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 26TH AUGUST 2008 / 4TH BHADRA 1930 S.T.Rev.No.159 of 2006 --------------------------------------- T.A.NO.1205/2003 OF THE KERALA SALES TAX APPELLATE TRIBUNAL, ADDL.BENCH-I, ERNAKULAM (ORDER DATED 3RD AUGUST, 2005) (ASSESSMENT YEAR 2000-2001) .................... PETITIONER:- -------------------- M/S. FASHION MARBLE & GRANITE CO.(P)LTD. S.A. ROAD, VYTTILA, COCHIN-682 019, REPRESENTED BY ITS DIRECTOR MR.SHARMA. BY ADV. SRI.DEVAN RAMACHANDRAN RESPONDENT:- ----------------------- STATE OF KERALA, REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT, SECRETARIAT, TRIVANDRUM. BY SENIOR GOVERNMENT PLEADER SRI.MUHAMMED RAFIQ. THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 26/08/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:- H.L.Dattu,C.J. & A.K.Basheer,J. ---------------------------------------------- S.T.Rev.No.159 of 2006 ---------------------------------------------- Dated, this the 26th day of August, 2008 ORDER H.L.Dattu,C.J. Petitioner is a dealer in marbles, granites, etc. Its assessment files are before the Assistant Commissioner (Assessment), IV Special Circle-II, Ernakulam. 2. The assessee is a dealer registered both under the provisions of the Kerala General Sales Tax Act, 1963 (“KGST Act” for short) and Central Sales Tax Act, 1956 (“CST Act” for short). 3. In this revision petition, we are concerned with the assessment year 2000-2001. 4. The assessee, in this revision petition, calls in question the correctness or otherwise of the orders passed by the Sales Tax Appellate Tribunal, Additional Bench-I, Ernakulam in T.A.No.1205 of 2003 dated 3rd August, 2005. 5. 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 Appellate Tribunal had materials to sustain the assessment by confirming the turnover of Rs.28,69,277/- added by the assessing authority? S.T.Rev.No.159 of 2006 - 2 - (ii) Whether there were materials for the Appellate Tribunal to sustain the addition in the absence of any pattern of suppression established and proved by the assessing officer merely on the basis of an alleged recovery of a note from the driver of the vehicle? (iii) Whether there were materials for the authorities to invoke section 28A of the KGST 1963 in the case of inter-state purchases by the petitioner?” 6. The assessee had filed its annual returns for the assessment year 2000-2001 and in that had conceded a total and taxable turnover of Rs.4,33,29,814/- and Rs.3,59,37,117/- respectively. 7. After rejecting the books of accounts and the annual return so filed by the assessee, primarily in view of the orders passed by the Intelligence Officer of the Department under Section 28A of the KGST Act, the assessing authority had issued a pre-assessment notice and, in that, had brought to the notice of the assessee the orders passed by the Intelligence Officer of the Department and had further directed the assessee, apart from others, to show cause why the freight charges and unloading charges should not be estimated at Rs.2,370/- per metric ton instead of Rs.1,670/- per metric ton as declared by the assessee and Rs.200/- as unloading charges per ton to the material cost of Rs.56251.725. S.T.Rev.No.159 of 2006 - 3 - 8. The assessee had filed its objections. The explanation offered by the assessee is as under: “1. We have sold granite amounting to Rs.14306 under concessional rate of tax against receipt of Form 18. The material was sold to M/s.Bristol Boats Pvt. Ltd. Granite is an industrial raw material for the purchaser since this was used for boat construction and sate. We are eligible for the concessional rate of tax since the sale was against valid Form 18 declarations. Granite is an industrial raw material if the same is used by the buyer for his manufacturing or process activity. If the purchaser has misused the concessional rate, he alone will be responsible and as a bonafied seller we need to collect and remit only concessional rate of tax if Form 18 is issued to us. 2. The Intelligence Officer Palakkad has purchased marble U/s 28A. of the Act which was sold by Marble Point, Rajasthan. The deal by the supplier to us will be completed only when the material reaches to our disposal, we are not a party in to that since the material meant to us was intercepted in half way and the officer took over and disposed the material beyond his powers. This issue is subjudice and our OP in this connection is pending before the Hon.High Court of Kerala. 3. As stated earlier, purchase U/s.28A by the S.T.Rev.No.159 of 2006 - 4 - Intelligence Officer Palakkad is under litigation and the case is pending before the Hon. High Court of Kerala. We wish to mention that we have not done any under valuation of freight charges. We have paid as demanded by the transporter. We are not aware about the lorry receipt or freight charges slip recovered from the lorry driver intended to have been issued by transporter for the gross freight earned for the said trip. Kindly note that M/s.Namakkal Roadways company has raised bill for the transportation of marble from Kishagarh to Kochi. The officer took over the material under the pretext of Sec.28A and settled transportation charges of Rs.53218/-. If the transportation charges claimed was undervalued then transporter should have demanded more freight and officer should have settled that. Please note that we are paying freight charges as demanded by the transporter which can be verified from the books of account. As such reworking of freight charges is not warranted in this case. In the pre assessment notice, you have added unloading charges @ of Rs.200/- per ton which is highly arbitrary and has no basis. Actual unloading charges paid are properly accounted and it is documented with proper vouchers as per agreement entered every two year with headload workers union and copy of the agreement enclosed herewith for your ready reference. Under the above circumstances, we request your S.T.Rev.No.159 of 2006 - 5 - goodself to accept our turnover and not to make any arbitrary additions, since this will only lead to litigations. We hope you will accept the returned turnover and finalise the assessment accordingly.”. 9. The assessing authority, after considering the objections so filed by the assessee, has confirmed the proposals made by him. 10. The assessee being aggrieved by the best judgment assessment had filed first appeal before the first appellate authority in STA 676/03. The said appeal is rejected by the first appellate authority by its order dated 16.10.2003, and while doing so, the first appellate authority has observed: “By establishing this irregularity with cogent evidences, a pattern of suppression is established. So the total denial of entire irregularities by the appellant was rightly rejected by the assessing authority. Therefore, rejection of the conceded rate of freight and unloading charges and sale is warranted. Therefore, addition of freight @Rs.2370 per M.T. and unloading @ Rs.200/- per ton to the material cost of 56251.725 are found correct. Also sale price of 56251-725 sq.mtre, 3026-342 MT arrived at by adding 15% gross profit to the actual purchase cost is also found in order, which are confirmed. Despite the arguments raised, the appellant could not furnish any S.T.Rev.No.159 of 2006 - 6 - material evidence to substantiate their contention. In view of the undervaluation detected, taxable sales turnover under Section 28A Rs.1,64,881/- is well found and sufficiently established. So assessment of the same is confirmed, rejecting the contention of the appellant as devoid of merit.”. 11. Aggrieved by the concurrent findings of fact by the authorities under the Act and the Tribunal, the assessee is before us in this revision. 12. We have already noticed the questions of law raised by the assessee for our consideration and consequential decision. 13. The parameters of the jurisdiction of this Court under Section 41 of the KGST Act is now well settled. This Court, while entertaining a revision petition, can decide only two issues, viz., whether the Tribunal has failed to consider a question of law and, secondly, whether the question of law has been erroneously decided. We are hasten to add, that, if the findings of the Tribunal, on facts, is perverse, that would also be a question of law and that could be considered by this Court in a revision petition filed under Section 41 of the Act. 14. Time and again the Courts have observed that the best judgment assessment is also an assessment. An estimation by best judgment may take into account an element of guess work, but it is S.T.Rev.No.159 of 2006 - 7 - nevertheless a 'judgment' and therefore, it must have some rational basis. That only means, that, the best judgment assessment cannot be on the basis of the whims and fancies of the assessing authority. 15. In the instant case it is not in dispute nor can it be disputed by the assessee that the Goods Vehicle bearing registration No.KA-01/C 6575, which was carrying marbles purchased by the assessee from a dealer in Rajasthan, was intercepted by the Intelligence Officer of the Department on the ground that the assessee had undervalued the goods in the bills produced. The Intelligence Officer had issued a show cause notice, directing the assessee to show cause why the vehicle in question should not be detained and proceedings under Section 28A of the Act should not be completed. The assessee had filed its objections. After considering the objections so filed by the assessee, the assessing authority has passed an order, dated 16.09.2000, under Section 28A of the Act, to purchase the goods on behalf of the Government of Kerala at the rate mentioned by the assessee in its sales invoice. The order so passed has attained finality. 16. It is that order of the Intelligence Officer that was kept in view and also had been made as the basis by the assessing authority to complete the best judgment assessment. As we have already noticed, S.T.Rev.No.159 of 2006 - 8 - while completing the best judgment assessment, there must be a rational basis and it cannot be on whims and fancies of the assessing authority and, in the present case, the orders passed by the Intelligence Officer having become final, the same has been adopted by the assessing authority for the purpose of best judgment assessment. 17. The findings and conclusions reached by the assessing authority is accepted by the first appellate authority and also by the Tribunal. That only means, that, there is concurrent findings by the authorities under the Act and also by the Tribunal, on facts. This finding of fact cannot be upset by this Court in a proceedings under Section 41 of the KGST Act. The reference can be made to the decision of the Apex Court in the case of Commissioner of Sales Tax vs. H.M.Esufali H.M.AbdulAli, [1973] 32 STC 77: “In estimating any escaped turnover, it is inevitable that there is some guess-work. The assessing authority while making the best judgment assessment, no doubt, should arrive at his conclusion without any bias and on a rational basis. That authority should not be vindictive or capricious. If the estimate made by the assessing authority is a bona fide estimate and is based on a rational basis, S.T.Rev.No.159 of 2006 - 9 - the fact that there is no good proof in support of that estimate is immaterial. Prima facie, the assessing authority is the best judge of the situation. It is his best judgment and not anyone else's. The High Court cannot substitute its best judgment for that of assessing authority.” 18. However, Mr.Devan Ramachandran, learned counsel appearing for the assessee, would submit that unloading charges have been included by the assessing authority while quantifying the tax liability of the assessee for the assessment year in question and for which there is no basis. According to the learned counsel, the unloading is done by the Headload and General Workers Union and there exists an agreement between the Headload and General Workers Union and the Marble dealers Association, whereby the rate of unloading is pre-determined. This issue has been answered both by the first appellate authority and the Appellate Tribunal. The findings and conclusions reached by them, by no stretch of imagination, can be said as a perverse finding which warrants interference by this Court in exercise of its revisional power. 19. In view of the above, while rejecting the revision petition, we answer the questions of law raised by the assessee in the S.T.Rev.No.159 of 2006 - 10 - negative and against the assessee and in favour of the Revenue. Ordered accordingly. H.L.Dattu Chief Justice A.K.Basheer vku/dk Judge