessing Officer. It was _O.T. [Rev.] No.10 of 2018_ **16** in this context that the Full Bench found that the first order had not attained finality, since there was a remand made and the assessee was entitled to challenge the findings at the first instance even in an appeal from the order passed pursuant to the remand. We do not see any reason to not apply the principle, if it is the Department, which is so aggrieved with the findings of the First Appellate Authority. 15. True, the Tribunal overstepped its limits in having first found the remand order to be illegal and then proceeding to make sweeping statements as to the other facts. The Tribunal was concerned with the address shown of the assessee in the Certificate of Registration at Trivandrum and that revealed from the invoice being different. The assessee has a claim that under the KGST regime, the assessee's principal place of business was at _O.T. [Rev.] No.10 of 2018_ **17** the address shown in the invoice as is evidenced from Annexure-A1. However, the assessee has no explanation for not having informed the foreign seller about the change of address, especially since the registration taken under the KVAT regime was in the new address. It is also a matter of concern that after the interception on 26.09.2008, the assessee had attempted to include a Branch in the Certificate of Registration as revealed from the invoice. We are hence disinclined to interfere with the order of remand made by the Tribunal. 16. The questions at A&B raised by the assessee are answered against the assessee and in favour of the Department. The Department was entitled to raise every contention before the Tribunal even without an appeal from the order of the First Appellate Authority at the first instance, since the said order at the first _O.T. [Rev.] No.10 of 2018_ **18** instance had not acquired finality and was an order of remand. Further the First Appellate Authority at the first instance had not considered the ground on which the Intelligence Officer had imposed the penalty; that is the transport having been made without any supporting documents. 17. The Tribunal having merely remanded the matter, we do not find any reason to answer grounds C & D. With respect to ground D, which is a matter, the assessee would have to answer before the Intelligence Officer, we do not intend to make any observations, since it would _pre-empt_ a proper adjudication. The assessee has a contention that the difference in the address was not an allegation raised in the notice. It could not have been so raised, since the Intelligence Officer at the time of detention, could not have known the address as shown in the Certificate of Registration. The _O.T. [Rev.] No.10 of 2018_ **19** discrepancy would have to be explained by the assessee at the time of adjudication. 18. We are told that the Intelligence Officer has posted the case on tomorrow [31.01.2018] in pursuance to the remand order of the Tribunal. The assessee has to be granted sufficient time to make its objections. The assessee would be granted three weeks time to file objections. The adjudication would be completed at any rate within two months from the date of filing of objections, after affording a reasonable opportunity of hearing to the assessee. The revision petition is dismissed. No Costs. Sd/- **K. VINOD CHANDRAN, JUDGE.** Sd/- ## **ASHOK MENON, JUDGE.** sp/30/01/18 //True Copy// P.A. To Judge