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M.Thrivikrama Prabhu vs State Of Kerala on 6 November, 2008

Kerala High Court
M.Thrivikrama Prabhu vs State Of Kerala on 6 November, 2008
       

  

  

 
 
  IN THE HIGH COURT OF KERALA AT ERNAKULAM

ST.Rev..No. 251 of 2005()


1. M.THRIVIKRAMA PRABHU,
                      ...  Petitioner

                        Vs



1. STATE OF KERALA.
                       ...       Respondent

                For Petitioner  :SRI.N.MURALEEDHARAN NAIR

                For Respondent  :GOVERNMENT PLEADER

The Hon'ble the Chief Justice MR.H.L.DATTU
The Hon'ble MR. Justice A.K.BASHEER

 Dated :06/11/2008

 O R D E R
                           H.L.Dattu,C.J. & A.K.Basheer,J.
                -------------------------------------------------------------------
                S.T. Rev.Nos.251, 258 & 273 of 2005
               --------------------------------------------------------------------
                          Dated, this the 6th November, 2008

                                            ORDER

H.L.Dattu, C.J.

These revision petitions are filed against the orders passed by

the Sales Tax Appellate Tribunal, Additional Bench, Kozhikode in

T.A.Nos.317/1997, 318/1997 and 319/1997 dated 30th November, 2004.

(2) The relevant assessment years are 1988-89, 1989-90 and

1990-91.

(3) The assessing authority has completed the assessment under

the provisions of the Kerala General Sales Tax Act, 1963 (“Act” for short).

(4) Petitioner is a dealer in copra. Copra is taxable at the point

of last purchase. Petitioner purchases copra from registered and unregistered

dealers. After such purchases, effects intra and inter-State sales. For

inter-State sales, the petitioner has to pay tax on the purchase turnover. For

intra-State sales, there is exemption from payment of tax, provided Form 25

declarations are produced before the assessing authority. The assessing

authority has estimated the purchase turnover of both intra and inter-State

sales, solely on the ground that the petitioner has not maintained the separate

purchase accounts of the copra purchased and sold locally as well as

inter-State sales and, therefore, has proceeded to pass the best judgment

S.T.Rev.251/2005, etc. – 2 –

assessment and has quantified the tax liability.

(5) The orders so passed by the assessing authority was the

subject matter of appeals before the first appellate authority in

S.T.A.Nos.304/2007, 305/2007 and 306/2007. The first appellate authority, by

its order dated 14th July, 1997, has granted some relief to the petitioner. While

disposing of the appeals, the first appellate authority, in its order, has stated as

under:

“The next serious contention raised in this appeal is with

regard to the determination of the purchase turnover of copra

sold interstate. It is not in dispute that the appellant has effected

on interstate sale of 17827 qtls. on copra. The dispute arises in

the determination of purchase value of copra sold interstate.

The learned counsel has produced before me a statement

showing the month vice split up of the purchase value of the

copra sold interstate. According to that statement, the purchase

turnover of copra sold interstate is Rs.32636034/-. He has also

produced before me the relevant copra purchase sale bills to

substantiate the purchase rate applied by him for preparing the

statement. My perusal of the documents reveal that the purchase

rate applied by the appellant, for preparing the aforesaid

statement, compares well with the accounted copra purchase

and is fairly identifiable to the interstate sales. For example.

For the month of May 1988, the purchase rate applied in

the preparation of the statement is at Rs.1825/- per qtls. The

following copra purchases are seen effected in the month of May

1988.

S.T.Rev.251/2005, etc.                      - 3 -



     Name of Party Bill No. & Date             Quantity Qtls        Rate

—————————————————————————

1. P.C.Mohammed 103/- 30.5.88 750 kgs. 1835/-

        Nileswar

     2. Trade Links              619/- "              1550 "          1815/-
        Nileshwar

     3. Rahaath Traders          310/- "              14 Qtls         1825/-
        Kanhangad.


Likewise for the month of March 1989 the purchases rate

applied in the preparation of the statement is at Rs.1583/- per

qtls. The following copra purchases are seen effected in the

month of March 1989.


     1. Poultry sons
       Calicut               1243/13.3.89            37Qtls           1590/-

     2. Subida Traders       257/22.3.89             71.50 Qtls       1465/-
        Calicut.

     3. Ekarool Produce
        Traders, Calicut 2113/30.3.89                47.50"           1565/-

     4. Sree Mookambika
        Traders, Calicut      256/30.3.89            23.50"           1570/-


The assessing authority has no case that the purchase rates as

revealed in the purchase bills are fabricated. Therefore the

purchase turnover of interstate sales of copra as per the

statement prepared and filed by the learned counsel appears fair

and reasonable.

While fixing the average purchase value of copra sold

locally and interstate, the assessing authority has also put to

consideration the value of copra lost due to driage. The

S.T.Rev.251/2005, etc. – 4 –

reasoning given by the assessing authority is as follows:-

“As regard to the loss on account of driage, the
dealer’s contention is against all logic. What is lost
during driage of copra is nothing but water content, which
has no purchase value. Therefore the quantity left after
driage contain the full purchase value of the quantum of
copra purchased before driage. This principles is
adopted in computing the purchase value of copra sold
interstate and locally.”

The logic applied by the assessing authority does not

appear correct. The appellant cannot be said to have purchased

water along with copra. What the appellant purchased was a

certain quantity of copra, at the prevailing market rate for

copra. When the purchase of copra is effected, water content is

also considered by the purchaser. Suitable modifications are

effected in the weight and purchase price to take care of the

water content. Any loss there after, has to be considered as a

trading loss. The quantity loss that occurred on account of

driage is also not available for sale. Therefore the purchase

turnover of the same cannot be brought to levy of tax.

The entire exercise of applying on average purchase rate

arose for the only reason the books of account do not disclose

separately the purchase turnover of copra sold interstate. By

itself this is not sufficient or adequate reason to apply the

average annual purchase value. Where a scrutiny of the

accounts and other corroborating evidences give a fair

indication the purchase value of copra sold interstate then the

necessity of applying an average rate is not warranted or

desirable. In this case, the application of the average rate

S.T.Rev.251/2005, etc. – 5 –

imposes an onerous burden on the appellant. While arriving at

this conclusion I have also put to consideration the contention of

the appellant that generally, lower quality of copra is sold

interstate. It is submitted that good quality copra is only in

demand in the local market. A scrutiny of the records

substantiate this view. On this ground also the application of

the average purchase rate is found not appropriate in this case.

For the aforesaid reasons the purchase value of copra

sold interstate, fixed by the assessing authority is found

excessive. In the light of the aforesaid discussions, the purchase

of 17827 qtls. of copra sold interstate is fixed at

Rs.3,26,36,034/- as revealed by the statement filed before me

which I find would be a just, fair and equitable, estimate.”

(6) The State, being aggrieved by the orders passed by the first

appellate authority, had filed appeals before the Sales Tax Appellate Tribunal

in T.A.Nos.317/1997, 318/1997 and 319/1997. The assessee had also filed

Cross Objections in Nos.43/2003, 44/2003 and 45/2003. The Appellate

Tribunal, by its order dated 30th November, 2004, has allowed the State’s

appeals and, accordingly, has rejected the assessee’s Cross Objections. While

doing so, the Tribunal, in its cryptic order, has stated as under:

“We have examined the contentions raised and perused

the records. The main objection raised by the SR is with regard

to the purchase price determined for the purpose of allowing

exemption. It is seen that the dealer has not maintained separate

purchase account for copra sold locally and that sold interstate.

The statements filed by him will not help the authorities to

S.T.Rev.251/2005, etc. – 6 –

ascertain the purchase value of copra sold locally and interstate

for the whole year. Under this circumstances the only way to

arrive at a conclusion is the method adopted by the assessing

authority in estimating the purchase turnover based on average

purchase price. It is found legal and proper and following the

accepted principles and norms. We therefore uphold the average

price fixed by the assessing authority. The direction of the DC(A)

to accept the purchase value as per the statement filed by the

dealer is incorrect and is therefore deleted”.

(7) Being aggrieved by the orders so passed by the Tribunal, the

assessee is before us in these revision petitions.

(8) The assessee has framed the following questions of law for

our consideration and decision. They are as under:

“1. Whether on the facts and in the circumstances of

the case the Appellate Tribunal has erred in law in confirming

the purchase value of copra sold interstate estimated by the

Assessing Authority considering the fact that the statement filed

by the petitioner clearly shows the actual purchase value of the

copra sold interstate?

2. Whether on the facts and circumstances of the case

the Appellate Tribunal was correct in law in reversing the

Annexure B order in the light of the law laid down by this

Hon’ble Court reported in 193 KLJ (TC) 371?

3. Whether on the facts and circumstances of the case

the additions sustained by the Appellate Tribunal has any nexus

to the alleged irregularities”.

(9) Apart from arguing the matter on merits, Sri.V.K.Shamsudheen,

S.T.Rev.251/2005, etc. – 7 –

learned counsel appearing for the assessee, would submit, that, the first

appellate authority, after going through the entire statement of accounts, the

purchase bills and sales bills, etc., had given some relief to the assessee and

that relief could not have been taken away by the Tribunal by passing a

non-speaking order. Therefore, the learned counsel is of the opinion, that, the

orders passed by the Tribunal requires to be set aside and the matter requires

to be remitted back to the Tribunal for passing fresh order in accordance with

law.

(10) In support of his contention, the learned counsel has relied

upon the observations made by this Court in the case of P.P.Raju v. State of

Kerala [(1999) 116 STC 93]. In the said decision, the Court has observed as

under:

“In a case where the first appellate authority has, for

reasons of its own, set aside the quantum of estimate made by the

assessing authority, a duty is cast on the second appellate

authority – the Appellate Tribunal – to demonstrate as to how or

in what manner the first appellate authority erred in interfering

with the estimate made by the assessing authority before

substituting its own figure of estimate or restoring the estimate

made by the assessing authority. It is true that the Appellate

Tribunal is the final fact-finding authority. It is an appellate

forum on the facts as well as in law. It is the duty of the appellant

before the Appellate Tribunal to demonstrate that the order

appealed against is wrong. Before reversing a decision of the

lower appellate authority a duty is cast on the Appellate Tribunal

S.T.Rev.251/2005, etc. – 8 –

to meet the reasonings of the first appellate authority and

indicate its own reasons for the conclusion to be reached. The

order of the Appellate Tribunal should show that it is for valid

and cogent reasons the decision of the first appellate authority is

being interfered with. It is not sufficient if the Appellate Tribunal

at its ipso dixit states that it disagrees with the decision of the

first appellate authority. This Bench had occasion to state the

duty of the Appellate Tribunal in cases of reversing the decision

of the lower authority and laid down the guidelines on the

matter, in Commissioner of Income-tax v. Nirmal Liquors [1991]

190 ITR 636 (Ker)”.

(11) We have carefully perused the orders passed by the first

appellate authority. The first appellate authority, while granting some relief to

the assessee, has passed a reasoned order and that order has been upset by the

Appellate Tribunal, by its cryptic order. While allowing the State’s appeals, it

was expected of by the Tribunal to have assigned appropriate reasons by

stating the area where the first appellate authority has committed a mistake. In

the orders passed by the Tribunal, except affirming the orders passed by the

assessing authority, they have not stated, for what reasons they are taking

exception to the orders passed by the first appellate authority. In a case where

some relief has been given by the first appellate authority, the Tribunal, while

upsetting the said orders, is expected to assign cogent reasons. Since that is

not forthcoming in the orders passed by the Tribunal, we are of the opinion,

that, the orders passed by the Appellate Tribunal requires to be set aside and

S.T.Rev.251/2005, etc. – 9 –

the matter requires to be remanded to the Tribunal for disposal in accordance

with law.

(12) Accordingly, we pass the following:

Order

(i) These revision petitions are disposed of.

(ii) The order passed by the Tribunal in T.A.Nos.317/1997,

318/1997 and 319/1997 dated 30th November, 2004 is set aside.

(iii) The matter is remitted to the Tribunal, and the Tribunal is

directed to restore T.A.Nos.317/1997, 318/1997 and 319/1997 to its file and

then pass a reasoned order.

(iv) All the contentions of the parties are left open.

Ordered accordingly.

H.L.Dattu
Chief Justice

A.K.Basheer
Judge
vku/dk

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