Shanthi Feeds Pvt. Ltd. v. Assistant Commissioner of State Tax, State GST Department, Special Circle, Palakkad; Deputy Commissioner State GST Department, Special Circle, Palakkad; and Selvam Broilers (P) Ltd. v. Assistant Commissioner of Commercial Taxes, Ernakulam Special Circle-III, Department of Commercial Taxes

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE AMIT RAWAL** **MONDAY, THE 12TH DAY OF OCTOBER 2020 / 20TH ASWINA, 1942** ## **WP(C).No.9508 OF 2018(K)** ## **PETITIONER/S:** **SHANTHI FEEDS PVT. LTD. [FORMERLY SHANTHI POULTRY FARM PVT LTD].6/15, MAIN ROAD, PAPPANPATY, COLIMBATORE - 641 066,REPRESENTED BY THE ITS GENERALA MANAGER,K. GUNASEKARAN.** **BY ADVS. SRI.K.SRIKUMAR (SR.) SRI.P.R.AJITHKUMAR SRI.S.A.MANSOOR (PATTANAM) SRI.P.V.THOMAS** ## **RESPONDENT/S:** **1 THE ASSISTANT COMMISSIONER OF STATE TAX STATE G.S.T DEPARTMENT, SPECIAL CIRCLE, PALAKKAD - 678 001. 2 THE DEPUTY COMMISSIONER STATE G.S.T DEPARTMENT, SPECIAL CIRCLE, PALAKKAD - 678 001.** **R1 BY GOVERNMENT PLEADER SRI. JASMIN M.M** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 28.09.2020, ALONG WITH WP(C).11894/2018(J), THE COURT ON 12.10.2020 DELIVERED THE FOLLOWING:** **WP(C).9508/2018 and conctd. Case** **2** ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE AMIT RAWAL** **MONDAY, THE 12TH DAY OF OCTOBER 2020 / 20TH ASWINA, 1942** ## **WP(C).No.11894 OF 2018** ## **PETITIONER/S:** **SELVAM BROILERS (P) LTD. SELVAM HOUSE,HILL PALACE ROAD,TRIPUNITHURA,REPRESENTED BY ITS MANAGER(ACCOUNTS)M.PERIYASWAMY.** **BY ADVS. SRI.K.SRIKUMAR (SR.) SRI.P.R.AJITHKUMAR SRI.K.MANOJ CHANDRAN** ## **RESPONDENT/S:** **1 THE ASSISTANT COMMISSIONER OF COMMERCIAL TAXES, ERNAKULAM SPECIAL CIRCLE-III,DEPARTMENT OF COMMERCIAL TAXES,ERNAKULAM-682015. 2 THE DEPUTY COMMISSIONER DEPARTMENT OF COMMERCIAL TAXES,ERNAKULAM-682015.** ## **R1 BY GOVERNMENT PLEADER** ## **OTHER PRESENT:** **GP SMT JASMINE M M** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 28.09.2020, ALONG WITH WP(C).9508/2018(K), THE COURT ON 12.10.2020 DAY DELIVERED THE FOLLOWING:** **WP(C).9508/2018 and conctd. Case** **3** ## **JUDGMENT** ## **Dated this the 12[th] day of October 2020** Four assessment orders have been challenged, for the year 2010-11 in W.P.(C) No.11894 of 2018 and remaining ie., 2011-12, 2014-15 and 2015-16 in W.P.(C) No.9508 of 2018. Therefore both the writ petitions are decided together as common question of law is involved. The facts are being taken from W.P.(C) No.9508 of 2018. 2. Petitioner is a private limited company conducting hatchery and selling day old chicks to registered farmers within the state being registered dealer under the provisions of the erstwhile KVAT Act and the GST Act. Petitioner filed the returns for the assessment year aforementioned. However, was, served with show cause notices proposing to reject the returns and to complete assessments on best judgment alleging certain defects. Copy of the notices in the aforementioned writ petition are Ext.P1, P1(a) and P1(b) dated 20.9.2017 and Ext.P1 in W.P.(C) No.11894 of 2018 dated 17.1.2018. Petitioner filed a detailed reply and objections Ext.P2 and **WP(C).9508/2018 and conctd. Case** **4** P3 giving reasons that the sale prices of day old chicks depends on various factors such as number of eggs hatched, manufacturing expenses, administrative expenses, market trend etc. If eggs are purchased from open market for hatching, one has to pay higher price for procurement. If eggs are from own farms, the cost of production of hatching eggs would be much low than that of day old chicks hatched from eggs purchased from open market. This would reflect in the production cost and consequent sale value of day old chicks. It is in this background one can produce a material at a much lower rate than the other and the sale value would be naturally much less compared to the other. Moreover the production of day old chicks by Kerala State Poultry Development Corporation (KEPCO) is very less when compared to them. 3. Apprehending non compliance of principle of natural justice petitioner had, earlier, approached this Court. This Court disposed of the writ petition by directing the respondent to appear before the assessing officer at a particular time as well as submission of reply and opportunity of hearing. Vide impugned assessment orders ie., Ext.P7, P7(a) and P7(b) in W.P.(C) No.9508 of 2018 and **WP(C).9508/2018 and conctd. Case** **5** Ext.P6 in W.P.(C) No.11894 of 2018, objections have been rejected and addition has been made. 4. Sri.K.Srikumar, learned Senior Counsel appearing for the petitioner submitted that though the order of assessments are appealable under Section 55 of 2003 Act but if they are against the principles of natural justice or gross abuse of the process of the court, writ jurisdiction in Article 226 can always be availed of. In support of the aforementioned contention, he relied on judgment in W.A No.2634 of 2017 dated 26.6.2020 whereby noticing all case law/judgment cited with regard to equal efficacious remedy and entertained the writ petition on the ground that the order of assessment was based upon audit report where a gross abuse of the process of court and accordingly, the additions made was set aside. 5. For the assessment year 2016-17, the petitioner had also approached this Court vide W.P.(C) No.14319 of 2019 on the premise that in a case of pre-assessment certain conditions were not r to be followed by Assessing officer were . By demonstrating the transaction to be wrong, before proceeding on best judgment it is to be required that an opportunity to cross examine the **WP(C).9508/2018 and conctd. Case** **6** witnesses should come up for hearing before this Hon'ble Court. This Hon'ble Court vide order dated 29th November 2019, quashed the assessment order and remitted the matter to the Assessing Officer permitting the petitioner to cross examine witnesses. 6. On the basis of the aforementioned direction, the petitioner appeared before the Deputy Commissioner of State GST Department, Kerala, Special Circle, Palakkad and after availing an opportunity of cross examination, Assessing Authority vide order dated 26th of May 2020 quashed the addition warranting invocation of action under Section 25(1) of KVAT Act 2003. The aforementioned order has been handed over to this Court during the course of the hearing. 7. On the contrary, learned Government Pleader submitted that the petitioner could conveniently challenge all these points before the appellate authority by availing the remedy of appeal. High Court cannot act as a court of appeal neither it should involve itself on a determination of questions relating to elaborate examination of evidence to establish rights. The petitioner has not place on record any material to substantiate the plea of allegation of under **WP(C).9508/2018 and conctd. Case** **7** valuation enabling the Assessing Officer to prima facie opine in his favour. There was no such flagrant violation of Rules and natural justice as evidenced from interim order, for, umpteen number of opportunities, were afforded, while considering claim of the petitioner. In support of her submission, attention of this Court was drawn to the relevant portion of the Assessment order whereby the entire defence of the petitioner has been canvassed. If such type of writ petitions are entertained without availing the efficacious remedy it would have cascading effect upon revenue. The order of assessing authority is based upon the material as well as the audit objection, thus, cannot be said to be erroneous to bring the case within the realm of judicial review under Article 226 of the Constitution of India and urging this Court for dismissal of the writ petition. 8. I have heard the learned counsel for the parties and appraised the paper book. Writ Appeal (W.A No.2634 of 2017) was preferred against the order of Single Bench, the petitioner, therein, was relegated to avail the remedy of appeal under the 2003 Act. Learned State Counsel referred to judgment of Hon'ble Supreme Court in **State of** **WP(C).9508/2018 and conctd. Case** **8** ## **Himachal Pradesh and Ors vs Gujarat Ambuja Cement** **Ltd. And Anr (2005 (6) SCC 499)** wherein certain principle permitting invocation of Article 226 even in the instances involving of the abuse of process had been culled out. The case of the petitioner is not only of non compliance of principle of natural justice, which as evidenced from assessment order have been complied with but by examining the nature of the order as the sum and substance leads to irresistible conclusion that the under valuation has been found to be only on the basis of an audit report as similar material ie., by KEPCO is being sold at a higher value than the petitioner which is reflected in the invoices. Identical facts regarding the under valuation were the point of debate in the aforementioned writ appeal. The Division Bench finding is as under: Para 14. The grounds raised against rejection of returns and consequential best judgment, were rejected by the Assessing Officer on the finding that the assessee had not proved the same, ie: the distinctive nature of the same goods based on the source, the quality, the expense incurred on procurement or production, the end consumer and so on and so forth. In this context we have to emphasize that the assessee's books of accounts were not found to be doctored in any manner. The sale price as asserted by the assessee was available from their invoices and there was no material detected that the assessee had in fact made sales for **WP(C).9508/2018 and conctd. Case** **9** higher prices than that disclosed in the invoices. It was the Assessing W.A.No.2634 OF 2017 - 14 - Officer on the basis of the Audit Report and the details of the sale price available from KEPCO, who sought to reject the returns and the books of accounts. The assessee has the initial burden to prove that the returns filed are in accordance with the provisions of the tax enactment and the books of accounts kept truly and correctly in the course of business. The Assessing Officer having not found anything to discredit the returns filed by the assessee or the books of accounts maintained, and relied on the turnover of another dealer that too a PSU, who incidentally also has the same business, to resort to a best judgment assessment. The onus shifts to the Assessing Officer, to prove that the operations carried on by the two dealers are similar and identical. The mere fact that both are dealing in the same product cannot lead to any irrefutable conclusion that the sale price would be the same. 15. In the present case, but for the fact that both deal in day-old chicks there is no similarity between the two dealers. The assessee sources its day-old chicks from outside the State, from small poultry farmers and brings it into the State for distributing to marginal farmers, who rear them for the purpose of sale as meat. KEPCO a PSU by its very nature and constitution projects an assurance of quality which the assessee obviously lacks. The Assessing Officer having adopted the sale price of a PSU cannot require another dealer who sources their products from outside the State to prove that his product is inferior in quality to that of the PSU. We find from the assessment order that while the dealer sold dayold chicks for prices between Rs.12.24 to Rs.17.23, KEPCO sold day-old chicks for Rs.19.82 to Rs.23.22. The assessee had also claimed that the average sale price worked out from KEPCO itself would be Rs.19.64 for the year 2011-12 and Rs.20.07 for the year 2012-13. The said contentions was also supported by a letter obtained from the Manager (Personnel) of KEPCO. On the ground that the Annexure to the letter produced was not signed or sealed by KEPCO, the document was rejected. When the proposal to adopt the sale price of KEPCO itself was on the basis of the details collected from KEPCO **WP(C).9508/2018 and conctd. Case** **10** by the Audit team, we fail to understand why the Assessing Officer did not take steps to get the details of the average sale price from KEPCO as disclosed from the documents produced by the W.A.No.2634 OF 2017 - 16 - assessee or verify the genuineness of the document from the PSU. 9. After reading the aforementioned observation, it is found that court is required to see whether the accounts maintained by the assessee rejected were unreliable or whether based upon an estimated turnover had a reasonable nexus or otherwise. On going through the all assessment orders, identical finding has been referred to. The reasoning assigned by the assessing officer is extracted below: “I have gone through the contentions in detail and verified the records. The dealer's contention that there is no rational basis for comparison of the average sale price of Day Old Chicks conceded by the dealer for the year 2014-15 with the sale price conceded by KEPCO, is against facts. As per the letter dt. 25.1.2017 of the Managing Director of KEPCO addressed to Accountant General (E&RSA), the average selling price of Day Old Chicks (Broiler) for the year 2014-15 is Rs.19.82 p Day Old Chick. The rate of chicks are fixed by KEPCO after analyzing the prevailing market . On analysis of the sale price conceded by the dealer, it can be seen that the dealer had conceed average sale value only Rs.13.24 per Day Old chick as against the bench mark of market rate of Day Old Chicks in Kerala during the years at Rs.19.82 per Day Old Chick. Gross under valuation is evident. As per the data provided by the dealer to the Audit party, the dealer had sold 13234508 Nos. of Day Old Chicks during the year. As such escaped turnover is worked out at 13234508 x Rs.6.58 (difference in average selling price (Rs.19.82 -Rs.13.24) at **WP(C).9508/2018 and conctd. Case** **11** Rs.8,70,83,063.00]” 10. On perusal of the finding it is axiomatic that the basis of order rejecting the contention of the petitioner assessee and the addition, had been only on the alleged data receipt from KEPCO, and data submitted by audit party, which has been made as a rational instead of a guess work , as, the finding of the Assessing officer is almost identical as was subject matter of consideration before the Division Bench, ibid. Accordingly, the assessment order is gross abuse of court as it is not based upon any material except the audit report, thus not sustainable being wholly irrational,. Accordingly, the assessment orders are set aside to the extent the additions have been made on the sale price of day old chicks of KEPCO. Resultantly, these writ petitions are allowed. No order as to costs. ## **Sd/-** sab **AMIT RAWAL JUDGE** **WP(C).9508/2018 and conctd. Case** **12** ## **APPENDIX OF WP(C) 9508/2018** ## **PETITIONER'S/S EXHIBITS:** **EXHIBIT P1TRUE COPY OF NOTICE DATED 20/09/2017 FOR THE YEAR 2011-2012.** **EXHIBIT P1(A)TRUE COPY OF NOTICE DATED 20/09/2017 FOR THE YEAR 2014-2015. EXHIBIT P1(B)TRUE COPY OF NOTICE DATED 20/09/2017 FOR THE YEAR 2015-2016. EXHIBIT P2TRUE COPY OF THE LETTER DATED 25/01/2017** **EXHIBIT P3TRUE COPY OF THE PRELIMINARY OBJECTION DATED 14/11/2017.** **EXHIBIT P4TRUE COPY OF THE LETTER DATED 17/11/2017 ISSUED BY KEPCO.** **EXHIBIT P5TRUE COPY OF THE CIRCULAR NO.13/2013 DATED 26/07/2013. EXHIBIT P6TRUE COPY OF THE REPLY DATED 07/12/2017.** **EXHIBIT P7TRUE COPY OF THE ASSESSMENT ORDER DATED 18/12/2017 FOR THE 2011-2012. EXHIBIT P7(A)TRUE COPY OF THE ASSESSMENT ORDER DATED 27/01/2018 FOR THE 2014-2015. EXHIBIT P7(B)TRUE COPY OF THE ASSESSMENT ORDER DATED 27/01/2018 FOR THE 2015-2016.** **WP(C).9508/2018 and conctd. Case** **13** ## **APPENDIX OF WP(C) 11894/2018** ## **PETITIONER'S/S EXHIBITS:** **EXT.P-1 TRUE COPY OF THE NOTICE DATED 17.01.2018 EXT.P-2 TRUE COPY OF THE LETTER DATED 25.01.2017 EXT.P-3 TRUE COPY OF THE PRELIMINARY OBJECTION DATED 09.03.2016 EXT.P-4 TRUE COPY OF THE LETTER DATED 17.11.2017 ISSUED BY KEPCO EXT.P-5 TRUE COPY OF THE CIRCULAR NO.13/2013 DATED 26.07.2013 EXT.P-6 TRUE COPY OF THE ASSESSMENT ORDER DATED 23.03.2018 FOR THE YEAR 2010-2011.**