Polakulath Tourist Home Pullut, Kodungallur v. Assistant Commissioner of State Tax (Assessment), State Goods and Services Tax Department, Special Circle, Thrissur; Assistant Commissioner (Recovery), State Goods and Services Tax Department, Irinjalakuda, Thrissur District

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MRS. JUSTICE SHOBA ANNAMMA EAPEN TUESDAY, THE 23[RD] DAY OF AUGUST 2022 / 1ST BHADRA, 1944** ## **WP(C) NO. 16530 OF 2019** ## **PETITIONER/S:** POLAKULATH TOURIST HOME PULLUT, KODUNGALLUR, PIN-680 663, REPRESENTED BY THE MANAGING PARTNER SRI.P.N.KRISHNADAS) BY ADVS. K.N.SREEKUMARAN P.J.ANIL KUMAR N.SANTHOSHKUMAR ## **RESPONDENT/S:** 1 ASSISTANT COMMISSIONER OF STATE TAX (ASSESSMENT),STATE GOODS AND SERVICES TAX DEPARTMENT, SPECIAL CIRCLE,THRISSUR-680001 2 ASSISTANT COMMISSIONER, (RECOVERY),STATE GOODS AND SERVICES TAX DEPARTMENT, IRINJALAKUDA,PIN-680 121, THRISSUR DISTRICT THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 23.08.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C) No.16530/2019 ..2.. ## **JUDGMENT** Exts.P4 assessment order & P7 rectification order passed by the 1[st] respondent under the Kerala General Sales Tax Act (for short, “the KGST Act”) are under challenge in this writ petition. 2. The petitioner is a registered dealer on the rolls of the 1[st] respondent under the KGST Act, who is running a bar hotel. The petitioner, instead of paying turnover tax on the sales turnover under Section 5(2) of the KGST Act, opted to settle liability at the compounded rate as provided under Section 7 of the KGST Act, which is 140% of the purchase turnover of liquor. For the assessment year, 2015-16, the petitioner opted to remit tax on 140% of the purchase price of the liquor made during the year. Though the 1[st] respondent accepted the option for compounding and accepted the return WP(C) No.16530/2019 **==> picture [31 x 8] intentionally omitted <==** and payment of tax, best judgment assessment proceedings under Section 17(3) of the KGST Act was initiated by issuing Ext.P1 notice dated 18.01.2019. In the said notice, it was stated that the closing stock of the Indian Made Foreign liquor (IMFL) for the previous year, 2014-15, would be taken into consideration in fixing the purchase value for 2015-16 for the purpose of computing the tax liability. As per Ext.P3, the petitioner objected to Ext.P1 notice, stating that as per Ext.P2 judgment, this Court has held that the purchase price referred to in Section 7 of the KGST Act is the purchase price of the entire liquor sold during the relevant year, which includes the value of the opening stock of the liquor with the purchases made in the year after excluding the value of closing stock. However, the 1[st] respondent, without taking into consideration the objections raised in WP(C) No.16530/2019 ..4.. Ext.P3, finalized the assessment as per Ext.P4. Thereafter, the petitioner filed Ext.P5 rectification application for recomputing the turnover and tax liability after allowing deduction towards closing stock value. It was also pointed out by the petitioner that in another case of the sister concern of the petitioner, the assessment was made on the purchase turnover of liquor after deducting the closing stock. Ext.P5 rectification application was rejected as per Ext.P7 order, stating that there is no error apparent on the face of record. Aggrieved by the said orders, the petitioner has approached this Court with this writ petition. 3. The 1[st] respondent has filed a counter affidavit, contending that since the petitioner was a non compounded dealer for the previous assessment year, 2014-15, the closing stock of the previous year, 2014-15, has to be WP(C) No.16530/2019 **==> picture [31 x 8] intentionally omitted <==** considered in fixing purchase value of IMFL sold for the relevant assessment year, 2015-16. 4. Heard both sides. 5. The petitioner submits that the 1[st] respondent has finalized the proceedings as per Ext.P4 by including the closing stock for the previous year, 2014-15, which is against the settled position of law as declared by this Court in **M/s Sannidhan Bar & Restaurant v. State of** **Kerala** [2010 (2) KLT 887], which is produced as Ext.P2 judgment. 6. In **M/s Sannidhan Bar & Restaurant** 's case _(supra),_ this Court has categorically held as follows; “Therefore, purchase price referred to in the section above extracted is the purchase price of the entire liquor sold during the relevant year, that is 2005-06 which includes the value of the opening stock of liquor with the purchases made in the year after excluding the value of closing stock. In any case, the purchase price referred to in Section 7 is the purchase price of the entire liquor sold during the relevant year, which includes opening stock as well.” WP(C) No.16530/2019 ..6.. 7. In Ext.P4 assessment order, the 1[st] respondent has finalized the proceedings by including the closing stock for the year 2014-15. Though Ext.P5 rectification petition was filed by the petitioner before the 1[st] respondent for recomputing the turnover and tax liability after allowing deductions towards closing stock value, it was rejected as per Ext.P7 order. Ext.P4 order is _per se_ illegal on the basis of the settled position in **M/s Sannidhan** **Bar & Restaurant** 's case _(supra)_ . Hence, Exts.P4 and P7 orders are liable to be set aside and remanded back to the assessing authority for _de novo_ consideration. 8. In the result, this writ petition is disposed of, as follows; - (a) Exts.P4 & P7 orders are set aside. - (b) The 1[st] respondent assessing authority is directed to reconsider the matter in WP(C) No.16530/2019 **==> picture [31 x 8] intentionally omitted <==** accordance with law, taking into consideration Ext.P2 judgment, within a period of two months from the date of receipt of a certified copy of this judgment. - (c) Needless to say, the 1[st] respondent shall afford the petitioner an opportunity of being heard before finalization of the proceedings. The petitioner shall produce a certified copy of this judgment along with a copy of the writ petition before the 1[st] respondent for compliance. ## **Sd/-** ## **SHOBA ANNAMMA EAPEN** ## **JUDGE** bka/- WP(C) No.16530/2019 ..8.. ## **APPENDIX OF WP(C) 16530/2019** PETITIONER EXHIBITS EXHIBIT P1 - TRUE COPY OF THE SHOW CAUSE NOTICE DATED 18.1.2019 ISSUED BY THE 1ST RESPONDENT EXHIBIT P2 TRUE COPY OF THE ORDER OF THIS HON'BLE COURT DATED 22.3.2010 IN S.T.REV.NO.73/2010 - EXHIBIT P3 TRUE COPY OF THE REPLY DATED 7.2.2019 FILED BEFORE THE 1ST RESPONDENT - EXHIBIT P4 TRUE COPY OF THE ASSESSMENT ORDER NO.25171295/2015-16 DATED 27.2.2019 ISSUED BY THE 1ST RESPONDENT - EXHIBIT P5 TRUE COPY OF THE RECTIFICATION PETITION DATED 18.3.2019 FILED BEFORE THE 1ST RESPONDENT - EXHIBIT P6 TRUE COPY OF THE ASSESSMENT ORDER DATED 30.10.2018 ISSUED BY THE ASSISTANT COMMISSIONER, MUVATTUPUZHA EXHIBIT P7 TRUE COPY OF THE ORDER NO.25171295/2015-16 DATED 30.5.2019 U/S.43 ISSUED BY THE 1ST RESPONDENT