IN THE HIGH COURT OF KERALA AT ERNAKULAM
ST Rev No. 243 of 2003()
1. M/S. SANDHYA BAKERY,
... Petitioner
Vs
1. THE STATE OF KERALA.
... Respondent
For Petitioner :SRI.RAJESH NAMBIAR
For Respondent :GOVERNMENT PLEADER
The Hon'ble the Chief Justice MR.H.L.DATTU
The Hon'ble MR. Justice HARUN-UL-RASHID
Dated :02/08/2007
O R D E R
H.L.DATTU, C.J. & HARUN-UL-RASHID, J.
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S.T.Rev.No.243 of 2003
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Dated, this the 2nd day of August, 2007
ORDER
H.L.Dattu, C.J.
Petitioner is a dealer registered under the provisions of the Kerala
General Sales Tax Act, 1963, hereinafter referred to as ‘the Act’.
(2) The assessing authority for the assessment year 1997-98 had
completed the revised assessment by his order dated 6.3.2001. While
computing the tax liability, the assessing authority has brought to tax the sale of
the car effected by the assessee, though it was the specific contention of the
assessee that he is a second dealer and not liable to pay tax. The assessing
authority in his proposal/pre-assessment notice has stated as under:-
“The assessee had sold a motor car during the year.
The written down value of the vehicle as on 1.4.1997 was
Rs.2.07,180.00. The profit on the sale of vehicle was
Rs.52,820.00. Thus the sale value of the vehicle was
Rs.2,60,000.00 (Rs.2,07,180 + Rs.52,820.00).”
(3) The assessing authority had also noticed the objections of the
assessee in his assessment order. The main objection that was canvassed by
the assessee in this regard was as under:
“The purchase of the car was made from a person said
to be the partner of various firms in Kannur. Since the
purchase had been effected from a Kannur party, the sale of
the car is not amounting the first sale in the hands of the
Assessee and so the Assessee is not liable to pay tax on the
sale of the car.”
(4) After considering the objections so made by the assessee, the
assessing authority has proceeded to pass the order as under:
“The burden of proof to establish that the car had
already suffered first point tax and now the sale in the hands of
S.T.Rev.No.243/2003 2
the Assessee is amounting only as IInd sale is entirely upon
the Assessee. The Assessee had raised some
arguments, but it is found to be not supported by any evidence.
In the circumstances the objections raised by the Assessee is
not found sustainable.”
(5) After coming to the aforesaid conclusion the assessing authority
had denied exemption to the assessee on the second sale of the car.
(6) Aggrieved by this portion of the order passed by the assessing
authority, the assessee had carried the matter in appeal before the first
appellate authority in S.T.A.No.549 of 2002. Before the first appellate authority
the assessee had produced the assessment records of his vendor, namely
M/s.Sannidhan Bar and Hotel. Even after perusal of the documentary evidence
so produced, the appellate authority has still come to the conclusion that the
assessee is not a second seller in the State of Kerala and accordingly
confirmed the orders passed by the assessing authority. The order passed by
the first appellate authority is as under:
“I have considered the above contentions and also
examined the connected records. The appellant has produced
before me the assessment order passed by the Addl. Sales Tax
Officer II, Commercial Taxes, III circle, Kannur in favour of
M/s.Sannidhan Bar and Hotel. In the above assessment order
the sales turnover of one car is seen assessed to tax. But the
appellant has failed to prove that the car purchased and sold
subsequently by him was that car and its sales turnover has
been assessed to tax at the hands of the seller.”
(7) Aggrieved by the said order of the appellate authority, the assessee
had carried the matter by way of second appeal before the Tribunal in
T.A.No.149 of 2003. The Tribunal has rejected the appeal by its order dated
28th May, 2003. The correctness or otherwise of the said order is the subject
matter of this revision petition.
(8) In the memorandum of revision petition the assessee has framed
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the following questions of law for our consideration and decision. They are as
under:
“I. Whether the order of the Sales Tax Appellate
Tribunal is correct in law, facts and circumstances of the
case?
II. The Sales Tax Appellate Tribunal in its order has
held that in order to claim exemption under the Act as second
seller the dealer has not only to prove that the sale was not
first sale, he has to further prove that the seller has liability
under the Act and paid tax. The said reasoning of the
Appellate Tribunal is against the provisions of the Act and
contrary to the principles and guidelines laid down by the
Hon’ble Supreme Court and Hon’ble High Court of Kerala and
other High Courts. Division Bench of the Madras High Court
in State of Tamil Nadu vs. Chamundesswari Enterprises
reported in 52 S.T.C. pg. 124 held that “the onus on the
subsequent seller is only to point out that there has been a
first sale and the onus is not on him to show that the first sale
has in fact suffered tax”. The said view has also been
upheld by the Supreme Court in its decision reported in 93
S.T.C. pg.185 and also by another Division Bench of the
Madras High Court in National Iron Traders Vs. State of Tamil
Nadu, reported in (1997) 108 S.T.C.Pg.42. Full Bench of the
Kerala High Court in its decision in Sree Krishna Trading Co
Vs. State of Kerala has also held that if the dealer establishes
that his purchase is from first seller who is liable to pay tax
under the Act, he shall be absolved from payment of tax.
Whether the finding of the Sales Tax Appellate Tribunal that
the petitioner has to prove that the car purchased by him has
suffered tax at the point of first sale in order to claim
exemption as second sale is correct in law?
III. Annexure D and E agreements produced by the
petitioner before the Tribunal is clear proof that the car
purchased by him from one Mr.Sunil and the car sold by him
are one and the same. It is also evident that the car was
purchased locally. The value of the car was Rs.2,65,000/-
which is above the taxable limit and thus the first seller was
liable to pay tax. The said facts are not disputed by the
Tribunal. The stand of the Tribunal that there is nothing in the
agreement to show that Mr.Sunil is the managing Partner of
M/s.Sannidhan Bar and Hotel and nothing to show that the
vehicle was owned by M/s.Sannidhan Bar and Hotel is totally
irrelevant. The Tribunal has ignored the fact that the first
seller is clearly identified and it is totally irrelevant whether the
first seller is the managing partner of a firm or not in order for
the petitioner to claim exemption as second seller.
S.T.Rev.No.243/2003 4
Whether the order of the Tribunal passed by ignoring relevant
facts and relying on irrelevant facts is sustainable in law?
IV. The petitioner had satisfied the burden of proof.
The burden of proof on the petitioner is to show that there had
been a first sale and that the first seller is liable to pay tax.
The petitioner has discharged the said burden of proof.
Whether the Tribunal was correct in law in stating that the
petitioner has failed to discharge his burden?”
(9) Under Section 12 of the Act the burden of proof is on the assessee.
The said provision is as under:
“12. Burden of proof:- (1) The burden of proving that
any transaction of a dealer is not liable to tax under this Act
shall lie on such dealer.”
(10) The burden of proving that any transaction of a dealer is not liable
to tax under the Act is mainly on the dealer who claims such exemption.
(11) For the purpose of disposal of this revision petition we need not to
have notice the Rules made for the purpose of Section 12 of the Act.
(12) The facts are not in dispute. The assessee has sold a car.
According to him he is a second seller. He has also stated that he had
purchased the car from M/s.Sannidhan Bar and Hotel.
(13) Before the first appellate authority, the assessee had produced the
assessment orders passed in the case of M/s.Sannidhan Bar and Hotel. In the
said assessment order the sales turnover of one car was assessed to tax. That
only means that M/s.Sannidhan Bar and Hotel had suffered the tax for the sale
of the car effected by them in favour of the assessee.
(14) If that position is accepted, it would only mean that the assessee
when he sold the car, he is a second seller, and if it is so, he is not liable to pay
any tax under the Act.
S.T.Rev.No.243/2003 5
(15) In that view of the matter, the questions of law raised by the
assessee require to be answered in his favour and against the Revenue.
Consequently, I.A.No.1706 of 2003 is dismissed.
Ordered accordingly.
(H.L.DATTU)
CHIEF JUSTICE
(HARUN-UL-RASHID)
JUDGE
vns/dk