O.T.Rev.No.68 of 2012 & O.T.Rev.No.69 of 2012

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 FRIDAY, THE 27TH DAY OF SEPTEMBER 2013/5TH ASWINA, 1935 OT.Rev.No. 68 of 2012 () ------------------------AGAINST THE ORDER IN TAVAT 624/2011 of KERALA VAT APPELLATE TRIBUNAL, ERNAKULAM DATED 31-01-2011 RESPONDENT/REVENUE: --------------------------- STATE OF KERALA REPRESENTED BY DEPUTY COMMISSIONER (LAW) COMMERCIAL TAXES, ERNAKULAM. BY GOVERNMENT PLEADER SRI.BOBBY JOHN PULIKKAPARAMBIL APPELLANT/ASSESSEE: ------------------------- SMT.V.M.RAJALAKSHMI, GROCERY MERCHANT P.O.MANKAVE, CALICUT-673 007. BY ADV. SRI.VIJAYAN. K.U. THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR ADMISSION ON 27-09-2013 ALONG WITH OT (REV) 69/2012, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: ## **O.T.REV.NO.68/2012** ## **APPENDIX** ANNEXURE A: A TRUE COPY OF THE ASSESSMENT ORDER DATED 29.06.2010 - ANNEXURE B: A TRUE COPY OF THE ORDER OF THE FIRST APPELLATE AUTHORITY DATED 03.11.2011. - ANNEXURE C: THE TRUE COPY OF THE COMMON ORDER OF THE SALES TAX APPELLATE TRIBUNAL DATED 31.01.2012. /TRUE COPY/ PA TO JUDGE ## **MANJULA CHELLUR,C.J.** ## **&** ## **A.M.SHAFFIQUE, J.** **= = = = = = = = = = = = = = = = O.T.R.Nos.68 & 69 of 2012 = = = = = = = = = = = = = = = = = = = = = Dated this the 27th day of September, 2013** ## **JUDGMENT** ## **Manjula Chellur,CJ** Heard learned Government Pleader as well as learned counsel representing the assessee. 2. O.T.R No.68 of 2012 pertains to the assessment year 2008-2009 and O.T.R.No.69/2012 pertains to the assessment year 2009-2010. 3. The brief facts that led to the filing of these revisions are as under:- Undisputedly the respondent asssessee deals in groceries as a grocery merchant at Mankavu She commenced her business in groceries for the first time in the assessment year 2008-09 is also not seriously disputed by the department. Subsequent to filing of the returns indicating the taxable turnover by the assessee, on O.T.R.Nos.68 & 69 of 2012 **2** scrutiny of the records by the department unearthed unaccounted purchase of `1,19,662/- so far as assessment year 2008-09 and `3,54,165/- so far as assessment year 2009-10. Assessment came to be completed by adding the unaccounted turnover and in both the above assessment years the total taxable turnover crossed `10 lakhs. Aggrieved by the assessment, the assesse filed appeals before the First Appellate Authority. The Appellate Authority only modified the quantum of total taxable turnover. Aggrieved by the same the assesse approached the 2[nd] Appellate Authority wherein by granting concession under sub-section 5(n) of Section 11 of the KVAT Act exempted `10 lakhs and directed the Assessing Authority to modify the assessment for the above two assessment years. Aggrieved by the same, the present revisions are preferred by the Assessing Authority. 4. According to learned Government Pleader, though Subsection 5(n) of Section 11 of KVAT Act ( the Act for short) provides giving exemption to first ten lakhs, by virtue of decision in **Venus Marketing vs. State of Kerala** (19 KTR 575) O.T.R.Nos.68 & 69 of 2012 **3** an assessee who has not filed his returns in accordance with the provisions of the Act, such a rebate provided in Sections 6 and 11 need not be extended. 5. As against this, learned counsel appearing for the assessee brings to our notice the definition of input tax rebate as defined under Section 2(xxiii) of the Act and contends that the word ‘means’ used in the said section has to be read in strict sense which would mean that any input tax paid or payable under this Act by a registered dealer to another registered dealer on the purchase of goods in the course of business has to be taken into consideration whether the assessee has committed omission or not. He also brings to our notice Section 11(3) contending that for an assessee a special concession is granted under sub-section (3) of Section 11 up to 10 lakhs for the 1[st] year of business. Therefore, even by virtue of sub-section 3 of Section 11 of the Act the assessee would get the benefit. 6. We have gone through the orders of both the appellate authorities and also the provisions referred to above. Section 2 (xxiii) of the Act defines input tax which reads as under:- O.T.R.Nos.68 & 69 of 2012 **4** “input tax' means the tax paid or payable under this Act by a registered dealer to another registered dealer on the purchase of goods in the course of business and includes the tax paid on the purchase of materials for the research and development in relation to any goods” This has to be understood with reference to input tax credit available to the assessee on purchases as provided under subsection (5) of Section 11. Sub-section 5(n) of Section 11 is relevant so far as the case on hand, as the contention of the assesse is that he being a registered dealer having purchased goods from another registered dealer the input tax benefit contemplated under section 11 would come to his benefit. No doubt, reading of the definition of input tax and the input tax credit allowable to the purchases to an assessee is applicable; but the Division Bench of this Court in the **Venus Marketing's case** had an occasion to deal with similar matter wherein it was held that the input tax credit under Section 11(1) of the Act is available only to registered dealers paying tax under Section 6(1) of the KVAT Act which provides for payment of tax at the rates provided under various schedules to KVAT Act. 7. Admittedly, the dealer while filing the taxable turnover O.T.R.Nos.68 & 69 of 2012 **5** returns did not come forward to disclose the actual taxable turnover in order to opine that he paid the tax in accordance with provisions of Section 6(1) of the Act as opined in the above judgment. 8. In that view of the matter, we are of the opinion, for the reason of nondisclosure of the actual taxable turnover and nonpayment of tax, the dealer could not claim the benefit provided under Section 11(1); and more than that, the real taxable turnover was brought to the notice of the department only under the scrutiny proceedings which would also dis-entitle the assessee claiming such benefits. 9. Then coming to another concession available to the assessee so far as beginner of the business in the first assessment year, by virtue of proviso 3 to section 6(1) of KVAT Act he gets exemption benefit up to 10 lakhs taxable turnover and when the turnover exceeds 10 lakhs such excess taxable turnover alone has to be taken into consideration. Proviso 3 to Section 6(1) of the KVAT Act reads as under:- “6. levy of tax on sale or purchase of goods.- (1) Every dealer whose total turnover for a year is not less than ten lakhs rupees O.T.R.Nos.68 & 69 of 2012 **6** and every importer or casual trader or agent of a non-resident dealer, or dealer in jewellery of gold, silver and platinum group metals or silver articles or contractor or any State Government, Central Government or Government of any Union Territory or any department thereof or any local authority or any autonomous body whatever be his total turnover for the year, shall be liable to pay tax on his sales or purchases of goods as provided in this Act. The liability to pay tax shall be on the taxable turnover,- |(a)|xx|xx|xx| |---|---|---|---| |(b)|xx|xx|xx| |(c)|xx|xx|xx| |(d)|xx|xx|xx| |(f)|xx|xx|xx| ||xx|xx|xx| Provided also that where the total turnover of a dealer, other than an importer or casual trader or agent of a nonresident dealer or dealer in jewellery of gold, silver and platinum group metals and silver articles or contractor, exceeds ten lakh rupees for the first time during the course of an year, such dealer shall be liable to pay tax under this sub-section only on the turnover in excess of ten lakh rupees; but he shall be liable to pay tax irrespective of the total turnover in any subsequent year: 10. Then coming to the facts of the present cases, for the assessment year 2008-09 as it happens to be the commencement of the business so far as the assessee is concerned, by virtue of O.T.R.Nos.68 & 69 of 2012 **7** proviso 3 to Section 6(1), for the first ten lakhs taxable turnover exemption is to be extended to the dealer and any excess taxable turnover needs to be assessed by fresh assessment by the department. So far as 2009-10 assessment year ,in the light of the law already stated above in **Venus marketing case (** supra), we are of the opinion, it happens to be the 2[nd] year of business, he is not entitled for input tax benefit either under sub-section 5 (n) of Section 11 or under proviso 3 to Section 6(1) of KVAT Act. 11. In the light of above discussion and reasoning, we direct the revision petitioner department to proceed with the fresh assessments for the years 2008-09 and 2009-10 as stated above. These revision petitions are disposed of accordingly. ## **MANJULA CHELLUR, CHIEF JUSTICE** ## **A.M.SHAFFIQUE, JUDGE.** sj 28/9