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 WEDNESDAY, THE 2ND JULY 2008 / 11TH ASHADHA 1930 ST.Rev..No. 189 of 2008 ---------------------------------------- (ORDER DATED 30-12-2006 IN TA.No.46/2006 OF THE KERALA SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, KOTTAYAM ) .................... REVISION PETITIONER/APPELLANT/APPELLANT/ASSESSEE: -------------------------------------------------------------------------------------- M/S.SIVASAKTHI TRADERS, PALA BY ADV. SRI.N.O.THOMAS SRI.K.MANOJ CHANDRAN SRI.P.R.AJITHKUMAR RESPONDENT/RESPONDENT/RESPONDENT/REVENUE: ------------------------------------------------------------------------------- STATE OF KERALA, REP. BY THE GOVERNMENT PLEADER, HIGH COURT OF KERALA BY SENIOR GOVERNMENT PLEADER SRI.MUHAMMED RAFIQ. THIS SALES TAX REVISION HAVING COME UP FOR ADMISSION ON 02/07/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: H.L.DATTU, C.J. & A.K.BASHEER, J. ------------------------------------------------------ S.T.Rev.No.189 of 2008 --------------------------------------------- Dated, this the 2nd day of July, 2008 O R D E R H.L.Dattu, C.J. This revision petition is filed by an arrack dealer, being aggrieved by the orders passed by the Sales Tax Appellate Tribunal in T.A.No.46 of 2006 dated 30-12-2006. By the impugned order, the Tribunal has confirmed the findings and conclusion reached by the first appellate authority. 2. The facts in nutshell are; the assessee is a dealer in arrack. The orders of assessment passed by the assessing authority pertains to the assessment year 1994-95. The assessments have been completed by the assessing authority on best judgment basis by fixing total and taxable turnover at Rs.45 lakhs. In the orders of best judgment assessment passed, the assessing authority has noticed that the Intelligence Wing of the department had conducted surprise inspection of the business premises of the assessee and the assessee has not maintained regular books of accounts. The assessing authority while completing the best judgment assessment has made an addition of four S.T.Rev.No.189/2008 -2- times the kist amount and he has also made an addition of R.3 lakhs towards the turnover of soda and cola. 3. Aggrieved by the best judgment assessment order passed by the assessing authority the assessee had questioned the said assessment order before the first appellate authority. The first appellate authority after carefully perusing the assessment records has firstly come to the conclusion that at no point of time the assessee had filed any application under Section 7 (14) of the Kerala General Sales Tax Act (“Act” for short) requesting the assessing authority to permit it to pay tax under the Act at the compounded rate. Further, the first appellate authority taking into consideration that the business of the assessee was closed some time on 29-9-1994 since the licence that was granted to the assessee was cancelled by the competent authority under the provisions of the Abkari Act, has reduced the additions made by the assessing authority from four times of the kist amount to two times. In so far as the tax on the turnover of soda and cola, the first appellate authority has granted enough relief to the assessee. The assessee, as usual, was not satisfied with the orders passed by the first appellate authority in modifying the assessment orders for the assessment year 1994-95. Therefore has filed Second Appeal before the Tribunal in T.A.No.46 of S.T.Rev.No.189/2008 -3- 2006. 4. Before the Tribunal, the primary contention canvassed by the assessee's representative was that since the assessee had filed application under Section 7 (14) of the Act, there is a presumption that the assessing authority has accepted its application and therefore, the assessee is entitled for payment of tax under the Act at the compounded rate. It was further contended before the Tribunal that the assessee had in fact paid the compounded rate of tax for the months of April 1994 to July 1994. Lastly, it was contended that since the assessee had closed its business with effect from 29-9-1994, the first appellate authority was not justified in restricting the additions made by the assessing authority from three times to two times. 5. The Tribunal has considered all these contentions canvassed by the assessee. In paragraph 7 of the order the Tribunal has stated as under: “We have examined the rival contentions and perused the connected records. From the records it is seen that there was no response from the part of Sri.Sasikumar and Madhavan, the partners of the appellant-firm, even though notices were served on them on 23-6-1994 and 21-6-1994 respectively. Some of the subsequent notices were seen S.T.Rev.No.189/2008 -4- refused. The application for registration was seen filed only on 26-8-1994 and that too after the service of exparte provisional assessments for the months of 4/94 to 7/94 in the absence of any returns. There was no application for compounding of the tax under Sec.7 (14). The inspections conducted in three different dates in the shops revealed no accounts. In these circumstances, we find that the assessing authority is perfectly justified in completing the assessment to the best of judgment. In appeal, the first appellate authority has seen observed as follows: “.............According to the learned Advocate, the appellant had filed an application for permission to pay tax at the compounded rate as provided under Sec.7 (14) of the KGST Act before the assessing authority and paid tax accordingly for two months on 25-8-94 and 5-10-94. Copies of two receipts has been produced before me. In one of the receipt it is recorded on “Tax for compounded Tax for 94-95. It is contended that the words C.T. denotes compounded tax. So it is the definite case of the appellant that they had filed compounding application U/s 7 (14) of the Act and the assessing authority had accordingly issued receipt for the same. It is the case of the assessing authority that no compounding application has been filed and no permission was granted to pay tax at the compounded rate. No evidence is forthcoming that the appellant has filed compounding application and S.T.Rev.No.189/2008 -5- permission was granted to pay tax at the compounded rate. The only piece of evidence is the receipt for tax paid. Unless the application is filed opting to pay tax at the compounded rate and permission was granted in such applications, the appellant is not entitled compounding u/s 7 (14) of the Act. So I hold that the appellant is not entitled to pay tax at the compounded rate......” 6. Aggrieved by the findings and conclusion reached by the Tribunal, the assessee is before us in this sales tax revision case. 7. Sri.Manoj Chandran, learned counsel appearing for the revision petitioner would submit that since the petitioner had filed an application before the assessing authority under Section 7 (14) of the Act, it shall be presumed that the assessing authority had permitted the assessee to pay tax under the Act at the compounded rate. In aid of his submission the learned counsel also informs us that for the period April 1994 to July 1994, the assessee, in fact, had paid the tax at the compounded rate. In support of this factual information the assessee takes us through the so-called receipts issued by the Sales Tax Department. 8. In so far as the additions sustained by the first appellate S.T.Rev.No.189/2008 -6- authority is concerned, the learned counsel for the assessee would submit that the first appellate authority having come to the conclusion that the assessee had closed its business with effect from 29-9-1994, there is no justification for the first appellate authority to reduce the additions made by the assessing authority from four times of the kist amount to two times. Lastly it is contended that the orders passed by the Tribunal is contrary to the facts pleaded by the assessee. 9. None of the contentions canvassed by the learned counsel for the assessee, in our opinion, has no merit whatsoever. 10. Section 7 of the Act provides for payment of tax under the Act at the compounded rates by a particular class of dealers. Section 7 (14) of the Act mandates that if an assessee wants to pay the tax at the compounded rate, he has to make an application in writing before the assessing authority. Section 7 (16) of the Act gives discretionary power to the assessing authority to entertain that application and grant permission to the assessee to pay tax under the Act at the compounded rate. 11. In the present case, the fact finding authority has come to the conclusion that the assessee has not filed any application under Section 7 (14) of the Act to pay tax at the compounded rate. In the S.T.Rev.No.189/2008 -7- absence of any application, the assessee cannot presume that it was permitted by the assessing authority to pay tax at the compounded rate merely because some officials in the department have accepted the tax paid by the assessee for the months of April, 1994 to July, 1994. The Act mandates of the filing of an application for permission to pay tax at the compounded rate and that procedure requires to be followed by the assessee. Without following the procedure, the assessee cannot presume that he is permitted by the assessing authority to pay the tax at the compounded rate. In that view of the matter, the first submission of the learned counsel for the petitioner cannot be accepted by us. 12. In so far as the second submission is concerned, the assessing authority had completed best judgment assessment for the assessment year 1994-95 on the ground that the assessee had not maintained any books of accounts. For completing the best judgment assessment, the assessing authority had taken the kist amount as the basis. The first appellate authority noticing that the assessee had closed its business with effect from 29-9-1994 was of the opinion that the additions made by the assessing authority is on the higher side, has reduced the same from 4 times to two times. It is not in dispute nor can be disputed by the assessee that the abkari licence was issued to conduct S.T.Rev.No.189/2008 -8- the business for the year 1994-95. In fact, the assessee conducted business till 29-9-1994. It is on that date the licence came to be cancelled by the competent authority under the Excise Act. It only means that during the excise year the assessee had conducted business for some time pursuant to the licence granted by the excise authorities. If that is so, if the first appellate authority has reduced the additions made by the assessing authority from 4 times to two times, it cannot be said that the addition made is either arbitrary or excessive. Therefore, the second contention canvassed by the learned counsel for the petitioner has no merit whatsoever. 13. Lastly it is contended that, the Tribunal, without properly appreciating the contentions pleaded by the assessee has rejected the assessee's appeal. We have carefully perused the orders passed by the Tribunal. The Tribunal has adverted to the contentions canvassed by the assessess's representative and thereafter, on facts has come to the conclusion that the assessee has not made out a case for its interference of the orders passed by the first appellate authority. In our opinion, the Tribunal has taken the considered view noting all the contentions urged by the assessee's representative. In that view of the matter, even the 3rd contention canvassed by the learned counsel for the S.T.Rev.No.189/2008 -9- petitioner cannot be accepted by us. 13. In the result, the Sales Tax Revision requires to be rejected and it accordingly rejected. Ordered accordingly. (H.L.DATTU) CHIEF JUSTICE (A.K.BASHEER) JUDGE MS