IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT:- THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE K.VINOD CHANDRAN FRIDAY, THE 23RD DECEMBER 2011 / 2ND POUSHA 1933 O.T.Rev.No.10 of 2011 ------------------------------------ (AGAINST THE ORDER OF THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL DATED 20.7.2010 IN T.A.(VAT) NO.449/2009 (ASSESSMENT YEAR 2005-06) ------------ REVISION PETITIONER/ APPELLANT/ASSESSEE:- ----------------------------------------------------------------------- HAVELLS INDID LTD. MARKET ROAD, NEAR COMBARA JUNCTION, KOCHI - 14 (REPRESENTED BY V.JYOTHISH KUMAR, VICE PRESIDENT). BY ADV. SRI.VIJAYAN. K.U. RESPONDENT/ REVENUE/RESPONDENT:- ------------------------------------------------------------ STATE OF KERALA, REPRESENTED BY SECRETARY TO GOVERNMENT, TAXES DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM. BY GOVERNMENT PLEADER SRI.BOBBY JOHN. THIS OTHER TAX REVISION (VAT) HAVING BEEN FINALLY HEARD ON 16/12/2011, THE COURT ON 23/12/2011 PASSED THE FOLLOWING:- APPENDIX PETITIONER'S ANNEXURES:- ------------------------------------------- ANNEXURE-A TRUE EXTRACTS OF THE “MATERIAL/STOCK RECEIVED REGISTGER” ALONG WITH THE ABSTRACT LIST SHOWING THE INVOICE PARTICULARS. ANNEXURE-B TRUE COPIES OF THE EXTRACT OF THE JOURNAL ENTRIES AND THE SUPPORTIUNG VOURCHERS FOR RATE DIFFERENCE IN RESPECT OF STOCK TRANSFER. ANNEXURE-C TRUE COPIES OF THE AUTIED STATEMENT IN FORM 13 & 13A FOR 2006-06. ANNEXURE-D TRUE COPY OF THE ASSESSMENT ORDER FOR 2006-06 DATED 30.8.2007 ISSUED BY THE ASSISTANT COMMISSIONER (AA), ERNAKULAM. ANNEXURE-E TRUE COPY OF THE APPELLATE ORDER NO.1994/07 DATED 31.7.2009 FOR 2005-06 ISSUED BY THE DEPUTY COMMISSIONER (APPEALS), ERNAKULAM. ANNEXURE-F TRUE COPY OF THE APPEAL MEMORANDUM IN FORM 32 DATED 6.11.2009 FILED BY PETITIONER BEFORE THE HON'BLE TRIBUNAL. ANNEXURE-G CERTIFIED COPY OF THE ORDER DATED 20.7.2010 IN TA (VAT) NO.449/2009 FOR 2005-06 OF THE KVAT TRIBUNAL, ERNAKULAM. (true copy) C.N.Ramachandran Nair & K.Vinod Chandran, JJ. -------------------------------------- O.T.Rev.No.10 of 2011 --------------------------------------- Dated this, the 23rd day of December, 2011 ORDER K.Vinod Chandran,J. The assessee, the petitioner herein, was before the Tribunal against the order of the first appellate authority confirming the audit assessment made for the year 2005-06, challenging only the addition of Rs.2,76,53,976/-, which constituted the under reported stock transfer to Kerala. The audit assessment of the assessee was completed by Annexure-D order dated 30.8.2007. One of the discrepancies found on audit visit was that the assessee had raised stock register invoices to outside the State of Kerala and claimed exemption against Form-F produced. Based on a comparison with the stock transfer and the details in the monthly return filed before the assessing authority, it was found that stock transfer amounting to Rs.4,53,12,788/- was under reported and the claim with respect to that was proposed to be rejected and treated as local sales. O.T.Rev.No.10 of 2011 : 2 : 2. The assessee filed explanation before the assessing authority that an amount of Rs.1,76,58,812/- was defective goods effected in stock transfer return and also included in the stock received register. However, with respect to the claim for an amount of Rs.2,76,53,976/-, the assessee's explanation was that it was journal entry passed by the Head Office at Delhi due to the rate difference of stock transfer. It was also submitted that on the basis of the copies of the journal entries produced adjustments were made at the Head Office at Delhi to account for the difference in the rate of stock transfer. The assessing authority, however, rejected the said claim and found that they are liable to be included as local sales made by the assessee. The assessee filed first appeal before the first appellate authority, inter alia challenging the said addition and on the same being confirmed, again approached the Tribunal in second appeal. The Tribunal concurred with the view of the first appellate authority that the contention of the assessee that CST under Section 6A would be applicable only in respect of goods moving out of the State and that there being no stock transfer to outside State, no interference is called for on the addition made by the assessing officer. O.T.Rev.No.10 of 2011 : 3 : 3. In our view, the said finding of the first appellate authority as also the Tribunal is not in consonance with the finding of local sales made by the assessing officer. The assessing officer had made the addition of Rs.2,76,53,976 on the premise that the stock transfer with respect to the above amounts in the State of Kerala supported by 'F' Form issued by the assessee was not disclosed in the monthly returns. The assessee's explanation was that though the goods had moved into the State, the rate difference of the goods were corrected by the consignor Head Office and Branch in the journal entries made at their end. The assessing officer, in our opinion, rightly held the same to be local sales. The Tribunal as well as the first appellate authority on a wrong understanding of the issue, upheld the addition; but on the ground that without 'F' Forms from the consignees outside the State, the said addition cannot be deleted. The claim of the assessee was that value of goods stock transferred into Kerala was later reduced by the consignor. The first appellate authority as also the Tribunal understood the assessee to have claimed stock transfer out of Kerala without supporting 'F' Forms. O.T.Rev.No.10 of 2011 : 4 : 4. However, the assessee would urge before us that they have materials to show that the said adjustments were genuine. We feel that another opportunity can be granted to the assessee to prove that the value of Rs.2,76,53,976/-, found to be under reporting of stock transfer, was not claimed by the consignors as stock transfer to the assessee on the strength of 'F' Forms issued by the assessee. Hence, we vacate the order of the Tribunal as also the first appellate authority, however, only with respect to the question of the said addition and remand the matter to the assessing authority for de novo consideration. In the above circumstances, the Other Tax Revision is allowed on the following terms: (a) The order of the Tribunal and the first appellate authority are set aside as also that of the assessing officer only to the extent of the addition made by the assessing officer with respect to an amount of Rs.2,76,53,976/- alleged to be under reporting of stock transfer and remand the matter to the assessing officer for fresh consideration in accordance with law. (b) The assessee shall produce the order of this Court before the assessing officer within two weeks of the receipt of the O.T.Rev.No.10 of 2011 : 5 : same and the assessing officer shall fix a date two weeks therefrom for production of any additional material by the assessee and the matter shall be heard and decided within one month therefrom. (c) If the assessee fails to produce the order as also the materials before the assessing officer within the above mentioned time, the assessment order with respect to the aforementioned addition shall stand revived as affirmed by the first appellate authority and the Tribunal. Sd/- C.N.Ramachandran Nair, Judge Sd/- K.Vinod Chandran, Judge. vku/-