IN THE HIGH COURT OF KERALA AT ERNAKULAM
ST.Rev..No. 78 of 2009()
1. NITHIN JOSE,
... Petitioner
Vs
1. STATE OF KERALA, REPRESENTED BY THE
... Respondent
For Petitioner :DR.K.B.MUHAMED KUTTY (SR.)
For Respondent :GOVERNMENT PLEADER
The Hon'ble MR. Justice C.N.RAMACHANDRAN NAIR
The Hon'ble MR. Justice C.K.ABDUL REHIM
Dated :12/08/2009
O R D E R
C.N.RAMACHANDRAN NAIR & C.K.ABDUL REHIM, JJ.
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S.T.Revn. Nos.78, 83 and 84 of 2009
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Dated this the 12th day of August, 2009
O R D E R
——————
Ramachandran Nair,J.
These Sales Tax Revision cases are filed against order of
Tribunal sustaining sales tax assessments for the years 2001-02,
2002-03 and 2003-04. The petitioner’s case is that though he
was doing business in packing materials from 1996-97 onwards,
he closed the business in 2000 and joined for higher studies in
Management. However since his accountant was to close the
business and cancel the registration, he had signed some blank
papers which were used by the accountant for bogus
transactions including issue of Form18 for purchase of raw
materials in collusion with dealers of timber. The Government
Pleader on the other hand contended that the timber dealer in
Chalakudy namely JJ Timbers, produced Form 18 declarations
issued by the petitioner for purchases made and based on the
details contained in the declarations issued by the petitioner and
produced by the dealer, petitioner’s turnover was estimated and
assessment was made. In fact in parallel proceedings for
penalty, the petitioner conceded the omissions and remitted
STRV.78,83&84/09
2
compounding fee at the rate of Rs.2,00,000/- each for the first
two years and Rs.1,35,000/- for the last year. On going through
the orders of the Tribunal we notice that the assessment is
sustained basically relying on the admission made by the
petitioner in compounding.
2. After hearing both sides and after going through the
records we feel some foul play may have taken place and
petitioner would have been induced to compound the offences to
finally settle the matter. Senior counsel appearing for the
petitioner contended that he has instituted proceedings against
JJ Timbers for the fraud committed on him. In any case we do
not want to express our opinion about the transactions between
the petitioner and JJ Timbers or the fraud that may have
committed by JJ Timbers against the petitioner. However we are
not inclined to accept the argument of the learned counsel
appearing for the petitioner that compounding should not have
been relied on for the purpose of sustaining assessment. We
notice that the compounding fee paid for the three years is
Rs.5,35,000/-. We are of the view that no one would pay such a
huge compounding fee without any involvement in the
transaction. However there is nothing to indicate in the
assessment orders that the department has made any enquiry
STRV.78,83&84/09
3
about the availability of goods with the supplier and the
genuineness of the transaction in as much as even the
documents used for transport was not called for from the seller.
We therefore feel addition made to the actual turnover disclosed
in Form 18 is not justified in this case. We therefore allow the
revision in part by deleting the addition made to the turnover but
by sustaining the assessment on the actual turnover collected
from Form 18 and along with 10% towards G.P. The orders of
the first appellate authority as well as the Tribunal will stand
reversed to this extent. The Assessing Officer is directed to
modify the assessment as above. We feel some clarification as
interest is required in this case because in our view interest
under Section 23(3A) is not payable because petitioner has not
filed any return and department has not called for the same. In
fact the very transaction itself is denied by the petitioner and
according to him business was closed and Form 18 declaration
produced by the supplier was bogus. Even though Section 23
(3A) authorises levy of interest on the unpaid tax which is the
difference between assessed tax and tax paid along with returns,
we feel in this case this Section has no application because there
is no evidence that petitioner was carrying on business on a
regular basis and admittedly he has not filed any monthly or
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4
annual return for any of the three years. In the circumstances
we direct the officer to limit the levy of interest under Section 23
(3) of the KGST Act for the delay in payment of actual tax fixed
as directed above after service of notice on the petitioner along
with assessment orders issued. We also make it clear that the
petitioner is free to continue his proceedings initiated by him
against the JJ Timbers or any other party and our findings in the
revision case should not stand in the way of authority including
court giving to any independent finding in the case between the
parties.
C.N.RAMACHANDRAN NAIR, JUDGE.
C.K.ABDUL REHIM, JUDGE.
okb