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 28TH JANUARY 2009 / 8TH MAGHA 1930 ST.Rev..No. 204 of 2007() ------------------------- TA.159/2004 of COMMR.KERALA AGR.IT & STAT,TVM. .................... PETITIONER/APPELLANT/RESPONDENT/REVENUE ------------------------------ STATE OF KERALA, REP. BY JOINT COMMISSIONER(LAW) IN-CHARGE, COMMERCIAL TAXES, ERNAKULAM. BY G.P. SRI.TEKCHAND RESPONDENT(S): --------------- SAKTHIMATHA CASHEW CO., NALLILA, KOLLAM. ADV. SMT.T.S.MAYA (THIYADIL) FOR R1 SMT.REKHA NAIR FOR R1 SMT.K.REENA FOR R1 THIS SALES TAX REVISION HAVING COME UP FOR ADMISSION ON 28/01/2009, ALONG WITH STRV NO.209 OF 2007,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR & C.K.ABDUL REHIM, JJ. .................................................................... S.T. Rev. Nos.204 & 209 of 2007 .................................................................... Dated this the 28th day of January, 2009. JUDGMENT Ramachandran Nair, J. Heard Government Pleader and counsel appearing for the respondent. The two tax revision cases arise from orders of the Tribunal relating to KGST and CST assessments for 1997-98. 2. The first issue raised in the KGST assessment is against addition of turnover of Rs.99,000/- on the ground that purchase of cashew worth Rs.90,000/- against Form 18A is not exported by the assessee. On going through the Tribunal's order, we find that the Tribunal has only remanded the matter to verify whether it is a second sale by the assessee after effecting purchase locally from registered dealers. We do not find any ground to interfere in the matter because it is an open remand whereunder the assessee is required to prove exemption on second sales. However, we make it clear that in order to grant exemption, the assessee should prove the requirement of Rule 32 (13) of the KGST Rules and it is open to the officer to verify 2 genuineness of the documents produced. In other words, if the claim of local purchase from registered dealer is not proved, the purchase turnover can be added with gross profit estimated at 10%. 3. The next question raised pertains to massive purchase of cashew kernel worth Rs.80,11,228/- accounted by the assessee as local purchase from unregistered dealers. The Assessing Officer on verifying the bought notes found that only names of sellers are given and so much so, the claim of local purchase is bogus. We had occasion to consider this issue in another case as well. Since cashew nut attracts tax at last purchase point, there is tendency among manufacturers and dealers to account purchase of cashew nut as cashew kernel thereby avoiding purchase tax. In the first place, cashew is one commodity which requires processing under controlled heating for achieving uniform quality in the product. This cannot be done except in factories and therefore, assessee's claim that he has purchased massive quantity of cashew kernel from unregistered dealers is something which should be examined critically. In other words, if the assessee does not furnish proper address and number of actual 3 purchases from all the suppliers, the officer's assumption that it is bogus accounting of kernel purchase as against purchase of raw cashew nuts is to be believed. We are unable to uphold the order of the Tribunal because after receiving two or three bought notes which contain the addresses, the Tribunal allowed 90% of the claim. We, therefore, vacate the order of the Tribunal but giving freedom to the assessee to produce all bought notes covering entire purchases with proper identity of the suppliers, for the Assessing Officer to conduct enquiry and allow the claim if it stands proved. In fact, the Officer is free to call for cash flow and Bank statements to prove source of fund available at the time of accounting the purchases. The assessee is given freedom to adduce evidence. 4. The issue arising in the CST assessment for the very same year is undervaluation of cashew sold. This is a related issue because when the assessee accounted local purchase of cashew kernels, assessee took the stand that the product is of low value and therefore, sale price is shown at below the market value. If on enquiry the Assessing Officer is satisfied that the assessee had really made purchase of cashew kernel 4 locally, then of course assessee's claim of sale at low value may be justified. However, if it is found that local purchases are bogus accounting of purchase of raw cashew nuts, then the Tribunal's order will stand reversed and the assessment will be modified based on findings in the KGST assessment as directed above. The Assessing Officer is directed to revise the assessments as directed above within three months from date of receipt of copy of this judgment. The revision cases are disposed of as above. C.N.RAMACHANDRAN NAIR Judge C.K.ABDUL REHIM Judge pms