State of Kerala v. M/s Alukkas Jewellery

**IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:-** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON** **TUESDAY, THE 5TH DAY OF JUNE 2018 / 15TH JYAISHTA, 1940** **O.T.Rev.No.34 of 2014** **--------------------------------** **AGAINST THE ORDER IN T.A (VAT) NO.210/2010 DATED 19-07-2013 OF KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, ERNAKULAM (ASSESSMENT YEAR 2007-08)** **------------** ## **REVISION PETITIONER(S)/ RESPONDENT/REVENUE:-** **------------------------------------------------------------------------------** **STATE OF KERALA,** **REPRESENTED BY THE DEPUTY COMMISSIONER OF LAW, COMMERCIAL TAXES, ERNAKULAM.** **BY SENIOR GOVERNMENT PLEADER SRI.MOHAMMED RAFIQ.** ## **RESPONDENT(S)/ APPELLANT/ASSESSEE:-** **----------------------------------------------------------------** **M/S. ALUKKAS JEWELLERY, M.O.ROAD, THRISSUR.** **BY ADVS. SRI.HARISANKAR V. MENON SMT.MEERA V.MENON SRI.MAHESH V.MENON** **THIS OTHER TAX REVISION (VAT) HAVING BEEN FINALLY HEARD ON 05-06-2018, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:-** ## **O.T.REV.NO.34 OF 2014** ## **APPENDIX** ## **REVISION PETITIONER'S ANNEXURES:-** **----------------------------------------------------------** ## **ANNEXURE-A TRUE COPY OF THE PENALTY ORDER.** **ANNEXURE-B TRUE COPY OF THE FIRST APPELLATE ORDER DATED 1.1.2010 IN S.T.APPEAL NO.KVAT 1831/08.** **ANNEXURE-C CERTIFIED COPY OF THE ORDER DATED 19.7.13 OF THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, ERNAKULAM IN T.A.(VAT) NO.210/10 DATED 19.7.13.** **RESPONDENT'S ANNEXURES:-** **---------------------------------------------NIL.** **vku/-** **[ true copy ]** _**CR**_ ## K. Vinod Chandran & Ashok Menon, JJ. ------------------------------------------------------- O.T.Rev.No.34 of 2014 ------------------------------------------------------- Dated, this the 05[th] day of June, 2018 ## **ORDER** ## Vinod Chandran, J: The questions of law arising in the above revision are re-framed as follows:- - “(i) Whether the Tribunal was correct in deleting the addition made on the strength of a cancelled issue voucher of gold, on the ground that the Intelligence Officer has not summoned the goldsmith and also not verified the stock register; when burden of proving that there is no attempt to evade tax is squarely on the assessee as statutorily prescribed under Section 67 of the Kerala Value Added Tax Act, 2003 [for brevity “KVAT Act”]? - (ii) Whether the Tribunal was correct in directing the penalty levied on sale of fixed assets to be deleted on the ground that the sale was reflected in the books of accounts, especially when under the KVAT Act there is no regular assessment contemplated wherein the Assessing Officer is mandated to look into the books of accounts before regular assessment? - (iii) Whether the penalty imposed on sale of fixed assets could be deleted when the regime under the KVAT Act contemplates self assessment, which stands completed unless the Assessing Officer invokes the provisions in Section 25? O.T.Rev.No.34 of 2014 - 2 - 2. The Intelligence Officer inspected the premises of the assessee, a dealer in jewellery, who had their Head Office at Thrissur and Branches at Edappal and Pathanamthitta. There were many discrepancies found, which were confirmed by the first appellate authority and the Tribunal. The issues arising in the above revision, as is evident from the questions of law, are two: (i) the cancelled issue voucher, and (ii) the sale of fixed assets. 3. A cancelled issue voucher was seen from the assessee's own books of accounts, which indicated 2000 grams of gold having been given to the artisan which, later, was cancelled. As a matter of practice, we are told that the assessee when transferring gold to the artisans, issues a voucher, the original of which is countersigned by the artisans and taken by the artisans along with the gold. The duplicate is maintained with the jewellery. The transfer of the gold and the return of ornaments are both duly entered in the stock register. 4. The presence of the cancelled voucher was sought to be explained by the assessee pointing out that though it was intended to be handed over to the artisan, along with gold, the goods were not handed over since the gold smith expressed an inconvenience; upon which the voucher stood cancelled and kept O.T.Rev.No.34 of 2014 - 3 - in the records of the assessee. The Intelligence Officer, however, found that the presence of the cancelled voucher indicates a suppression of the quantity of gold so transferred and the ornaments received back. The Tribunal cancelled the same on the ground that the artisan was not summoned and the stock register was not verified. 5. In this context, we have to notice Section 67 of the KVAT Act, which, by the Explanation, casts the burden of proof on the person who is alleged to have committed an offence leading to evasion of tax; which reads as under: “Explanation.- The burden of proving that any person is not liable to the penalty under sub-section (1) shall be on such person”. 6. In the context of the burden being squarely on the shoulders of the assessee, it was for the assessee to seek summoning of the artisan and enable verification of the stock register. The assessee has not filed any application before the Intelligence Officer to summon the artisan. The assessee also did not produce the stock register and specifically point out the entry made to absolve himself from the liability. The burden stands undischarged. In such circumstance, we find that the Tribunal - 4 - O.T.Rev.No.34 of 2014 erred insofar as casting the burden on the Intelligence Officer; contrary to the statutory prescription. 7. The burden to prove that the artisan had refused to take the gold as per the issue voucher which led to its cancellation was that of the assessee. The assessee ought to have sought for summoning the artisan to be examined before the Intelligence Officer; which the assessee failed to do. The assessee also failed to discharge its burden by enabling verification of the stock register, by producing it and pointing out the specific transaction which stood cancelled; recovered by the Intelligence Officer.We, hence, set aside the deletion of penalty on account of the cancelled voucher. 8. The further issue is with respect to sale of fixed assets, which was not disclosed in the monthly return. The learned Counsel for the assessee argued that the same was available in the books of accounts and relied on a decision of this Court in _**Kollanur Agencies v. Assistant Commissioner**_ **[(1991) 80 STC 177]** and that of the Hon'ble Supreme Court in _**Sree Krishna Electricals v. State of T.N.**_ **[(2009) 23 VST 249 (SC)].** In both the aforesaid cases, the assessee had disclosed the transaction in the books of accounts; but, however, not paid tax. - 5 - O.T.Rev.No.34 of 2014 The Court found that when there is disclosure in the books of accounts, there could be no penalty imposed; obviously since there could be no contumacious conduct discernible from the action of the assessee. 9. We notice the decision of the Hon'ble Supreme Court in _**Sree Krishna Electricals**_ **,** wherein the assessee was selling wet grinders. In the return, the assessee did not disclose the sales, since the assessee erroneously held a belief that the exemption available to spare parts of wet grinders would be available to a wet grinder itself. The Hon'ble Supreme Court found that the exemption would not be so available especially since the wet grinder sold by the assessee is a different product. However, on the question of penalty it was held that the assessee having disclosed the sale in its books of accounts, the Assessing Officer could have very well ferreted out the liability from the books of accounts and levied tax. We are of the opinion that the said decisions are in the context of a tax regime where there was contemplated a regular assessment after filing of a return; which requires production of books of accounts before the Assessing Officer. Under the VAT regime, Section 21 contemplates a self assessment on the basis of a return filed by the assessee subject - 6 - O.T.Rev.No.34 of 2014 only to the provisions of Sections 22, 24 and 25. Hence, there is no regular assessment contemplated as was available under the KGST regime or the tax regime as seen from _**Sree Krishna Electricals.**_ 10 _**.**_ The provision for self assessment creates an obligation on the assessee to file a correct return; more onerous than in a regime which mandates a regular assessment. The submission of the learned Government Pleader that the filing of an untrue or incorrect return as available under sub-clause (d) of Section 67(1) assumes more rigour in the teeth of the onerous obligation, resulting in imposition of penalty without reference to whether there has been disclosure made in the books of accounts, has to be accepted. 11. On the question raised with respect to the sale of fixed assets, the assessee had filed an incorrect return and had not returned the sale of fixed assets nor paid tax in accordance with that. Even after issuance of notice on penalty, the assessee filed an annual return without showing the aforesaid liability. A revision of the annual return was carried out and only then the liability satisfied. 12. We hence answer the questions of law framed, in - 7 - O.T.Rev.No.34 of 2014 favour of the revenue and against the assessee. On the issue of cancellation of voucher, we are of the opinion that the penalty as levied at 170% by the first appellate authority can be affirmed. With respect to the quantum of penalty on the sale of fixed assets, since the assessee had filed revised return, paid tax and also interest from the due date, we are of the opinion that the same can be reduced to the actual amount of tax sought to be evaded. We allow the revision with the above modification on quantum. No costs. Sd/- K.Vinod Chandran Judge Sd/Ashok Menon Judge vku/- [ true copy ]