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.
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S.T. Rev.Nos.251, 258 & 273 of 2005
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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
