IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM WEDNESDAY, THE 12TH AUGUST 2009 / 21ST SRAVANA 1931 ST.Rev..No. 78 of 2009() ------------------------ TA.97/2008 of S.T.A.TRIBUNAL,ADDL.BENCH,PALAKKAD .................... REVISION PETITIONER: ------------------------- NITHIN JOSE, PROPRIETOR, M.R. FRANCIS ASSOCIATES, OLLUR, THRISSUR DIST. BY ADV. DR.K.B.MUHAMED KUTTY, SENIOR ADVOCATE SRI.SAIBY JOSE KIDANGOOR RESPONDENT(S): --------------- STATE OF KERALA, REPRESENTED BY THE SECRETARY TO GOVERNMENT, COMMERCIAL TAX DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM. GOVERNMENT PLEADER SRI. MUHAMMED RAFIQ THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 12/08/2009, ALONG WITH STRV NO. 83 OF 2009 & STRV NO.84 OF 2009 THE COURT ON THE SAME DAY PASSED THE FOLLOWING: C.N.RAMACHANDRAN NAIR & C.K.ABDUL REHIM, JJ. ----------------------------------- S.T.Revn. Nos.78, 83 and 84 of 2009 -------------------------------------- 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 STRV.78,83&84/09 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