State of Kerala v M/S Gnanam Enterprises

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** # **PRESENT** **THE HONOURABLE MR.JUSTICE S.V.BHATTI** **&** **THE HONOURABLE MR.JUSTICE BASANT BALAJI FRIDAY, THE 26[TH] DAY OF NOVEMBER 2021 / 5TH AGRAHAYANA, 1943** **ST.REV. NO. 39 OF 2015** **AGAINST THE ORDER/JUDGMENT IN TA 233/2010 OF KERALA AGRICULTURAL INCOME TAX AND SALES TAX APPELLATE TRIBUNAL,ERNAKULAM** ## **PETITIONER/S:** STATE OF KERALA REPRESENTED BY DEPUTY COMMISSIONER (APPEALS), COMMERCIAL TAXES, ERNAKULAM. BY ADV GOVERNMENT PLEADER ## **RESPONDENT/S:** M/S.GNANAM ENTERPRISES 38/731-A, MARKET ROAD, KADAVANTHRA, COCHIN,PIN - 682 020. BY ADVS. SRI.K.J.ABRAHAM SRI.NIKHIL JOHN SMT.B.DEEPALAKSHMI ## **OTHER PRESENT:** SPL. GP MOHAMMED RAFIQ THIS SALES TAX REVISION HAVING COME UP FOR ADMISSION ON 26.11.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ## **ST.REV. NO. 39 OF 2015** **-2-** ## **O R D E R** ## S.V.Bhatti, J _._ Heard Mr.Mohammed Rafiq, learned Special Government Pleader for petitioner and Mr.K.J.Abraham, learned counsel for respondents. 2. The revision is at the instance of revenue and is filed challenging the order in T.A.No.233 of 2010 filed as Annexure-C herein. The circumstances leading to the revision are briefly stated as follows: 2.1. On 7.2.2008, the Intelligence Officer of Commercial Tax Department in the inspection conducted and carried out at the premises of M/s Gnanam Enterprises/respondent herein recovered a few records which were related to the business transactions of the respondent for the year 2004-2005. The Commercial Tax **-3-** ## **ST.REV. NO. 39 OF 2015** Officer, Ernakulam in Annexure-A order dated 22.12.2009 completed the assessment under Section 17(3) of KGST Act. The respondent aggrieved by the order dated 22.12.2009 filed appeal before the Deputy Commissioner (Appeals) Kottayam. Through Annexure-B order dated 25.8.2010 the order of assessment was modified reducing the total turn over or contract receipts of the respondent from Rs.90,80,255/- to 41,98,042/-. The respondent filed second appeal before the Tribunal and through the order dated 29.11.2014 the appeal filed by the respondent was allowed. Hence the revision under Section 41 of the KGST Act, 1963. ## 3. The revision petitioner has formulated the following questions for the consideration of this Court. 1. Whether Annexure C order passed by the Tribunal is in accordance with law and settled principles? 2. Whether the finding of the Tribunal that the **-4-** ## **ST.REV. NO. 39 OF 2015** provisions of KGST Act is not applicable in the above case is correct? 3. Is it proper for the Tribunal to observe that KGST Act is not applicable when the assessment order in the above case is 2004-2005 and Kerala Value Added Tax has been introduced only with effect from 1.4.2005 vide notification SRO No.139/05 dated 9.2.2005? 4. Is it proper for the Tribunal to hold that even though the inspection was conducted during the year 2007-09, the suppression revealed was for the year 2004-05 and nothing was preventing the Intelligence Officer to proceed under KGST Act? 5. Is it proper for the Tribunal to direct issuance of registration to the assessee u/s 16(2) of the KVAT Act 2003 from the starting date of the business when the KVAT Act came into force only from 1.4.2005? 6. Is it proper for the Tribunal to delete additions made towards probable omission and suppression when the assessee has not produced any books of accounts? 4. The Tribunal through the order in Annexure-C formulated three points. The first point deals with the effort of the respondent herein to register under KVAT Act and thereafter availing the benefit under Section 16(2)(b) of KVAT Act to pay tax at the compounded rate is legal or in order. The Tribunal recorded the following finding: **-5-** ## **ST.REV. NO. 39 OF 2015** "We are of the view that the appellant have a legitimate right to get registration under the KVAT Act as the penal action against here were compounded under Section 74 of the KVAT Act. On getting registration as provided under Section 16(2) of the KVAT Act the registration shall be deemed to have been granted with effect from the date of commencement of business irrespective of the date of application for the purpose of opting for payment of tax under Section 8 for the relevant years subject to eligibility.” 5. Mr.Mohammed Rafiq argues that the order in Annexure-A refers to and deals with the contemporaneous entries for the assessment year 2004-05. The respondent was under obligation to have registration under KGST Act. Admittedly, there is no registration obtained by the respondent under KGST Act. The omission or commission under KGST Act cannot be cured or purged with registration under KVAT Act. Therefore the consideration _se_ by the Tribunal _per_ is illegal and literally taking KVAT Act prior to its coming into force on 1.4.2005. 6. Adv.Abraham tries to justify the order under **-6-** ## **ST.REV. NO. 39 OF 2015** revision that once the registration is granted under KVAT, the respondent gets right to avail the benefits for the commission or omission for the assessment year 2004-05. The alternative argument is that on merits, the determination of Rs.41,98,042/- by Appellate Authority is unavailable for the respondent. The labour contract entered into by the dealer, in most of the contracts involves labour component at more than 70%. On merits, the respondent has very good case to establish that no tax evasion has happened. This Court ought not to entertain the circumstances now stated by Revenue and secondly that the respondent was not before the Tribunal for the second appeal was heard _ex parte._ He, therefore, requests the Court to set aside the order of the Tribunal and remit the matter to the Tribunal for consideration and disposal afresh in accordance with law. Yet another conclusion **ST.REV. NO. 39 OF 2015** **-7-** recorded by the Tribunal is by referring to the judgment in v . _**Refrigeration state of Kerala[1]**_ 7. Mr.Mohammed Rafiq relies on the Full Bench judgment reported in _**M/s Yeses International**_ v _**Bharat Petroleum Corporation State of Kerala[2]**_ to canvass that refrigeration case (supra) does not hold the field as on date _**.**_ The Full Bench has reversed the judgment in v _Refrigeration State of Kerala_ . We are persuaded that the reasoning as it stands today in the order of the Tribunal is unsustainable. We, however, keep in perspective the argument of Adv.Abraham that the respondent has case even on merits of the matter and an opportunity may be afforded before the Tribunal. Hence the questions are answered in favour of revision petitioner and against the respondent and the matter is remitted to Tribunal for consideration and disposal afresh in accordance with law, > 1 138 STC 472 2 2008(4) KLT 454 **ST.REV. NO. 39 OF 2015** **-8-** preferably within four months from the date of receipt of a copy of this judgment. No order as to costs. **Sd/S.V.BHATTI JUDGE Sd/BASANT BALAJI JUDGE** css **ST.REV. NO. 39 OF 2015** **-9-** ## **APPENDIX OF ST.REV. 39/2015** PETITIONER ANNEXURE ANNEXURE A A TRUE COPY OF THE ASSESSMENT ORDER PASSED BY THE COMMERCIAL TAX OFFICER (WORKS CONTRACTOR), OFFICE OF THE DEPUTY COMMISSIONER, COMMERCIAL TAXES, ERNAKULAM DATED 22.12.2009. ANNEXURE B A TRUE COPY OF THE ORDER DATED 25.08.2010 PASSED BY THE DEPUTY COMMISSIONER (APPEALS), KOTTAYAM ANNEXURE C A CERTIFIED COPY OF THE ORDER OF THE TRIBUNAL DATED 29011.2014 IN TA NO. 233/10 ON THE FILE OF THE KERALA AGRICULTURAL INCOME TAX AND SALES TAX APPELLATE TRIBUNAL, ERNAKULAM