S.T(Rev) Nos. 6, 7, 8 & 9 of 2018

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR. JUSTICE T.R.RAVI** **WEDNESDAY, THE 27TH DAY OF MAY 2020 / 6TH JYAISHTA, 1942** **ST.Rev..No.6 OF 2018** **AGAINST THE ORDER IN TA NO.3/2015 DATED 16-01-2018 OF THE AGRICULTURAL INCOME TAX & SALES TAX APPELLATE TRIBUNAL ADDITIONAL BENCH, KOTTAYAM** ## **REVISION PETITIONER/APPELLANT/APPELLANT/ASSESSEE:** **M/S.RIVER VIEW BAR & RESTAURANT THODUPUZHA, REPRESENTED BY ITS MANAGING PARTNER, SONY THOMAS.** **BY ADVS. SMT.S.K.DEVI SRI.SANTHOSH P.ABRAHAM** ## **RESPONDENT/RESPONDDENT/RESPONDENT/REVENUE:** **STATE OF KERALA REPRESENTED BY ITS SECRETARY (FINANCE) SECRETARIAT, THIRUVANANTHAPURAM-695 001.** **R1 BY SR.GP SRI.MOHAMMED RAFIQ** **THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 27.05.2020, ALONG WITH ST.Rev. NOS.7/2018, 8/2018, & 9/2018, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** **S.T(Rev) No.6 of 2018 & - 2 - connected cases** ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR. JUSTICE T.R.RAVI** **WEDNESDAY, THE 27TH DAY OF MAY 2020 / 6TH JYAISHTA, 1942** **ST.Rev.No.7 OF 2018** **AGAINST THE ORDER IN TA NO.4/2015 DATED 16-01-2018 OF THE AGRICULTURAL INCOME TAX & SALES TAX APPELLATE TRIBUNAL ADDITIONAL BENCH, KOTTAYAM** ## **REVISION PETITIONER/APPELLANT/APPELLANT/ASSESSEE:** **M/S.M.G.BAR & TEE CEE RESTAURANT THODUPUZHA, REPRESENTED BY ITS PARTNER BABU GEORGE.** **BY ADVS. SMT.S.K.DEVI SRI.SANTHOSH P.ABRAHAM** ## **RESPONDENT/RESPONDDENT/RESPONDENT/REVENUE:** **STATE OF KERALA REPRESENTED BY ITS SECRETARY (FINANCE) SECRETARIAT, THIRUVANANTHAPURAM-695001.** **R1 BY SR.GP SRI.MOHAMMED RAFIQ** **THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 27.05.2020, ALONG WITH ST.Rev. NOS.6/2018, 8/2018, & 9/2018, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** **S.T(Rev) No.6 of 2018 & - 3 - connected cases** ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR. JUSTICE T.R.RAVI** **WEDNESDAY, THE 27TH DAY OF MAY 2020 / 6TH JYAISHTA, 1942** **ST.Rev.No.8 OF 2018** **AGAINST THE ORDER IN TA NO.6/2015 OF THE AGRICULTURAL INCOME TAX & SALES TAX APPELLATE TRIBUNAL ADDITIONAL BENCH, KOTTAYAM** ## **REVISION PETITIONER/APPELLANT/APPELLANT/ASSESSEE:** **M/S.M.G.BAR AND TEE CEE RESTAURANT THODUPUZHA, REPRESENTED BY ITS PARTNER BABU GEORGE.** **BY ADVS. SMT.S.K.DEVI SRI.SANTHOSH P.ABRAHAM** ## **RESPONDENT/RESPONDDENT/RESPONDENT/REVENUE:** **STATE OF KERALA, REPRESENTED BY ITS SECRETARY (FINANCE), SECRETARIAT, THIRUVANATHAPURAM - 695 001.** **R1 BY SR.GP SRI.MOHAMMED RAFIQ** **THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 27.05.2020, ALONG WITH ST.Rev. NOS.6/2018, 7/2018, & 9/2018, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** **S.T(Rev) No.6 of 2018 & - 4 - connected cases** ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR. JUSTICE T.R.RAVI** **WEDNESDAY, THE 27TH DAY OF MAY 2020 / 6TH JYAISHTA, 1942** **ST.Rev..No.9 OF 2018** **AGAINST THE ORDER/JUDGMENT IN TA 5/2015 DATED 16-01-2018 OF THE AGRICULTURAL INCOME TAX & SALES TAX APPELLATE TRIBUNAL ADDITIONAL BENCH, KOTTAYAM** ## **REVISION PETITIONER/APPELLANT/APPELLANT/ASSESSEE:** **M/S. M.G.BAR AND TEE CEE RESTAURANT THODUPUZHA, REPRESENTED BY ITS PARTNER BABU GEORGE** **BY ADVS. SMT.S.K.DEVI SRI.SANTHOSH P.ABRAHAM** ## **RESPONDENT/RESPONDDENT/RESPONDENT/REVENUE:** **STATE OF KERALA REPRESENTED BY ITS SECRETARY (FINANCE) SECRETARIAT, THIRUVANANTHAPURAM 695 001** **THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 27.05.2020, ALONG WITH ST.Rev. NOS.6/2018, 7/2018, & 8/2018, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** **S.T(Rev) No.6 of 2018 & - 5 - connected cases** **K.Vinod Chandran & T.R.Ravi, JJ. --------------------------------** **S.T.Rev.Nos.6, 7, 8 & 9 of 2018 -------------------------------Dated, this the 27[th] day of May, 2020** ## **O R D E R** **K. Vinod Chandran, J.** **S.T(Rev) No.6 of 2018 is concerned with, assessment of the revision petitioner for the year 2006-2007. ST(Rev) Nos 7, 8 & 9 of 2018 arise from the assessment of another assessee, for the years 2006-2007, 2007-2008 and 2008-2009; the first of which year raise the same issue as in the other revision. The substantial issue that arise in S.T(Rev) Nos.6 & 7 of 2018 is with respect to the computation of tax payable under Section 7 of the Kerala General Sales Tax Act (KGST Act), 1963. According to the petitioners, this is an exercise permissible only as a rectification; which has to be carried out under Section 43 within a period of three years from the date of the order. The orders permitting payment of tax under the compounding provision at Annexure-I, in both the revision petitions, were passed respectively on 06.02.2007 and 28.11.2006. The orders of assessment at Annexure-II were passed** ## **S.T(Rev) No.6 of 2018 & - 6 - connected cases** **respectively on 13.08.2010 and 30.07.2010, beyond the limitation period. The issue raised in ST(Rev) Nos.8 & 9 of 2018 is dependent on the result of ST(Rev) No.7 of 2018. If ST(Rev) No.7 of 2018 stands rejected, necessarily there would be a cascading effect in the two subsequent years.** **2. The questions of law in the above revisions are re-framed by us as follows:** _**“1. Ought not the Tribunal have set aside the impugned original orders finding the same to be beyond the limitation period for rectification of mistakes as provided under Section 43?**_ _**2. Has not the Tribunal erred insofar as finding the impugned original order to be an assessment completed under Section 17 of the KGST Act, subject only to limitation under sub-section (6) of section 17?”**_ **3. We need only refer to the brief facts as noticed from ST(Rev) No.6 of 2018. In the year 2006-2007, the assessee applied for compounding, which was permitted as per Annexure-I order. The permission granted was for payment of turnover tax at compounded rate of Rs.68,732/-** **S.T(Rev) No.6 of 2018 & - 7 - connected cases** **per month or tax on 140% of the purchase value of the foreign liquor in each month.** **4. Here, we have to pertinently notice that the provision as existed at that point of time, which is as below:** **“7. Payment of tax at compounded rates:-Notwithstanding anything contained in sub-section (2) of section 5, any bar attached hotel, not being a star hotel of and above three star hotel, heritage hotel or club, may, at its option, instead of paying turnover tax on foreign liquor in accordance with the provisions of the said sub-section pay turnover tax on the turnover of foreign liquor calculated,-** **(a) at one hundred and forty per cent of the purchase value of such liquor, in the case of those situated within the area of a municipal corporation or a municipal council or a cantonment, and at one hundred and thirty five per cent of the purchase value of such liquor, in the case of those situated in any other place; or** **(b) at one hundred and fifteen per cent of the highest turnover tax payable by it as conceded in the return or accounts or the turn over tax paid or (sic) (it should be 'of') any of the previous consecutive three years, whichever is higher.”** ## **S.T(Rev) No.6 of 2018 & - 8 - connected cases** **Hence, any Bar-attached hotel, not being excluded specifically, could pay turnover tax at their option, computing the higher amount payable either under clause (a) or (b). The provision at Clause (a) requires computation of 140% or 135% of the purchase value of liquor in the year of option, depending on the location of the business. Clause (b) requires 115% of the highest turnover tax conceded or paid in any of the previous three consecutive years. The Assessing Officer, by the impugned original order [Annexure-II], computed the tax payable as per Clause (a) & (b), finding the tax payable under Clause (a) to be more. The order was passed fixing the compounded tax payable for that year to be at Rs.14,20,979/-. According to the petitioner, this results in a rectification of the earlier permission granted at Annexure-I, which does not reckon the opening stock of that year for the purpose of determining the purchase value of liquor.** **5. As far as the question of purchase value of liquor, the decision of a Division Bench of this Court in** _**M/s.Sannidhan Bar and Restaurant, Kannur v. State of kerala [2011 (42) VST 352 (Kerala)]**_ **is binding** . **It was found** ## **S.T(Rev) No.6 of 2018 & - 9 - connected cases** **therein that the purchase price as seen from Section 7 is the purchase price of the entire liquor sold during the relevant year, which necessarily includes the value of the opening stock of liquor of that year reduced by the value of closing stock. There is no dispute raised on that count. The petitioners accept the said legal proposition, but points out that this should have found a place in the permission granted and if subsequently that is sought to be included, it can only be a rectification of mistake, which has to comply with the rigor of Section 43.** **6. The issue stands covered against the assessee by another Division Bench of this Court reported in** _**Commercial Tax Officer v. Hotel Breezeland Ltd. [2019 (2) KHC 432]**_ **. Therein two factual aspects arose for consideration. The first issue was as to the modification made of the compounded tax payable, for reason of variation of the tax assessed for a relevant previous year as spoken of in Section 7(b). The other issue was identically the one agitated herein, as to the opening stock being liable for inclusion in the purchase value. This Court found that the Hon'ble Supreme Court in** _**Koothattukulam Liquors v. Deputy**_ **S.T(Rev) No.6 of 2018 & - 10 - connected cases** _**Commissioner of Sale Tax [(2014) 72 VST 353 (SC)] and Bhima Jewellery v. Assistant Commissioner (Assessment), Special Circle & Another [(2014) 71 VST 710 (SC)]**_ **held that there is a bilateral agreement between the parties on permission being granted for compounding, in an option exercised by the assessee, from which neither can resile from. This however does not permit a departure from the requirement of a regular assessment under Section 17.** **7. In the present case, as in the cited one, the computation of tax to be paid under Section 7, which is an alternative mode of payment opted by the assessee, was correctly quantified within the five year period as provided under Section 17(6).** _**Hotel Breezeland Ltd.**_ **found that under clause (a) & (b) of section 7, there could be a final determination of the exact tax payable, only on the close of the year for more than one reason. Under Clause (a) of Section 7, the purchase value can be determined only after the closure of the assessment year. The opening stock for the assessment year has to be taken, which has to be added to the purchase value of liquor carried out in the assessment year and the closing stock for the year reduced.** ## **S.T(Rev) No.6 of 2018 & - 11 - connected cases** **As has been held in** _**M/s.Sannidhan Bar and Restaurant**_ **[supra], this would be the purchase value of the liquor sold in that year. Simultaneously, it also requires to be looked at as to what is the highest tax payable or paid in any of the previous consecutive three years under Clause(b) of Section 7. It was categorically held that this would take in the assessed tax also and not the tax conceded in the return or accounts alone, since the words employed are tax conceded or tax paid. It was found that if a contrary interpretation is given, it would only advance the cause of a dishonest dealer, who does not maintain proper books of accounts or file returns in accordance with the Statute [Para 25 sic].** **8. The learned Counsel relied on a Division Bench judgment of this Court in** _**S.T(Rev) No.94 of 2012 [G. Pushpalatha v. State of Kerala] dated 11.12.2013**_ **. Therein, an identical question of inclusion of opening stock came up for consideration and the Division Bench directed the Tribunal to consider the issue as to whether the rectification made under Section 43 was barred by limitation. There can be no authority ferreted out from the** **S.T(Rev) No.6 of 2018 & connected cases** ## **- 12 -** **aforesaid decision that the exercise could have been carried out only under Section 43. The Division Bench did not notice Section 17 or the ramification of the aforesaid provision in relation to Section 7.** **9. The learned Counsel also relied on the decision** **of a Single Judge in** _**Parakkattil Aleyamma v. S.T.O. [1993 (vol.91) STC 518]**_ **, paragraph 6 of which is as under:** _**“6. What sub-section (14) does is to obviate the necessity for determination of taxable turnover by examination of the accounts and the records, and the completion of assessment on that basis. The amount paid at 20 per cent of the kist is in lieu of the tax payable on the turnover determined for the purposes of Clause (v) of sub-section (1) of section 5. The effect of Section 7(14) is to fictionally fix the turnover, as also the tax payable, without the assessee being put to the difficulty of going through the process of assessment. It provides only for payment of the lump sum of 20 per cent, less the purchase tax paid, in lieu of what is payable under Section 5(1). It is not a complete discharge of all the liabilities which the State may impose under the powers vested in it under entry 54 of List II of the Seventh Schedule to the Constitution. Surcharge**_ ## **S.T(Rev) No.6 of 2018 & - 13 - connected cases** _**and additional tax are payable under separate enactments and turnover tax is payable under a different section, namely, sub-section (2A) of Section 5, all referable to the said entry 54. No intention is discernible in sub-section (14) to do away with these other levies in case compounding is opted for under it. That is limited to the tax payable under Section 5(1)(v) and not for anything else. Demand for surcharge, turnover tax or additional tax is not therefore hit by the compounding under Section 7(14).”**_ **The aforesaid declaration is only with respect to the alternate mode under Section 7 and it is to be specifically noticed that the learned Single Judge found that there is no necessity for completion of assessment by examination of accounts and records. Here too, there is no such assessment made on an examination of the books of accounts and records in view of the permission granted under Section 7. The assessment was only with respect to the computation of the exact tax amount payable under Section 7.** **10.** _**Hotel Breezeland Ltd.**_ **is an authority for the proposition that the computation made under Section 7 after the close of the year is not one confined to Section 43, as** ## **S.T(Rev) No.6 of 2018 & - 14 - connected cases** **rectification of mistakes. In this context, we notice Annexure-I order in S.T.Rev.6 of 2019. Annexure-I directed payment of tax at the compounded rate of an amount of Rs.68,732/- per month, or tax on 140% of the purchase value of the foreign liquor in each month. This cannot be said to be a final determination by the Assessing Officer even going by Section 7. Section 7 speaks of computation of tax at 140% of the purchase value of liquor for the assessment year and the highest turnover tax paid in the prior three consecutive years, with the higher of the two being the obligation of the dealer under Section 7. The amount determined at Rs.68,732/- is equated monthly payment on the basis of the highest tax paid in the prior consecutive three years. There could definitely be an increase by reason of an assessment made in any of the three consecutive years, which could result in modification of Annexure-I order. This exercise is one contemplated under Section 17 within the five year period. Likewise 140% of the purchase value could be determined only after the close of the assessment year. Further, the order at Annexure-I itself stipulates determination of the higher tax payable** ## **S.T(Rev) No.6 of 2018 & - 15 - connected cases** **on a monthly basis, while the higher of the tax payable under Clause (a) & (b) has to be determined for the whole year as per Section 7. The order at Annexure-I insofar as the computation of tax, is only provisional, though the permission granted for compounding is final and binding.** **11. We hence answer both the questions of law in favour of the Revenue and against the assessee. The Tribunal has rightly found the impugned order to be one under Section 17 of the KGST Act. The limitation for an assessment to be completed under Section 17 is five years, as the provision existed then. Both the orders have been passed within five years of the permission granted of compounding, and the limitation commences only from the last date of the assessment year. We hence reject the revisions.** **12. The learned Counsel for the assessee raised a specific question as to the issue of reduction of the closing stock. Though not raised in the revision, it is raised before the Tribunal, which was not considered. We do not think there is requirement for remand on that issue. We make it clear that when the opening stock is added to the** **S.T(Rev) No.6 of 2018 & - 16 - connected cases** **purchase value of the assessment year, necessarily there** **should be deduction of the closing stock of that assessment year, which alone would bring forth the actual purchase value of the liquor sold in that assessment year. We direct the Assessing Officer to make re-computation on that basis.** **The revisions are rejected with the above observation. No order as to costs.** ## **Sd/-** **K. VINOD CHANDRAN, JUDGE.** **Sd/-** **T.R. RAVI, JUDGE.** **sp/28/05/2020** **//True Copy//** **P.A. To Judge** **S.T(Rev) No.6 of 2018 & - 17 - connected cases** ## **APPENDIX OF ST.Rev. 6/2018** ## **PETITIONER'S/S EXHIBITS:** **ANNEXURE I TRUE COPY OF THE ORDRE NO.0604 K 000008/0607 DATED 06.02.2007 ANNEXURE II TRUE COPY OF THE ORDER NO.0613 K 00007/0607 DATED 13.08.2010 ANNEXURE III TRUE COPY OF THE ORDER NO.STA 47/2014 (OLD NO.386/2011)DC(A), EKM DATED 3.9.2014 ANNEXURE IV TRUE COPY OF THE JUDGMENT IN WP(C)NO.3187/2015(W) DATED 12.2.2015 ANNEXURE V TRUE COPY OF THE ORDER OF THE APPELLATE TRIBUNAL IN TA NO.03/2015 DATED 16.1.2018** **S.T(Rev) No.6 of 2018 & connected cases** ## **- 18 -** ## **APPENDIX OF ST.Rev. 7/2018** ## **PETITIONER'S/S EXHIBITS:** |**ANNEXURE**|**1**|**TRUE COPY OF THE ORDER NO. 0604 K**| |---|---|---| |||**000006/06-07 DATED 28.11.2006.**| |**ANNEXURE**|**II**|**TRUE COPY OF THE ORDER NO. 0613K000005/06-**| |||**07 DATED 30.7.2010.**| |**ANNEXURE**|**III**|**TRUE COPY OF THE ORDER NO. STA 61/2014,**| |||**62/2014, AND 63/2014 OLD NO. 383/2011,**| |||**384/2011 AND 385/2011 DC (A) EKM DATED**| |||**4.8.2014.**| |**ANNEXURE**|**IV**|**TRUE COPY OF THE JUDGMENT IN WPC NO. 3168**| |||**OF 2015 (U) DATED 12.2.2015.**| |**ANNEXURE**|**V**|**TRUE COPY OF THE ORDER OF THE APPELLATE**| |||**TRIBUNAL IN TA NOS. 04/2015, 05/2015 AND**| |||**06/2015 DATED 16.1.2018.**| ## **S.T(Rev) No.6 of 2018 & - 19 - connected cases** ## **APPENDIX OF ST.Rev. 8/2018** **PETITIONER'S/S EXHIBITS:** **ANNEXURE I TRUE COPY OF THE ORDER NO.0613K000005/08-09 DATED 30/7/2010. ANNEXURE II TRUE COPY OF THE ORDER NO.STA 61/2014, 62/2014 & 63/2014 (OLD NO.383/2011, 384/2011 & 385/2011) DC(A), EKM DATED 4/8/2014.** **ANNEXURE III TRUE COPY OF THE JUDGMENT IN WPC NO.3168 OF 2015 (U) DATED 12/2/2015. ANNEXURE IV TRUE COPY OF THE ORDER OF THE APPELLATE TRIBUNAL IN TA NOS.04/2015, 05/2015 & 06/2015 DATED 16/1/2018.** ## **S.T(Rev) No.6 of 2018 & - 20 - connected cases** ## **APPENDIX OF ST.Rev. 9/2018** ## **PETITIONER'S/S EXHIBITS:** **ANNEXURE-I TRUE COPY OF THE ORDER N.0613K000005/07-08 DATED 30.7.2010** **ANNEXURE-II TRUE COPY OF THE ORDER NO.STA 61/2014,61/2014 AND 63/2014 (OLD NO. 383/2011,384/2011 AND 385/2011) DC(A), EKM DATED 4.8.2014 ANNEXURE-III TRUE COPY OF JUDGMENT IN WP.(C)NO. 3168 of 2015 (U) DATED 12.2.2015** **ANNEXURE-IV TRUE COPY OF THE ORDER OF THE APPELLATE TRIBUNAL IN TA NOS 04/2015,05/2015 AND 06/2015 DATED 16.1.2018**