State of Kerala v Shahariyar Timbers East Kallai, Kozhikode

OT.REV.No.175 & 190/2014 **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** ## **&** **THE HONOURABLE MR. JUSTICE T.R.RAVI** **MONDAY, THE 16TH DAY OF NOVEMBER 2020 / 25TH KARTHIKA, 1942** **OT.Rev.No.175 OF 2014** **AGAINST THE JUDGMENT IN TAVAT 466/2013 DATED 26-02-2014 OF VALUE ADDED TAX APPELLATE TRIBUNAL,ADDITIONAL BENCH,PALAKKAD** ## **REVISION PETITIONER/RESPONDENT/RESPONDENT/REVENUE:** **STATE OF KERALA, REPRESENTED BY THE DEPUTY COMMISSIONER (LAW), COMMERCIAL TAXES, ERNAKULAM.** **BY SR. GOVERNMENT PLEADER SRI MOHAMMED RAFIQ** ## **RESPONDENT/APPELLANT/APPELLANT/ASSESSEE :** **SHAHARIYAR TIMBERS EAST KALLAI, KOZHIKODE, PIN - 673 003.** **BY ADV. SRI.K.M.FIROZ BY ADV. SRI.S.KANNAN BY ADV. DR.K.B.MUHAMED KUTTY SR. BY ADV. SRI.K.SANJAYAN** **THIS OTHER TAX REVISION (VAT) HAVING BEEN FINALLY HEARD ON 16-11-2020, ALONG WITH OT.Rev.190/2014, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** OT.REV.No.175 & 190/2014 2 # **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** ## **&** **THE HONOURABLE MR. JUSTICE T.R.RAVI** **MONDAY, THE 16TH DAY OF NOVEMBER 2020 / 25TH KARTHIKA, 1942** **OT.Rev.No.190 OF 2014** **AGAINST THE ORDER IN TA(VAT) 467/2013 OF VALUE ADDED TAX APPELLATE TRIBUNAL,ADDITIONAL BENCH,PALAKKAD** ## **REVISION PETITIONER/RESPONDENT/REVENUE:** **STATE OF KERALA REPRESENTED BY THE DEPUTY COMMISSIONER (LAW), COMMERCIAL TAXES, ERNAKULAM.** **BY SR. GOVERNMENT PLEADER SRI MOHAMMED RAFIQ** ## **RESPONDENT/APPELLANT/ASSESSEE:** **SHAHARIYAS TIMBER EAST KALLAI, KOZHIKODE.** **R1 BY ADV. SRI.K.M.FIROZ R1 BY ADV. DR.K.B.MUHAMED KUTTY SR. R1 BY ADV. SMT.M.SHAJNA** **THIS OTHER TAX REVISION (VAT) HAVING BEEN FINALLY HEARD ON 16-11-2020, ALONG WITH OT.Rev.175/2014, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** OT.REV.No.175 & 190/2014 -3- ## **ORDER** ## **T.R.RAVI, J.** Heard Senior Government Pleader Sri Mohammed Rafiq on behalf of the revision petitioners and Sri K.A.Firoz on behalf of the respondent. 2. These revision petitions are filed at the instance of the Revenue challenging the common order of the KVAT Tribunal in T.A.(VAT)Nos.466 and 467 of 2013. The assessee in these revisions is a dealer in timber having registration under KVAT Act and CST Act. The revisions relate to the assessments under the two enactments for the year 2005-06. 3. The assessment was completed on best of judgment, mainly on the reason that goods have been undervalued. According to the Revenue, the sale value conceded by the dealer for local sale was Rs.4,688.17 per cubic metre and for interstate sale was Rs.4,401/- per cubic metre. However, the opening stock was valued at Rs.11,166.88 per cubic metre and the closing stock at Rs.16,718.61 per cubic metre. The case of the OT.REV.No.175 & 190/2014 -4- Revenue is that this huge difference has not been satisfactorily explained by the assessee. The Assessing Officer found sales suppression and evasion of tax. The Appellate Authority modified the assessment to certain extent, however, confirming the finding regarding sales suppression. The assessee filed appeals before the Tribunal challenging the assessment orders and appellate orders under the CST Act and the KVAT Act. The Tribunal found that the audit department had inspected the business place of the assessee on 04.01.2007 and the accounts for the year 200506 were audited. It was noticed that the order dated 31.10.2007 would clearly show that all the records were verified and no defect was noticed regarding the valuation of stock at the time of audit. On the basis of the bills relating to the goods sold intestate, it was found that what was sold are packing cases. The Tribunal found that the goods had passed through the Check Post and were accompanied by bills showing the address of parties and the Officers could have verified the veracity of the contention. The Tribunal held that there was no material available before the Assessing Authority to estimate the local sale OT.REV.No.175 & 190/2014 -5- and intestate sale for an amount other than one which was conceded by the assessee in the books of accounts. Since the Assessing Officer could not establish that the assessee has received a higher consideration than what is shown in the books of accounts, the assessments were set aside directing the Assessing Authority to accept the sale conceded by the assessee in the books of accounts and the returns filed by the assessee. 4. The Revenue has raised the following questions of law; (i) Ought not the Tribunal have found that the estimation of turnover on the basis of closing stock value of the goods is just and proper in view of the huge difference in the value of goods stated in the sale invoice and that of closing stock and opening stock? (ii) Whether Tribunal is right in law in holding that the assessing officer could not establish that the assessee has received more ostensible consideration than what is shown in the books of accounts, particularly when the assessee failed to produce the OT.REV.No.175 & 190/2014 -6- books of accounts before the assessing authority? (iii) Ought not the Tribunal have found that, the huge difference in value representing Lakshadweep sales and other interstate sales/local sales is a sufficient reason to discredit the return of the assessee and completion of the assessment on best of judgment? (iv) Are not the findings of the Tribunal are arbitrary, erroneous and perverse in nature, in the facts and circumstances of the case?” 5. Senior Government Pleader contended that the assessee was dealing in wood of superior quality and value shown in the sales bills were much below the actual value which is seen reflected in the value of the closing stock. He hence contends that the Tribunal ought not to have interfered with the orders passed by the Assessing Authority and Appellate Authority. In the decision in **C.O.Devassy v. State of Kerala and others** reported in **[1991 (81) STC 2]** , a Division Bench of this Court held that it must be shown by the Revenue that the OT.REV.No.175 & 190/2014 -7- assessee received more than what is declared or disclosed by him as consideration. It was further held that the burden of proof was on the Revenue. In paragraph 14 of the judgment, the Court held thus; “14. In the light of the above decision of the Supreme Court and of the Andhra Pradesh High Court, a duty was cast on the Revenue to prove that the assessees factually collected more than the ostensible consideration shown in the accounts. There is no finding in any of the orders of the statutory authorities that the revisionpetitioners/assessees factually collected or obtained more than the amount shown in the accounts or bills. Such a finding is essential to sustain the assessments under Section 19B of the Act. In the absence of such a finding, we hold that reliance placed on Section 19B of the Act was misplaced. On this ground as well, the assessments made by invoking Section 19B of the Act are illegal. The Appellate Tribunal was in error in sustaining the assessments under Section 19B of the Act without entering a definite finding that the assessees in fact collected or obtained more than the amount shown in the accounts or bills.” 6. Having noticed the legal position, when we go through the materials placed before us, we are of the opinion that the order of the Tribunal does not call for any interference. Neither OT.REV.No.175 & 190/2014 -8- the Assessing Authority, nor the Appellate Authority had categorically found that the assessee had received more consideration than what has been conceded in his returns. Except for mere surmises, there is no material available to come to such a finding. The difference in the value adopted for the closing stock and that adopted for the sales cannot be compared, since the records would show that what has been sold are log sizes to industries manufacturing packing cases. Merely based on such differential value, there was no justification for the Assessing Officer to find that there is sales suppression. The revision petitions fail and are dismissed. Questions of law raised are found against the Revenue. The parties will bear their respective costs. ## Sd/- **K. VINOD CHANDRAN JUDGE** Sd/- **T.R. RAVI JUDGE** dsn OT.REV.No.175 & 190/2014 9 ## **APPENDIX OF OT.Rev 175/2014** ## **PETITIONER'S/S EXHIBITS:** |**ANNEXURE A**|**TRUE COPY OF THE ASSESSMENT ORDER DATED**| |---|---| ||**07.05.2008 PASSED BY THE COMMERCIAL TAX**| ||**OFFICER (AUDIT ASSESSMENT) FOR THE YEAR**| ||**2005-06.**| |**ANNEXURE B**|**TRUE COPY OF THE ASSESSMENT ORDER DATED**| ||**07.05.2008 PASSED BY THE COMMERCIAL TAX**| ||**OFFICER (AUDIT ASSESSMENT) FOR THE YEAR**| ||**2005-06.**| |**ANNEXURE C**|**TRUE COPY OF THE FIRST APPELLATE ORDER DATED**| ||**24.07.2010 PASSED BY THE ASSISTANT**| ||**COMMISSIONER (AUDIT ASSESSMENT), KOZHIKODE**| ||**IN KVAT NO.646/08.**| |**ANNEXURE D**|**TRUE COPY OF THE FIRST APPELLATE ORDER DATED**| ||**24.07.2010 PASSED BY THE ASSISTANT**| ||**COMMISSIONER (AUDIT ASSESSMENT), KOZHIKODE**| ||**IN KVAT NO.647/08.**| |**ANNEXURE E**|**TRUE COPY OF THE COMMON 2ND APPELLATE ORDER**| ||**OF THE TRIBUNAL DATED 26.02.2014 IN T.A.**| ||**(VAT) NO. 466/2013 AND 467/2013.**| OT.REV.No.175 & 190/2014 10 ## **APPENDIX OF OT.Rev 190/2014** ## **PETITIONER'S/S EXHIBITS:** ## **ANNEXURE A** **TRUE COPY OF THE ASSESSMENT ORDER DATED 07.05.2008 PASSED BY THE COMMERCIAL TAX OFFICER (AUDIT ASSESSMENT) FOR THE YEAR 2005-06.** **ANNEXURE B TRUE COPY OF THE ASSESSMENT ORDER DATED 07.05.2008 PASSED BY THE COMMERCIAL TAX OFFICER (AUDIT ASSESSMENT) FOR THE YEAR 2005-06.** **ANNEXURE C TRUE COPY OF THE FIRST APPELLATE ORDERS DATED 24.07.2010 PASSED BY THE ASSISTANT COMMISSIONER (AUDIT ASSESSMENT), KOZHIKKODE IN KVAT NO.646/08.** **ANNEXURE D TRUE COPY OF THE FIRST APPELLATE ORDERS DATED 24.07.2010 PASSED BY THE ASSISTANT COMMISSIONER (AUDIT ASSESSMENT), KOZHIKKODE IN KVAT NO.647/08.** **ANNEXURE E TRUE COPY OF THE COMMON 2ND APPELLATE ORDER OF THE TRIBUNAL DATED 26.02.2014 IN T.A. (VAT) NO. 466/2013 AND 467/2013.**