IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE HARUN-UL-RASHID WEDNESDAY, THE 17TH DECEMBER 2008 / 26TH AGRAHAYANA 1930 ST.Rev..No. 198 of 2007() ------------------------- TA.489/1999 of KERALA SALES TAX APPELLATE TRIBUNAL,KOTTAYAM .................... REVISION PETITIONER APPELLANT ASSESSEE ---------------------------------------------------------- M/S.BHIMA AND BROTHERS,ALAPPUZHA. BY ADVS. DR.K.B.MUHAMED KUTTY (SR.) SRI.K.M.FIROZ SMT.M.SHAJNA RESPONDENT(S): RESPONDENT/ REVENUE --------------------------------- THE STATE OF KERALA, REP BY THE SECRETRY TO GOVERNMENT, TAXES DEPARTMENT, SECRETARIAT,THIRUVANANTHAPURAM. GOVERNMENT PLEADER SRI. PRADEEP THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 17/12/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: C.N. RAMACHANDRAN NAIR & HARUN-UL-RASHID, JJ. --------------------------------------------------------- S.T. REVISION NO. 198 OF 2007 --------------------------------------------------------- Dated this the 17th day of December, 2008 JUDGMENT Ramachandran Nair, J. The question raised in this revision filed by the assessee is whether the Sales Tax Appellate Tribunal, Kottayam was justified in confirming the assessment of purchase turnover of gold valuing Rs.1,62,30,263.70 under Section 5A of the Kerala General Sales Tax Act, 1963 (hereinafter referred to as "the Act"). We have heard senior counsel appearing for the petitioner and Government Pleader appearing for the respondent. 2. Assessee is a dealer in gold ornaments. During the assessment year 1997-98, the assessee conceded purchase turnover of gold ornaments above Rs. 8 crores. The assessing officer noticed that the assessee accounted purchase of gold ornaments for the value of Rs. 1,62,30,263.70 from close relatives of one of the partners of the petitioner-firm. According to the assessee, the turnover cannot be subjected to purchase tax as it represents value of new gold ornaments purchased from close relatives of one of the partners. The assessing officer felt that purchase S.T.REVISIOIN NO.198/2007 2 should be taken as old ornaments because the persons from whom the petitioner purchased gold are neither manufacturers nor dealers of new gold ornaments. The further finding is that the purchase bills are not in conformity with Rule 32(12A) of the Kerala General Sales Tax Rules (hereinafter referred to as "the Rules") because the address of the suppliers are not available in the three purchase bills. The bills contain only the names and the address shown is that of the petitioner's shop. The purchase bills are in the name of individual sellers who have no connection with the firm except the fact that they are close relatives of one of the partners. The Officer, therefore, concluded that the gold ornaments purchased is in fact old gold ornaments liable to purchase tax under Section 5A of the Act along with other turnover. The First Appellate Authority held that since the sellers' turnover is above taxable limit, assessment should have been made on them. However, the sellers contested this order issued by the First Appellate Authority before the Appellate Tribunal which were taken along with the appeal filed by the petitioner. By the common order, the Tribunal exonerated the sellers from liability and upheld the assessment holding that the petitioner is liable to pay purchase tax as the gold ornaments purchased is only old gold ornaments. 3. During hearing, senior counsel appearing for the petitioner S.T.REVISIOIN NO.198/2007 3 produced the purchase bills before us which do not even contain the details of the articles purchased and the bills are also not in conformity with Rule 32(12A) of the Rules. Therefore, the contention of the petitioner that the purchase is of new gold ornaments from three individuals does not stand proved. Besides this, if the claim of the petitioner that what is purchased is new jewellery is correct, all these sellers, namely the three individuals are required to pay tax on their sales as they acted as dealers in gold jewellery above the limit which would attract tax under the Act. Moreover, the petitioner admittedly paid tax on the sale of the items purchased which is against their own case because if the petitioner's case that the articles purchased are new jewellery is correct, then the subsequent sales being second sales would not attract tax. The petitioner could have claimed exemption on that complying with the requirement of Rule 32(13) of the Rules. It is clear from the Tribunal's order that old gold ornaments introduced in business in the name of the family members is as a result of voluntary disclosure of income made by them. 4. We notice that this is a hand in glove operation between the partner and the family members to avoid tax liability. We do not think we should recognise this arrangement and help evasion of tax. Further, when gold jewellery is purchased from individuals who are only users, it should S.T.REVISIOIN NO.198/2007 4 be taken as old gold jewellery and not new gold jewellery as claimed by the petitioner. Moreover, no evidence was made available by the petitioner to establish their case which would have involved sales tax liability for the individuals who contested liability before the Tribunal. We do not think that the stand taken by the suppliers who are close relatives of one of the partners will advance the case of the petitioner to get exemption from payment of purchase tax. The view taken by the suppliers that they are not engaged in first sale of new gold ornaments or dealers under the Act will support the case of the Department. Accordingly, this Tax Revision filed by the assessee is dismissed as devoid of any merit. (C.N. RAMACHANDRAN NAIR) JUDGE (HARUN-UL-RASHID) JUDGE sp/ S.T.REVISIOIN NO.198/2007 5 C.R. C.N. RAMACHANDRAN NAIR & HAURN-UL-RASHID, JJ. S.T. REV. NO. 198/2007 JUDGMENT 17th December, 2008 S.T.REVISIOIN NO.198/2007 6