IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HON'BLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR WEDNESDAY, THE 28TH MAY 2008 / 7TH JYAISHTA 1930 ST.Rev.No.414 of 2005 ------------------------------------- (TA.No.427/2004 OF KERALA SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, KOTTAYAM (ORDER DATED 15TH FEBRUARY, 2005) .................... PETITIONER/APPELLANT. -------------------------------------- N.PUSHKARAN, PROPREITOR, VEMBANAD LIME INDUSTRIES, POONAD P.O. ALAPPUZHA. BY ADV. SRI.V.P.SUKUMAR SRI.KURYAN THOMAS RESPONDENT: RESPONDENT. ------------------------------------------- STATE OF KERALA, REPRESENTED BY THE CHIEF SECRETARY, SECRETARIAT, THIRUVANANTHAPURAM. BY SPECIAL GOVERNMENT PLEADER SRI.VINOD CHANDRAN. THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 28/05/2008, ALONG WITH STRV NO. 415 OF 2005 THE COURT ON THE SAME DAY PASSED THE FOLLOWING: H.L.DATTU, C.J. & T.R.RAMACHANDRAN NAIR , J. ------------------------------------------------------------------ S.T.Rev. Nos.414 of 2005 & 415 of 2005 ------------------------------------------------------- Dated, this the 28th day of May , 2008 O R D E R H.L.Dattu, C.J. The petitioner is a dealer registered both under the Kerala General Sales Tax Act and Central Sales Tax Act. 2. Petitioner is engaged in the business of manufacture and sale of lime. The petitioner's industrial unit is recognised by the Khadi and Village Industries Board. For his business activity, the petitioner purchases lime shells from different co-operative societies. 3. The Intelligence Officer of the Intelligence Wing of the Department had obtained information from different co-operative societies about the quantity of lime shells purchased by the petitioner for the purpose of manufacture and sale of lime. Even prior to the obtaining of information by the Intelligence Officer of the Intelligence Wing of the Department, the assessing authority had completed the assessments in the petitioner's case for the assessment years 1999-2000 and 2000-2001. 4. After receipt of the information from the Intelligence Wing of the Department, the assessing authority has re-opened the concluded assessments dated 29-3-2003 by issuing notice under Section 19 of the Kerala General Sales Tax Act (“Act” for short). In the said notice, the assessing authority had brought to the notice of the assessee that he has received information from the Intelligence Wing of the Department about the purchase of lime shells effected by the petitioner/assessee for his business S.T.Rev.Nos.414 & 415/2005 -2- activity. The notice was issued to the assessee, inter alia directing the assessee to show cause why the information received from the Intelligence Wing of the Department should not be made used of for the purpose of passing re-assessment order. 5. After receipt of the notice under Section 19 of the Act, the assessee had filed his objections to the aforesaid notice. In the objection statement so filed, the assessee had merely stated that he had not effected the purchase as detailed in the notice. After considering the reply so filed, the assessing authority has proceeded to complete the re-assessment and while doing so has observed as under: “The above facts were brought to the notice of the dealer through a notice under section 19 of the Act and invited his objection, if any. The dealer filed a reply on 25-3-04. In the reply he stated that he had not effected the purchase as detailed in the notice. But the certificate in Annexure-1 issued by him is the clear evidence to prove that he had effected the purchase. The contention raised by him deserves no merit and hence overruled.” 6. It is apropos, to state here itself that, in the reply to the notice issued under Section 19 of the Act there was no claim by the assessee that the assessing authority had not passed the orders of assessment and had not served the same to him along with the demand notice. S.T.Rev.Nos.414 & 415/2005 -3- 7. The assessing authority after receipt of the reply statement filed by the assessee, has proceeded to complete the re-assessment confirming the proposal made by him in the notice issued under Section 19 of the Act. The correctness or otherwise of the said re-assessment order was questioned by the assessee in appeal before the first appellate authority. The first appellate authority has rejected the appeal filed by the assessee. 8. Being aggrieved by the order passed by the first appellate authority, the assessee had filed second appeals before the Tribunal in T.A.No.427/2004 and T.A.No.428/2004 for both the assessment years. Before the Tribunal, for the first time, the assessee had raised a contention that the assessing authority was not justified in re-opening the assessment which was not even completed or concluded for the assessment years in question. It was the further case of the assessee that at no point of time the orders of assessment passed for the assessment years in question was served on the assessee. 9. The Tribunal by its common order dated 15th February, 2005, after going through the records maintained by the assessing authority and being convinced that the orders of assessment had been passed for the assessment years in question and the same has been served on the representative of the assessee, has rejected the aforesaid assertion made by the assessee and accordingly has confirmed the orders passed by the assessing authority and also the orders passed by the first appellate authority. It is the legality or otherwise of this order passed by the Tribunal is S.T.Rev.Nos.414 & 415/2005 -4- the subject matter of this revision petition. 10. The assessee has framed the following questions of law for our consideration and decision. They are as under: “i). Annexure I assessment order was passed U/s.19 (1) of the KGST Act. Sec.19 (1) provides as follows: 19. Assessment of escaped turnover: (1) Where for any reason the whole or any part of the turnover of business of a dealer has escaped assessment to tax in any year or has been under-assessed at a rate lower than the rate at which it is assessable or any deduction has been wrongly made therefrom, the assessing authority may, at any time within (5 years) from the expiry of the year to which the tax relates, proceed to determine to the best of its judgment the turnover which has escaped assessment to tax or has been under- assessed or has been assessed at a rate lower than the rate at which it is assessable or the deduction that has been wrongly made and assess the tax payable on such turnover after issuing a notice on the dealer and after making such enquiry as it may consider necessary: Provided that before making an assessment under this sub-section the dealer shall be given a reasonable opportunity of being heard. (Provided further that the time limit mentioned in this sub-section shall not apply where the turnover which escaped assessment relates to any business done by such dealer as benamindar or through a benami or where it relates to a dealer, S.T.Rev.Nos.414 & 415/2005 -5- who being liable to get himself registered under this Act and the rules made thereunder has failed to do so). From the above provision it is clear that Sec.19 can be invoked only if the assessment is already completed resulting in escapement of turnover or under assessment or levy of tax at a lower rate than the rate at which it is assessable or any deduction has been wrongly made. In the instant case though it is stated in Annexure-I revised assessment order that the original assessment was completed on 29-3-2003, no such order was served on the petitioner and therefore legally original assessment was not passed. Therefore is the Tribunal justified in law in upholding the Annexure-I assessment order passed U/s.19 of the KGST Act? ii). Se.17 (5A) of the KGST Act makes it mandatory to impose penalty amounting to three times the differential amount of tax in cases where the assessment is originally completed U/s.17 (4) of the KGST Act and subsequently re-opened. In the instant case original assessment was not “Passed” as understood in law. However by confirming Annexure-I assessment order the Tribunal has held that the original assessment was duly passed and thus Annexure-II penalty order stands confirmed. Is the Tribunal justified in law in confirming Annexure-I revised assessment order and thus exposing the petitioner to penalty U/s.17 (5A) of the KGST Act? iii). In the factual circumstances of the case is the Tribunal justified in not declaring that Annexure-I assessment order S.T.Rev.Nos.414 & 415/2005 -6- shall be treated as one passed u/s.17(3) of the KGST Act? 11. Sri. Kuryan Thomas, learned counsel appearing for the petitioner/assessee would vehemently contend before us that, the assessing authority without framing the orders of assessment for the assessment years in question as required under Section 17 (4) of the Act and without serving the said assessment orders along with the demand notice, could not have passed the order under Section 19 of the Act which provides for re-assessment of an order which has been concluded/completed. 12. Sri.Vinod Chandran, learned Government Advocate appearing for the Revenue has produced the assessment records for the assessment years in question before us and he would contend that the representative of the assessee had received the orders of assessment passed by the assessing authority for the assessment years in question, and therefore, there is no merit in the contention of the learned counsel for the assessee. He would further contend that, the assessee had not raised the issue that was canvassed before the Tribunal either before the assessing authority immediately after service of notice issued under Section 19 of the Act or before the first appellate authority and it is only for the first time, according to the learned counsel, the issue was raised before the Tribunal and the Tribunal, after going through the records and being convinced that the assessee had been served with the orders of assessment for the assessment years in question has rightly rejected the second appeal filed by the assessee. Therefore, he submits that the assessee has not made out a S.T.Rev.Nos.414 & 415/2005 -7- case for interference by this Court. 13. Having heard the learned counsel for the parties to the lis, the one and the only question that requires to be considered by us is: 'Whether the assessing authority was justified in passing the order of re-assessment in exercise of his power under Section 19 of the Act?' 14. In order to answer the aforesaid question, the provisions of Section 19 of the Act requires to be noticed. The said provision is as under. 19. Assessment of escaped turnover: (1) Where for any reason the whole or any part of the turnover of business of a dealer has escaped assessment to tax in any year or has been under-assessed at a rate lower than the rate at which it is assessable or any deduction has been wrongly made therefrom, the assessing authority may, at any time within (5 years) from the expiry of the year to which the tax relates, proceed to determine to the best of its judgment the turnover which has escaped assessment to tax or has been under- assessed or has been assessed at a rate lower than the rate at which it is assessable or the deduction that has been wrongly made and assess the tax payable on such turnover after issuing a notice on the dealer and after making such enquiry as it may consider necessary: Provided that before making an assessment under this sub-section the dealer shall be given a reasonable opportunity of being heard. (Provided further that the time limit mentioned in this S.T.Rev.Nos.414 & 415/2005 -8- sub-section shall not apply where the turnover which escaped assessment relates to any business done by such dealer as benamidar or through a benami or where it relates to a dealer, who being liable to get himself registered under this Act and the rules made thereunder has failed to do so). 2. In making an assessment under sub-section (1), the assessing authority may, if it is satisfied that the escape from assessment is due to wilful non-disclosure of assessable turnover by the dealer, direct the dealer to pay, in addition to the tax assessed under sub-section (1) (a penalty as provided in Section 45A). Provided that (no such penalty) shall be imposed unless the dealer affected has had a reasonable opportunity of showing cause against such imposition. 15. Sub-section (1) of Section 19 specifies the conditions precedent for assessing escaped turnover. They are, the assessing authority must have reason to believe that any part or the whole of the turnover of the dealer in respect of any period has either escaped assessment to tax or has been under assessed or has been assessed to tax at a rate lower rate than the correct rate, etc.. This only means that there must be an order of assessment and the same must have been served on the assessee. Keeping in view the provisions of the Section 19 of the Act, we cannot accept the submission of the learned counsel for the assessee. We say so for the reason, firstly, a notice of re-assessment was issued to the assessee on S.T.Rev.Nos.414 & 415/2005 -9- 25-2-2004. In the said notice the assessing authority has specifically stated that the regular assessments in the assessee's case have been completed on 29-3-2003 and since there is an error in the regular assessment order passed, he intends to pass a re-assessment order. The notice issued under Section 19 of the Act for both the assessment years was served on the assessee and in fact the assessee has filed his reply to the said notice. In the reply to the notice, except stating that he had not effected purchases as detailed in the notice, he has not stated that the assessing authority cannot issue notice under Section 19 of the Act to re-open an unconcluded assessment for the assessment years in question. In our opinion, in the objections filed to the notice issued, the assessee/petitioner ought to have taken up this contention. The aforesaid contention is taken by the assessee only before the Tribunal for the first time. This in our opinion, is an after thought and cannot be countenanced either by this Court or by the Tribunal. If for any reason, the orders of assessment had not been passed and the same was not served on the assessee, in our opinion, while filing the reply to the notice issued under Section 19 of the Act, the assessee would have definitely taken up that contention. Secondly, from the records, it is seen that the orders of assessment for the assessment years in question had been served on the representative of the assessee. The Tribunal, after going through the records, has given its positive finding that the orders of assessment and demand notice issued pursuant to the orders of assessment had been served on the assessee. The conclusion so reached by the last S.T.Rev.Nos.414 & 415/2005 -10- fact finding authority cannot be disturbed by this Court while entertaining the revision petition under Section 41 of the Act. 16. In view of the above discussion, we are of the opinion that, the questions of law framed by the assessee requires to be answered in the negative and against the assessee and in favour of the Revenue. Accordingly, the revision petitions require to be rejected and they are rejected. No order as to costs. 17. In view of the orders passed in the revision petitions, all pending interlocutory applications are rejected. Ordered accordingly. (H.L.DATTU) CHIEF JUSTICE (T.R.RAMACHANDRAN NAIR) JUDGE MS/dk.