ST(Rev.) Nos.25/2019, 22/2019, 23/2019, 24/2019 & 1/2020; M/S SAMS Property Developers & Hotels (P) Ltd. v. State of Kerala

**IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR. JUSTICE T.R.RAVI** **THURSDAY, THE 25TH DAY OF JUNE 2020 / 4TH ASHADHA, 1942** ## **S.T.Rev.No.25 OF 2019** **AGAINST THE ORDER IN TA(VAT).6/2017 DATED 28-01-2019 OF KERALA VALUE ADDED TAX/AGRICULTURAL INCOME TAX & SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, KOZHIKODE.** **[ASSESSMENT YEAR 2010-11]** ## **REVISION PETITIONER/APPELLANT/APPELLANT/ASSESSEE:** **M/S.SAMS PROPERTY DEVELOPERS & HOTELS (P) LTD., KANNUR ROAD, CHAKKORATHUKULAM, KOZHIKODE, REPRESENTED BY ITS MANAGING DIRECTOR, P.SHRINIVAS.** **BY ADVS. SRI.K.P.ABDUL AZEES SMT.SHOBA ANNAMMA EAPEN SHRI.AKHIL SURESH SMT.T.ARCHANA** ## **RESPONDENT/RESPONDENT/RESPONDENT/REVENUE:** **STATE OF KERALA, REPRESENTED BY DEPUTY COMMISSIONER (LAW), STATE GOODS AND SERVICE TAX DEPARTMENT, ERNAKULAM.** **BY SENIOR GOVERNMENT PLEADER SRI.V.K.SHAMSUDHEEN** **THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 25.06.2020, ALONG WITH ST.Rev..22/2019, ST.Rev..23/2019, ST.Rev..24/2019, ST.Rev..1/2020, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** **ST(Rev).25/2019 & - 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** **THURSDAY, THE 25TH DAY OF JUNE 2020 / 4TH ASHADHA, 1942** **ST.Rev..No.22 OF 2019** **AGAINST THE ORDER IN TA(VAT).4/2017 DATED 28-01-2019 OF KERALA VALUE ADDED TAX/AGRICULTURAL INCOME TAX & SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, KOZHIKODE.** **[ASSESSMENT YEAR 2007-08]** ## **REVISION PETITIONER/APPELLANT/APPELLANT/ASSESSEE:** **M/S.SAMS PROPERTY DEVEOPERS & HOTELS (P) LTD., KANNUR ROAD, CHAKKORATHUKULAM, KOZHIKODE, REPRESENTED BY ITS MANAGING DIRECTOR, P. SRINIVAS.** **BY ADVS. SRI.K.P.ABDUL AZEES SMT.SHOBA ANNAMMA EAPEN SHRI.AKHIL SURESH SMT.T.ARCHANA** ## **RESPONDENT/RESPONDENT/RESPONDENT/REVENUE:** **THE STATE OF KERALA REPRESENTED BY DEPUTY COMMISSIONER (LAW), STATE GOODS AND SERVICE TAX DEPARTMENT, ERNAKULAM - 682 016.** **BY SENIOR GOVERNMENT PLEADER SRI.V.K.SHAMSUDHEEN** **THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 25.06.2020, ALONG WITH ST.Rev..23/2019, ST.Rev..24/2019, ST.Rev..25/2019, ST.Rev..1/2020, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** **ST(Rev).25/2019 & - 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** **THURSDAY, THE 25TH DAY OF JUNE 2020 / 4TH ASHADHA, 1942** **ST.Rev..No.23 OF 2019** **AGAINST THE ORDER IN TA(VAT).7/2017 DATED 28-01-2019 OF KERALA VALUE ADDED TAX/AGRICULTURAL INCOME TAX & SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, KOZHIKODE.** **[ASSESSMENT YEAR 2011-12]** ## **REVISION PETITIONER/APPELLANT/APPELLANT/ASSESSEE:** **M/S.SAMS PROPERTY DEVELOPERS & HOTELS (P) LTD., KANNUR ROAD, CHAKKORATHUKULAM, KOZHIKODE, REPRESENTED BY ITS MANAGING DIRECTOR P.SHRINIVAS.** **BY ADVS. SRI.K.P.ABDUL AZEES SMT.SHOBA ANNAMMA EAPEN SHRI.AKHIL SURESH SMT.T.ARCHANA** ## **RESPONDENT/RESPONDENT/RESPONDENT/REVENUE:** **STATE OF KERALA, REPRESENTED BY DEPUTY COMMISSIONER (LAW), STATE GOODS AND SERVICE TAX DEPARTMENT, ERNAKULAM - 682 016.** **BY SENIOR GOVERNMENT PLEADER SRI.V.K.SHAMSUDHEEN** **THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 25.06.2020, ALONG WITH ST.Rev..22/2019, ST.Rev..24/2019, ST.Rev..25/2019, ST.Rev..1/2020, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** **ST(Rev).25/2019 & - 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** **THURSDAY, THE 25TH DAY OF JUNE 2020 / 4TH ASHADHA, 1942** **ST.Rev.No.24 OF 2019** **AGAINST THE ORDER IN TA(VAT).5/2017 DATED 28-01-2019 OF KERALA VALUE ADDED TAX/AGRICULTURAL INCOME TAX & SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, KOZHIKODE.** **[ASSESSMENT YEAR 2009-10]** ## **REVISION PETITIONER/APPELLANT/APPELLANT/ASSESSEE:** **M/S.SAMS PROPERTY DEVELOPERS & HOTELS (P) LTD., KANNUR ROAD, CHAKKORATHUKULAM, KOZHIKODE, REPRESENTED BY ITS MANAGING DIRECTOR, P.SHRINIVAS** **BY ADVS. SRI.K.P.ABDUL AZEES SMT.SHOBA ANNAMMA EAPEN SHRI.AKHIL SURESH SMT.T.ARCHANA** ## **RESPONDENT/RESPONDENT/RESPONDENT/REVENUE:** **STATE OF KERALA REPRESENTED BY DEPUTY COMMISSIONER (LAW), STATE GOODS AND SERVICE TAX DEPARTMENT, ERNAKULAM.** **BY SENIOR GOVERNMENT PLEADER SRI.V.K.SHAMSUDHEEN** **THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 25.06.2020, ALONG WITH ST.Rev..22/2019, ST.Rev..23/2019, ST.Rev..25/2019, ST.Rev..1/2020, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** **ST(Rev).25/2019 & - 5 - 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** **THURSDAY, THE 25TH DAY OF JUNE 2020 / 4TH ASHADHA, 1942** **ST.Rev.No.1 OF 2020** **AGAINST THE ORDER IN TA(VAT).106/2018 DATED 08-08-2019 OF KERALA VALUE ADDED TAX/AGRICULTURAL INCOME TAX & SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, KOZHIKODE.** **[ASSESSMENT YEAR 2013-14]** ## **REVISION PETITIONER/APPELLANT/APPELLANT/ASSESSEE:** **M/S.SAMS PROPERTY DEVELOPERS & HOTELS (P) LTD., KANNUR ROAD, CHAKKORATHUKULAM, KOZHIKODE, REPRESENTED BY ITS MANAGING DIRECTOR, P.SHRINIVAS.** **BY ADVS. SRI.K.P.ABDUL AZEES SMT.SHOBA ANNAMMA EAPEN SHRI.AKHIL SURESH SMT.T.ARCHANA** ## **RESPONDENT/RESPONDENT/RESPONDENT/REVENUE:** **STATE OF KERALA REPRESENTED BY DEPUTY COMMISSIONER(LAW) STATE GOODS AND SERVICE TAX DEPARTMENT, ERNAKULAM.** **BY SENIOR GOVERNMENT PLEADER SRI.V.K.SHAMSUDHEEN** **THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 25.06.2020, ALONG WITH ST.Rev..22/2019, ST.Rev..23/2019, ST.Rev..24/2019, ST.Rev..25/2019, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** **- 6 -** **ST(Rev).25/2019 & connected cases** **K.Vinod Chandran & T.R.Ravi, JJ.** **---------------------------------------S.T.(Rev.)Nos.25/2019, 22/2019, 23/209, 24/2019 & 1/2020** **----------------------------------------** **Dated, this the 25[th] day of June, 2020** ## **ORDER** ## **Vinod Chandran, J.** **The revisions by the assessee are with respect to assessment years 2007-08, 2009-10, 2010-11, 2011-12 and 2013-14. S.T.Rev.No.1/2020 is with respect to assessment year 2013-14, wherein the Assessing Officer adopted a gross profit (GP) of 160% as against the books of accounts of the assessee, which indicated a gross profit of 138.45%. In the other revisions, the impugned common order is with respect to the balance assessment years relevant for consideration, wherein the Assessing Officer adopted a GP of 190% as against that conceded for the respective assessment years between 143% and 184%.** **2. The learned Counsel appearing for the assessee submitted that the action of the Assessing Officer as confirmed by the appellate authorities, goes against the basic principles of best judgment assessment as has been declared in** _**Classic Marbles v**_ **.** _**State of Kerala**_ **[** _**(2009) 25 VST 295 (Ker.)**_ **]. There is absolutely no valid reason for** **ST(Rev).25/2019 & - 7 - connected cases** **rejecting the books of accounts and the gross profit as evidenced from the books. The learned Counsel took us through the assessment orders to demonstrate that it is on mere assumptions and presumptions that the GP has been estimated. It is pointed out that, GP of 2 brands of foreign liquor sold respectively in the Air Conditioned (AC) and Ordinary (Non AC) Bar of the assessee, was the basis on which the estimation was carried out. There is no material available for carrying out such an estimation, which is merely on surmises and conjectures, is the submission.** **3. The learned Government Pleader would argue that there is no question of law arising from the order of the Tribunal and the revisions have to be rejected. The learned Government Pleader also relies on two decisions of this Court in** _**Sapna Polyweave Ltd**_ **.** _**v**_ **.** _**State of Kerala**_ **S.T.Rev.No.124 of 2007 dated 30.05.2007 and** _**K.H.Floorings v**_ **.** _**State of Kerala**_ **– S.T.Rev.No.216 of 2007 dated 27.06.2007.** **4. We first looked at the decisions. In** _**Sapna Polyweave Ltd**_ **., the questions of law raised were with respect to the finding of the Tribunal that the business loss accounted was not supported by documentary evidence,** **ST(Rev).25/2019 & - 8 - connected cases** **the Tribunal having failed to examine the explanation with respect to the projected loss, the Tribunal sustaining the addition and the Tribunal having erred in sustaining the rejection of books of accounts on mere guess work. The Division Bench found that there are no questions of law arising, since all these are purely questions of fact. In** _**K.H.Floorings**_ **, though three questions were raised, the only question arising was the addition made of one and half times of the suppression detected, which is again a question on the sustainability of the estimation made.** **5. We are unable to find any parallel with the decisions cited. In the present case, the specific question raised by the assessee is on the estimation of the turnover, which, though on facts, is raised on the ground that the same has been made purely on assumptions and presumptions and not on the basis of any material.** **6. We have looked at the assessment order as found in S.T.Rev.No.22 of 2019, which led to the estimation made for the subject assessment years except that in 2013-14. The assessment order shows a table, in which the Assessing Officer has compared the purchase value and sales value of the various brands/items of foreign liquor. The assessee admittedly has business of sale of foreign liquor, which is** **ST(Rev).25/2019 & connected cases** **==> picture [35 x 12] intentionally omitted <==** **carried out through an AC Bar and an Ordinary one; both licensed premises. It is the specific contention of the assessee, as is also evident from the above referred table; different brands/items are fast moving in the two different licensed premises. The assessee has been billing the liquor sold in AC Bar at a higher rate than that sold in the Ordinary Bar. The assessee is well within its rights to adopt such a procedure especially considering the fact that better facilities are provided in the AC Bar. There is also no statutory bar (no pun intended) from doing so. What the Assessing Officer has done is to take the highest gross profit of a brand as available in the invoices of the Ordinary Bar and that in the AC Bar, which were respectively 160.41% and 237.26%. The average was computed at 198% and the estimation was made at 190%. We cannot but find the said adoption of GP to be in violation of the basic principles of best judgment assessment.** **7. The Hon'ble Supreme Court in** _**Commissioner of Sales Tax v. H.M.Esufali**_ **[** _**(1973) 2 SCC 137**_ **] found that there can be no assumption that the assessing authority has the material before it to prove the exact turnover suppressed and estimation can be made on the basis of some material available before the Assessing Officer; which** **ST(Rev).25/2019 & - 10 - connected cases** **should not be arbitrary and have nexus with the facts discovered. In the said case, on inspection a bill book was seized; which the assessee disowned at first, but later admitted to be of his. The turnover as revealed from the said bill book was not reflected in the books of accounts, on which a best judgment assessment was made. The Hon'ble Supreme Court held that though there is an element of guess work in making a best judgment assessment, the conclusion should be without any bias and on a rational basis. If the estimate made is a** _**bona fide**_ **one, the mere fact that there is no good proof in support of that estimate is immaterial. The duty of the Court is to see whether the accounts maintained by the assessee were rightly rejected and if so, whether the basis adopted in estimating the turnover has a reasonable nexus with the estimate made.** **8. Keeping the above principles in mind, we again look at the assessment order. There is no material available to the Assessing Officer as to any brand having been sold at a higher rate than that disclosed in the bills. What was before the Assessing Officer was only the actual invoices from which two of the highest in the respective licensed premises were picked up to compute the average for the purpose of estimation. We do not think that** **ST(Rev).25/2019 & - 11 - connected cases** **the Assessing Officer adopted a rational basis for making such estimation when admittedly the assessee had sold different brands which have different purchase value; as seen from the sale value disclosed in the sale invoices. The assessee sells liquor on retail, after purchasing the same from the Kerala State Beverages Corporation. The purchase value cannot be a reference to decide on the assessee's sale price since the assessee offers a premises for the customer to consume alcohol. The assessee is entitled to prescribe the sale value, which the consumer is aware of when the purchase is made. The assessee also sells the same brand at different prices in the different premises, which is dependant on the facilities provided to the customer in the separate premises. It is not open to the sale tax authorities to prescribe the price for which the liquor is sold. There was nothing relied on, to suggest that the assessee had sold any of the brands at a higher rate than that disclosed in the invoices. There was no rational basis to reject the invoices and consequently the books of accounts.** **9. What we have said about the common order applies equally to the assessment year 2013-14, where again the different brands listed in a table from the two** **ST(Rev).25/2019 & - 12 - connected cases** **licensed premises were verified. The highest gross profit obtained in the AC counter and the Non-AC counter was relied on without reference to the brands and the nature of the business to make an estimation.** **10. We are of the opinion that the estimation has been made on mere surmises and conjectures. There is absolutely no rational basis to reject the books of accounts and the estimation made has no nexus to the nature of the business and transactions carried out in the two licensed premises of the assessee. We set aside the orders of the authorities below, answering the question of law in favour of the assessee and against the Revenue.** **The revisions are allowed, leaving the parties to suffer their respective costs. All pending interlocutory applications would stand closed.** **Sd/K.VINOD CHANDRAN JUDGE** **Sd/T.R.RAVI JUDGE** **Vku/-** **ST(Rev).25/2019 & - 13 - connected cases** ## **APPENDIX OF ST.Rev. 25/2019** ## **PETITIONER'S/S ANNEXURES:** ## **ANNEXURE A** **TRUE COPY OF ASSESSMENT ORDER NO.33122992/2010-11 DATED 28/02/2014 PASSED BY COMMERCIAL TAX OFFICER II, 2ND CIRCLE, COMMERCIAL TAXES, KOZHIKODE.** ## **ANNEXURE B** **TRUE COPY OF APPELLATE ORDER IN S.T.APPEAL NO.21/2014 DATED 16/01/2017 PASSED BY DEPUTY COMMISSIONER (APPEALS)I, COMMERCIAL TAXES, KOZHIKODE.** ## **ANNEXURE C** **TRUE COPY OF COMMON ORDER OF THE KERALA VALUE ADDED TAX/AGRICULTURAL INCOME TAX & SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, KOZHIKODE IN T.A.(VAT) NO.4//2017, 5/2017. 6/2017, 7/2017 AND 8/2017 DATED 28/01/2019.** **ST(Rev).25/2019 & - 14 - connected cases** ## **APPENDIX OF ST.Rev. 22/2019** ## **PETITIONER'S/S ANNEXURES:** **ANNEXURE A TRUE COPY OF ASSESSMENT ORDER 33122992/2007-08 DATED 19/02/2013 PASSED BY COMMERCIAL TAX OFFICER II, 2ND CIRCLE, COMMERCIAL TAXES, KOZHIKODE.** **ANNEXURE B TRUE COPY OF APPELLATE ORDER IN S.T. APPEAL NO.4/2014 DATED 16/01/2017 PASSED BY DEPUTY COMMISSIONER (APPEALS)I, COMMERCIAL TAXES, KOZHIKODE.** **ANNEXURE C TRUE COPY OF COMMON ORDER OF THE KERALA VALUE ADDED TAX/AGRICULTURAL INCOME TAX AND SALES TAX APPELLATE TRIBUNAL ADDITIONAL BENCH, KOZHIKODE IN T.A. (VAT) NO.4/2017, 6/2017, 7/2017 AND 8/2017 DATED 28/01/2019.** **ST(Rev).25/2019 & - 15 - connected cases** ## **APPENDIX OF ST.Rev. 23/2019** ## **PETITIONER'S/S ANNEXURES:** ## **ANNEXURE A** **TRUE COPY OF ASSESSMENT ORDER NO.33122992/2011-12 DATED 31/12/2013 PASSED BY COMMERCIAL TAX OFFICER-II, 2ND CIRCLE, COMMERCIAL TAXES, KOZHIKODE.** ## **ANNEXURE B** **TRUE COPY OF APPELLATE ORDER IN S.T.APPEAL NO.3/2014 DATED 16/01/2017 PASSED BY DEPUTY COMMISSIONER (APPEALS)I, COMMERCIAL TAXES, KOZHIKODE.** ## **ANNEXURE C** **TRUE COPY OF COMMON ORDER OF THE KERALA VALUE ADDED TAX/AGRICULTURAL INCOME TAX & SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, KOZHIKODE IN T.A.(VAT) NO.4/2017, 5/2017, 6/2017, 7/2017 AND 8/2017 DATED 28/01/2019.** **ST(Rev).25/2019 & - 16 - connected cases** ## **APPENDIX OF ST.Rev. 24/2019** **PETITIONER'S/S ANNEXURES:** ## **ANNEXURE A** **TRUE COPY OF ASSESSMENT ORDER NO.33122992/2009-10 DATED 28/02/2013 PASSED BY COMMERCIAL TAX OFFICER-II, 2ND CIRCLE, COMMERCIAL TAXES, KOZHIKODE.** ## **ANNEXURE B** **TRUE COPY OF APPELLATE ORDER IN S.T.APPEAL NO.22/2014 DATED 16/01/2017 PASSED BY DEPUTY COMMISSIONER (APPEALS)I, COMMERCIAL TAXES, KOZHIKODE.** **ANNEXURE C TRUE COPY OF COMMON ORDER OF THE KERALA VALUE ADDED TAX/AGRICULTURAL INCOME TAX & SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, KOZHIKODE IN T.A.(VAT) NO.4/2017, 5/2017, 6/2017, 7/2017 AND 8/2017 DATED 28/01/2019.** **ST(Rev).25/2019 & - 17 - connected cases** ## **APPENDIX OF ST.Rev.1/2020** ## **PETITIONER'S/S ANNEXURES:** ## **ANNEXURE A** **TRUE COPY OF ASSESSMENT ORDER 32110769902/2013-14 DATED 22/01/2018 PASSED BY THE ASSISTANT COMMISSIONER, SPECIAL CIRCLE II, STATE GOODS AND SERVICE TAX DEPARTMENT, KOZHIKODE** **ANNEXURE B TRUE COPY OF APPELLATE ORDER IN VATA NO. 413/2018 DATED 06/06/2018 PASSED BY DEPUTY COMMISSIONER (APPEALS) 1, STATE GOODS AND SERVICE TAX DEPARTMENT, KOZHIKODE** **ANNEXURE C TRUE COPY OF ORDER OF THE KERALA VALUE ADDED TAX/AGRICULTURAL INCOME TAX AND APPELLATE TRIBUNAL, ADDITIONAL BENCH , KOZHIKODE IN T.A (VAT) NO. 106/2018 DATED 08/08/2019** **[TRUE COPY]**