IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE A.K.BASHEER TUESDAY, THE 22ND JULY 2008 / 31ST ASHADHA 1930 S.T.Rev..No. 91 of 2006 -------------- ------------------------ ORDER DATED 23.11.2005 IN TA.329/2003 OF THE KERALA SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, KOZHIKODE. .................... REVISION PETITIONER/ASSESSEE/RESPONDENT: ----------------------------------------------------------------------- SMT.MOLLY LUKOSE, PROPRIETRIX, PALLITHARA JEWELLERY, PAYYANNUR, CANNANNORE DIST. BY ADV. SRI.E.P.GOVINDAN & SRI.A.J.ANTONY RESPONDENT/REVENUE/APPELLANT: ------------------------------------------------------ STATE OF KERALA, REPRESENTED BY THE SECRETARY, TAXES DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM. BY SR. GOVERNMENT PLEADER SRI.MUHAMMED RAFIQ THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 22/07/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: H.L.DATTU, C.J. & A.K.BASHEER, J. ------------------------------------------- S.T.Rev.No.91 of 2006 ------------------------------------------ Dated, this the 22nd day of July, 2008 ORDER H.L.Dattu, C.J. The orders passed by the Kerala Sales Tax Appellate Tribunal, Additional Bench, Kozhikode in T.A.No.329 of 2003 dated 23.11.2005 is the subject matter of this revision petition filed by an assessee registered under the provisions of the Kerala General Sales Tax Act, 1963 (hereinafter, for the sake of brevity, referred to as 'the Act'). 2. The only question that would arise for our consideration and decision in this revision petition is, whether the assessing authority was justified in levying tax under Section 5A of the Act on the premise, that the assessee had purchased gold and had introduced that gold as her additional investment/additional capital to the business and whether the Tribunal is justified in confirming the order passed by the assessing authority by over ruling the orders passed by the first appellate authority? 3. The assessee is a dealer in gold jewellery and ornaments. For the assessment year 1997-98, she had filed her total and taxable turnover. The assessing authority after verification of the books of accounts and the returns filed, had rejected the same, on the ground that S.T.Rev.No.91 of 2006 2 the assessee had not accounted for the gold which had been introduced as additional investment for the levy of purchase tax in the books of accounts maintained in the regular course of business and therefore had issued a pre-assessment notice. In that, apart from other omissions, he had pointed out the omission towards non-inclusion of the gold introduced as additional investment in the capital of the assessee's business. The defect that was pointed out by the assessing authority reads as under: “1. The record shows that the purchase of gold as per account is Rs.45,13,426.50 (i.e. Rs.24,67,71,350 + Rs.20,45,712/-). As per section 5A of the Act, the tax is leviable on the purchase turnover of gold consumed for the manufacture of ornaments for sales. The value of the receipt of 5014 grams of gold as per account is Rs.20,45,712/- for which no evidence was produced to show that first point of tax was suffered at your hand.” 4. In spite of the receipt of the pre-assessment notice, the assessee could not file her objections. Since no objections were filed to the pre-assessment notice issued, the assessing authority has confirmed the proposals made in the pre-assessment notice. 5. The assessee had carried the matter by filing first appeal before the first appellate authority, being aggrieved by certain additions made by the assessing authority, in particular, the levy of purchase tax S.T.Rev.No.91 of 2006 3 under Section 5A of the Act. Before the first appellate authority, it was the specific stand of the assessee that the gold which was introduced, weighing about 5014 grams in a sum of Rs.20,45,712/-, is her personal gold and the said gold had not been purchased from an outsider and therefore, the question of payment of purchase tax would not arise. It was the further case of the assessee before the first appellate authority, that, the aforesaid item of gold/quantity of gold had been declared as her own personal asset before the Income Tax authority in the income tax return filed for the financial year 1987-88. 6. The first appellate authority while considering the aforesaid issue, in his order has observed as under: “The above decision of the Hon'ble High Court of Kerala is squarely applicable in this case. The appellant contributed her gold ornaments with the business as additional capital, and the gold ornaments brought into the business were her personal heritage and belongings. As per records produced before me by the appellant the above gold ornaments are seen declared before the income tax authority for 1987-88 assessment year. Hence as contended by the appellant it has no relationship with the assessment year 97-98 and there is no scope for assessing the above turnover during 97-98 ie. after long period of 10 years. Since it S.T.Rev.No.91 of 2006 4 is proved that the gold ornaments amounting to Rs.20,45,712/- is the appellant's contribution as additional capital to her business the levy of tax under section 5A is ill founded, incorrect and unsustainable since the business is her own and as it is known one person cannot sell his goods to himself. Hence I direct the assessing authority to delete the above turnover from the taxable turnover determined for 97-98. The other grounds raised in this appeals are found inadmissible in the absence of concrete evidences,” 7. It is relevant to state here itself, that the first appellate authority is also a fact finding authority. On facts, the first appellate authority has come to the conclusion that the gold on which the assessing authority is trying to levy purchase tax under Section 5A of the Act is the gold which belongs to the assessee and the said gold had been declared by the assessee in the income tax return filed for the year 1987-88. Therefore, the assessing authority was not justified in levying purchase tax under Section 5A of the Act. 8. The State had carried the matter in appeal before the Tribunal in T.A.No.329 of 2003, being aggrieved by the orders passed by the first appellate authority. The Tribunal has allowed the appeal. The S.T.Rev.No.91 of 2006 5 findings and conclusions reached by the Tribunal reads as under: “4. We have considered the contentions raised by both sides. The assessment records reveal that the assessment was completed under Section 17(3) of the Act. Before completing the assessment a notice mentioning this defect was issued to the assessee. This is seen accepted on 5.2.2002. The final assessment was completed on 21.3.2002 which was accepted by the assessee on 24.6.2002. There is no evidence from record that the gold introduced as Capital were from the gold declared before the Income Tax authorities. Considering the above facts we are of the view that the finding of the authority below is not correct. Therefore the order of the first appellate authority is cancelled and the order of the assessment dated 21.3.2002 stands restored.” 9. The assessee being aggrieved by the order passed by the Tribunal is before us in this tax revision case. 10. The assessee has framed the following questions of law for our consideration and decision. They are as under: “(i) Whether on the facts and in the circumstances of the case the Tribunal was justified in confirming the Annexure A assessment order passed by the Assessing Authority. S.T.Rev.No.91 of 2006 6 (ii) Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that tax is payable under Sec.5A of the Act on the value of ornaments brought in as capital investment by the petitioner. Has not the Tribunal committed an error in not following the decisions of this Hon'ble Court and Hon'ble Supreme Court of India. (iii) Whether on the facts and in the circumstances of the case the Tribunal was justified in allowing the appeal filed by the revenue without considering the plea of the petitioner.” 11. Sri.E.P.Govidan, learned counsel appearing for the assessee, would submit that the first appellate authority was justified in modifying the orders passed by the assessing authority for the assessment year 1997-98 and the facts which were accepted and concluded by the first appellate authority ought not to have been upset by the Tribunal without assigning appropriate/cogent reasons. Therefore, it is contended that the orders passed by the Tribunal requires to be interfered with. 12. Per contra, Sri.Muhammed Rafiq, learned Government Advocate appearing for the Revenue, sought to justify the orders passed by the Tribunal. 13. The one and the only issue that falls for our S.T.Rev.No.91 of 2006 7 consideration and decision in this revision petition is, whether the assessing authority was justified in levying purchase tax under Section 5A of the Act on 5014 grams of gold valued at Rs.20,45,712/-. 14. Section 5A of the Act reads as under: “5A. Levy of purchase tax:- (1) Every dealer who, in the course of his business, purchases from a registered dealer or from any other person any goods, the sale or purchase of which is liable to tax under this Act, in circumstances in which no tax is payable under sub- sections (1), (3), (4) or 5 of section 5 and either, - (a) consumes such goods in the manufacture of other goods for sale or otherwise: or (b) uses or disposes of such goods in any manner other than by way of sale in the State; or (c) despatches them to any place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce; shall, whatever be the quantum of the turnover relating to such purchase for a year, pay tax on the taxable turnover relating to such purchase for the year at the rates mentioned in Section 5. (2) Notwithstanding anything contained in sub-section (1), a dealer (other than a casual trader or agent of a non-resident dealer) purchasing goods, the sale of which is liable to tax under Section 5, shall not be liable S.T.Rev.No.91 of 2006 8 to pay tax under sub-section (1) if his total turnover for a year is less than two lakh rupees.” 15. This section deals with levy of purchase tax in the following circumstances, when a dealer purchases in the course of his business taxable goods in the circumstances in which no tax under Section 5 is leviable on the sale price of such goods; when the dealer consumes such goods in the manufacture of other goods for sale; when the dealer otherwise disposes of such goods in any manner other than by way of sale within the State; and when the dealer despatches the goods to a place outside the State except as a direct result of an inter-State transaction.. 16. The assessee has a huge total turnover of gold jewellery and ornaments. In the annual returns filed, the assessee has declared total and taxable turnover in a sum of Rs.61,04,016.39 and Rs.56,10,419.11 respectively in the books of accounts maintained during the regular course of her business. The assessee has claimed that she has introduced an additional capital of Rs.20,45,712/- by introducing gold/old gold which is the personal belonging of the assessee towards additional capital. It is no doubt true that when the assessing authority had issued the pre-assessment notice, the assessee had not replied the same for various S.T.Rev.No.91 of 2006 9 reasons. The appellate forum is continuation of the original assessment proceedings. Before the first appellate authority, the assessee is entitled to produce such other materials/documents/evidences which are in her possession while requesting the appellate authority to annul/modify the orders passed by the assessing authority, after assigning appropriate satisfactory reasons for not filing any reply to the pre-assessment notice. Before the first appellate authority, it was the specific case of the assessee, that, the gold which had been introduced as an additional capital investment in the business, is the gold which belongs to her and it had been declared as such in the income tax return filed for the financial year 1987-88. This assertion of the assessee is accepted by the first appellate authority which is also a fact finding authority. After accepting the said factual position, the first appellate authority has granted the relief to the assessee. The State has carried the matter in appeal before the Tribunal. The Tribunal, without adverting to this specific aspect of the matter, as we have already noticed, by its cryptic order, has annulled the orders passed by the first appellate authority. 17. In our opinion, in the hierarchy of the authorities provided under the Act, the Tribunal is the last fact finding authority. It is supposed to apply its mind to the facts of the case and pass a reasoned S.T.Rev.No.91 of 2006 10 order. Findings based on no reason are no finding at all. From a reading of the findings of the Tribunal, it would appear to us that the Tribunal had not recorded any reasons for meddling with the finding of fact noticed by the first appellate authority in the course of his order. It has also not stated the reason for setting aside the order passed by the first appellate authority. Therefore, we cannot sustain the order passed by the Appellate Tribunal. 18. In the normal course, we should have remanded the matter to the Appellate Tribunal with a direction to pass fresh order in accordance with law. In our opinion, that exercise may not be necessary in the present case. An order of remand could be justified, if it is shown that the evidence on record was not sufficient to decide the question of law involved in the revision petition effectively and not otherwise. In the present case, we have carefully perused the relevant assessment records produced by the learned Government Advocate. From the perusal of the records, it reveals that the assessee, in fact, had declared the quantity of gold introduced as additional capital investment in the business in the income tax return filed for the financial year 1987-88. This fact is accepted by the first appellate authority. The learned Government Advocate is not in a position to convince us, why we should not believe the finding of facts by the first appellate authority. Therefore, we have S.T.Rev.No.91 of 2006 11 no hesitation to accept the finding of fact arrived at by the first appellate authority. 19. In view of the above, while setting aside the orders passed by the Tribunal, we confirm the orders passed by the first appellate authority and answer the questions of law framed by the assessee in favour of the assessee and against the Revenue. 20. Consequently, I.A.Nos.1117 of 2006 and 1536 of 2008 stand rejected. Ordered accordingly. (H.L.DATTU) CHIEF JUSTICE (A.K.BASHEER) JUDGE vns/dk