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 THURSDAY, THE 3RD JULY 2008 / 12TH ASHADHA 1930 T.R.C.No. 121 of 2001 -------------------------------------- ORDER DATED 25.10.2000 TA.236/1999 OF THE KERALA AGRICULTURAL INCOME TAX & SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH,ERNAKULAM .................... REVISION PETITIONER/ASSESSEE/APPELLANT: -------------------------------------------------------------------- E.J.DAVIS, EDASSERY HOUSE, ANGAMALY. BY ADV. DR.K.B.MUHAMED KUTTY (SR.) RESPONDENT/REVENUE/RESPONDENT: ---------------------------------------------------------- STATE OF KERALA, REPRESENTED BY THE SECRETARY TO GOVERNMENT (TAXES) DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM. BY SR.GOVT.PLEADER SRI.MUHAMMED RAFIQ THIS TAX REVISION CASE HAVING BEEN FINALLY HEARD ON 03/07/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: H.L.DATTU, C.J. & A.K.BASHEER, J. ------------------------------------------- T.R.C.No.121 of 2001 ------------------------------------------ Dated this the 3rd day of July, 2008 ORDER H.L.Dattu, C.J. This Court while admitting the case and issuing notice to the respondent has framed the following questions of law for consideration and decision of this Court. They are as under: “i) Whether on the facts and in the circumstances of the case, the Appellate Tribunal is justified in confirming the assessment on the rectified spirit in view of the fact the entire compounded tax for the year 1993- 94 has been paid and the Government incurred no loss of revenue? ii) On the facts and circumstances of the case, has not the Appellate Tribunal committed an error in confirming the levy on the rectified spirit when the petitioner has no legal obligation to pay tax on the rectified spirit transferred in terms of the requirement of law and in terms of the compounded scheme? iii) Without prejudice to the above is not the estimated value of rectified spirit arrived at for the purpose of assessment excessive or arbitrary?” 2. This tax revision case is under the provisions of the Kerala General Sales Tax Act, 1963 ('the Act' for short). Petitioner before T.R.C.No.121 of 2001 2 us is an arrack contractor. He was issued with a licence to do the arrack business in the Abkari year from 1.4.1993 to 31.3.1994. It appears that the petitioner had to stop his business activity on 30.11.1993. 3. During the commencement of the assessment year 1993-94, the assessee had filed an application under Section 7(14) of the Act requesting the authorities to permit him to pay the tax under the Act at the compounded rate. The permission was granted to the assessee and accordingly he was paying the tax at the compounded rate till he was forced to close down his business on 30.11.1993. 4. While conducting his business for the assessment year in question, he had purchased rectified spirit from a dealer outside the State. It was his case before the assessing authority that the rectified spirit so purchased by him could not be used during the assessment year in question and therefore, had transferred the same to yet another dealer without collecting either the sale price or the sales tax. 5. The assessee had filed his annual returns before the assessing authority and in that, up to 30.11.1993, had claimed that he has paid the tax at the compounded rate, and for the balance sales turnover of Rs.40,93,920/-, since he had only transferred the said arrack to a third party, he is not exigible for payment of sales tax on the said turnover. This T.R.C.No.121 of 2001 3 story of the assessee is not accepted by the assessing authority and therefore, on the sales turnover of Rs.40,93,920/-, the assessing authority has levied tax under Section 5 of the Act. Aggrieved by the quantification so made by the assessing authority, the assessee had unsuccessfully filed appeals before the first appellate authority as well as before the appellate Tribunal. 6. Inter alia, calling in question the legality or otherwise of the orders passed by the appellate Tribunal, the assessee is before us in this tax revision case. 7. Dr.K.B.Mohammed Kutty, learned senior counsel appearing for the assessee, would submit that since the assessee had closed down his business on 30.11.1993 and since the assessee had paid the tax at the compounded rate as permitted by the assessing authority, the assessing authority was not justified in levying tax on the sales turnover of Rs.40,93,920/- which reflects the sales turnover after 30.11.1993. Therefore, submits that even assuming that the said sales turnover requires to be taxed, it can be done only at the compounded rate. 8. Per contra, Sri.Muhammed Rafiq, learned Senior Government Pleader appearing for the Revenue justifies the orders passed by the assessing authority, first appellate authority and the appellate T.R.C.No.121 of 2001 4 Tribunal. 9. The facts are not in dispute. The assessee had abkari business in the Abkari year 1993-94. The assessee was permitted to pay tax at the compounded rate by the assessing authority. The assessee had in fact, paid the tax at the compounded rate till 30.11.1993. 10. It is also not in dispute that while he was conducting the business, he had purchased by way of interstate sales, rectified spirit in a sum of Rs.40,93,920/- . The said spirit is transferred to a third party. According to the assessee, he had not collected any sales price and therefore, not exigible to sales tax. This contention cannot be believed. 11. The assessee is a prudent businessman. He has purchased rectified spirit from a dealer situated outside the State. For whatever reason it may be, he would not have parted with the rectified spirit without collecting the sales price from the third party. 12. Since the assessee had closed down his business on 30.11.1993, whatever permission that was granted by the assessing authority for payment of tax at the compounded rate, would come to an end on that day and whatever transactions that the assessee has done after that date is exigible for payment of tax under the charging provision which only means under Section 5 of the Act. Keeping all these aspects of the T.R.C.No.121 of 2001 5 matter in view, the assessing authority, the first appellate authority and the appellate Tribunal have concurrently held that the assessee is liable to pay tax on the sales turnover of Rs.40,93,920/- under Section 5(1) of the Act. 13. Having given our anxious consideration to the pleas raised by the assessee, we are of the opinion, that none of the authorities under the Act have committed any mistake whatsoever for us to interfere with in this revision petition. 14. Accordingly, this revision petition requires to be rejected and it is rejected and the questions of law framed by the assessee are answered against the assessee and in favour of the Revenue. Ordered accordingly. (H.L.DATTU) CHIEF JUSTICE (A.K.BASHEER) JUDGE vns/dk