IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HON'BLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE A.K.BASHEER TUESDAY, THE 29TH JULY 2008 / 7TH SRAVANA 1930 ST.Rev..No. 56 of 2008 -------------------------------- TA.116/2007 of S.T.A.TRIBUNAL,ADDL.BENCH,PALAKKAD .................... REVISION PETITIONER//: RESPONDENT/REVENUE: ------------------------------------------------------------------------ STATE OF KERALA REPRESENTED BY JOINT COMMISSIONER (LAW) IN-CHARGE, COMMERCIAL TAXES, ERNAKULAM. BY SPL. GOVT. PLEADER SRI. VINOD CHANDRAN. RESPONDENTS: APPELLANT/ASSESSEE: -------------------------------- P.VINOD, CHANDINI ENTERPRISES, PUDUPALLY STREET, PALAKKAD. BY ADV. SRI.ARIKKAT VIJAYAN MENON SRI.HARISANKAR V. MENON SMT.MEERA V.MENON SRI.MAHESH V.MENON THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 16/07/2008 ALONG WITH S.T.REV. No.173 of 2005 AND CONNECTED CASES, THE COURT ON 29/07/2008 PASSED THE FOLLOWING: H.L. DATTU, C.J. & A.K. BASHEER, J. ------------------------------------- S.T.Rev. Nos.56/08, 173/05, 217/05, 453/05, 454/05, 459/05, 464/05, 468/05, 469/05, 252/06, 253/06, 267/06, 388/06, 403/06, 57/08, 62/08, 65/08 and 67/08. ------------------------------------ Dated this, the 29th day of July, 2008 ORDER H.L. DATTU, C.J. In these revision petitions, the primary question that would arise for our consideration and consequent decision is, whether the Appellate Tribunal was justified in directing the assessing authority to allow deductions towards mortality and weight loss during the transportation of chicken, while quantifying the sales tax liability under the provisions of Kerala General Sales Tax Act, 1963 read with the Kerala General Sales Tax Rules, 1963? 2. In these revision petitions, the assessees are dealers in live chicken and the assessment for several assessment years in question were completed by the assessing authorities by resorting to the best judgment assessment, since they have found that the books of accounts and the annual returns filed by the dealers cannot be accepted as correct and complete. 3. In order to understand the controversy between the parties to the lis, it may be useful to notice, how the authorities under the Act and the Appellate Tribunal has decided the legal issue involved in these revision petitions. S.T.Rev.No.56/08 etc. - 2 - 4. We may set out the facts in Sales Tax Revision Petition No.56 of 2008, which are typical and illustrative of the position of the other dealers in this batch of revision petitions. 5. In the instant case, the assessee has filed his annual returns for the assessment year 2001-02 and in that has conceded the total turnover and taxable turnover in a sum of Rs.17,18,45,761/-. The assessing authority has rejected the returns so filed, mainly on the ground that the purchase value declared in the delivery notes while transporting the live chicken through the entry check post of the State differs from the purchase value shown in the books of accounts maintained in the regular course of business. The aggregate purchase value as per the delivery note is Rs.25,23,55,000 and the aggregate purchase value shown in the accounts is only Rs.16,28,83,916 and therefore, there is substantial variation in the returns filed. This issue was explained by the assessee by filing its written objection and in that had only stated, that, the purchase value voluntarily shown in the delivery note is incorrect and the actual purchase value is much lesser than what is reflected in the delivery note; the rule does not mandate a dealer to show the value shown in the delivery note in the purchase accounts of the dealer; the delivery note is not a selling document S.T.Rev.No.56/08 etc. - 3 - and so, on the basis of the value shown in the delivery note to arrive at the purchase value is contrary to the statutory provisions. It is also stated that during the transportation of the chicken from outside the State, there will not only be weight loss but also mortality of the chicken and therefore, the assessee has conceded the actual amount realised for consideration of sales of chicken and therefore, the liability to tax must be restricted to that extent alone. It is also stated, that, the value shown in the delivery note is approximate and the same was shown as directed by the check post authorities and in the peculiar circumstances that prevail in the line of business, the illegal direction issued by the check post authorities is required to be followed by the assessee. Having taken up all these contentions, the assessee has still filed the revised returns, conceding the sales turnover as per the delivery note and in that has claimed deduction towards the mortality and weight loss of the chicken. This claim is rejected by the assessing authority and has quantified the tax payable under the Act by passing the best judgment assessment. The order passed by the assessing authority is as under. “I have examined the contention raised by the assessee. The revised return filed revealed the following: Live chicken sales as per delivery note value : Rs.25,25,55,000.00 S.T.Rev.No.56/08 etc. - 4 - Less weight loss, death and price difference : Rs. 8,07,09,238.08 Net Sales : Rs.17,18,45,761.92 The value declared in the delivery notes used for transporting the goods from purchasing point is always the purchase value of goods. Approximate value is entered in delivery notes only in cases where correct value at the point where consignment begins is not ascertainable. In this case, the assessee purchased goods from a dealer and the purchase value is known to him and such value is entered in the delivery note. The freight charges will always be over and above the purchase value. The estimated freight, cooly, G.P. etc. in proposal is reasonable. If damages to the goods happens on transportation and if such damages are regular in nature, the average sales rate per unit quantity will be fixed at a higher point so that the loss due to the damages will be recouped. The gross sales value will include purchase value, G.P. and other charges. Hence the method of estimation of sales value adopted in the pre-assessment notice, ie., on the basis of purchase value, the expenses incurred and the gross profit, not on the basis of quantity sold, is correct. In this case, the assessee had consigned 2563 lorry loads of live chicken. The damages due to death, weight loss etc. claimed is Rs.8,07,09,238.08. This is 49.55% of the accounted purchased value. The assessee has not produced any evidence for such a huge loss. The nature of the disposal of carcasses for about Rs.8.07 crores is also not disclosed. Further, the claim of death and weight loss is Rs.31,490.00 per load. No prudent man will allow such a damage in every consignment. Transporting of birds in vehicles with ultra modern facilities including air conditioning to avoid S.T.Rev.No.56/08 etc. - 5 - such death will be much cheaper, if such a damage actually happens. The Commissioner of Commercial Taxes, Thiruvananthapuram has taken up the matter of death and weight loss of live chicken during transportation with the Kerala State Poultry Development Corporation. They have studied the matter in detail and came to the conclusion that there will not be any mortality during transportation if the birds are transported after observing the prevalent rules and regulations for such transport. In this case, the assessee has no case that he had violated any rules. In the circumstances stated above, it can be concluded that there will not be any death during transit. Even if any death happens, the over all sale value will not go lower than the purchase value, since the chicken will be sold at a higher rate per Kg. of live chicken. The turnover estimated is on the quantity sold. Hence the estimate is fair and reasonable and the assessment is completed as proposed under: Purchase value as per the delivery notes: Rs.25,25,55,000.00 Add 5% for freight, coolies and G.P. : Rs. 1,26,27,750.00 Total turnover estimated : Rs.26,51,82,750.00 Less exemption allowed : Nil Taxable turnover proposed : Rs.26,51,82,750.00 ST due @ 8% : Rs. 2,12,14,620.00 AST due @ 15% : Rs. 31,82,193.00 Total tax due : Rs. 2,43,96,813.00 ST paid : Rs. 1,51,71,749.00 Balance due : Rs. 92,25,064.00 This shall be paid. Demand notice is issued. Interest due under section 23 (3A) shall also be paid.”. S.T.Rev.No.56/08 etc. - 6 - 6. In the appeal filed against the said order, the first appellate authority while modifying the best judgment assessment order passed, has observed as under: “As I have already stated the dispute in this appeal is also identical as in previous year. The appellants claim weight loss, due to mortality and transportation at 26.75% during this year. But the assessing authority has not considered it. As in the previous year, the learned Sales Tax Practitioner made a strong and detailed argument regarding loss and damages of live chicken while transporting and resultant weight loss identical as in previous year. He also produced various decisions of the Hon'ble Tribunal and certificate from competent authorities to establish the claim of weight loss. In appellants' case while disposing the appeal for the previous year I have considered the issue in detail on the basis of various decisions of the Hon'ble Appellate Tribunal. Then I hold by admitting the claim of the appellant that 15% weight loss is allowable in the case of the appellant when considering his nature of transportation and business. I feel that this is reasonable for this year also. Therefore, on the same ground as I have decided the appeal filed for previous year I allow 15% weight loss for this year also. The assessing authority is therefore directed to modify his order accordingly. S.T.Rev.No.56/08 etc. - 7 - Regarding the estimation of freight, cooli etc. on the same line as I have observed in previous year, since the appellant keeps correct and complete accounts for freight and cooli, the assessing authority is directed to accept the figure adopted by (sic. for) the purpose of freight and cooli and modify his order accordingly. Last issue in both appeal is regarding the levy of interest under section 23(3A). The levy of interest was not based on actual due and demand. The assessing authority is therefore directed to revise the interest levied for the year 2001-02 and 2002-03 on the basis of the decisions of the Hon'ble High Court of Kerala in P.K.Damodaran vs. State of Kerala, 12 KTR 133 and modify his order accordingly. 7. The assessee and the revenue being aggrieved by the order passed by the first appellate authority, has carried the matter before the Sales Tax Appellate Tribunal by filing the second appeal. The Tribunal has clubbed both the appeals, since the legal issue involved was one and the same, and has allowed the assessee's appeal and has rejected the revenue's appeal. The reasoning and conclusion reached by the Tribunal is as under: “We have examined the facts of the case. The first contention raised by the assessee for the years 2001-2002 and 2002-2003 is that the mortality and weight loss restricted to 15% by the first appellate authority is unjustifiable. The assessing officer has adopted the value S.T.Rev.No.56/08 etc. - 8 - shown in the delivery note for assessment purpose. The first appellate authority has restricted the claim of mortality and weight loss to 15%. According to the authorised representative of the assessee the value quoted in the delivery note was an approximate value dictated by the departmental authorities and that the actual value was shown in the bills. Weight loss and death loss contributed to the difference between the sale value as per delivery notes and the value as per sales bills. It is contended that there is absolutely no material to establish that the respondent had in fact received more than what has been recorded in the sale bills. The authorised representative has relied on the decision of this Tribunal in T.A. NO.399 and 400 of 2004 and C.O. Nos.24 and 25/2004 dated 22nd November, 2004 in support of their contentions. We find force in the contentions raised by the assessee. This Tribunal has allowed the claim of the assessee towards weight loss and death loss at 25.99% in T.A. NO.399 and 400 of 2004 and C.O. Nos.24 and 25/2004 dated 22nd November, 2004 cited above. Moreover, this Tribunal has also allowed the weight loss and death loss at 25.99% in T.A. No.357/2003 dated 17th June, 2003. The Tribunal has allowed the claim of the assessee in the above appeals on the ground that the lower authorities have not stated any reason for restricting the claim of the assessee. In the instant case, the death loss and weight loss claimed by the assessee comes to 32% for the year 2001-2002 and 27% for the year 2002-2003. We are of the view that the claim S.T.Rev.No.56/08 etc. - 9 - of the assessee is excessive. Considering the entire facts and circumstances of the case and in view of the decisions taken by this Tribunal in various appeals stated above for the same issue, we are of the view that it is only fair and reasonable to allow the claim of the assessee towards the weight loss and death loss at 25.99% same as decided by this Tribunal in various appeals stated above. Levy of AST in respect of tax payable is effective from 23.7.2001 and hence we direct the assessing officer to delete the levy of AST prior to 23.7.2001. With regard to estimation of freight and cooly, the assessee produced the accounts for the freight and cooly before the first appellate authority and, therefore, the first appellate authority has directed to delete the estimation of freight and cooly. We find no reason to discredit the book figures and hence confirm the decision of the first appellate authority in this case. In the result the appeal filed by the assessee for the years 2001-2002 and 2002-2003 are allowed in part. Appeals filed by the revenue are dismissed.”. 8. The Revenue, being aggrieved by the order passed by the Sales Tax Appellate Tribunal has filed these Tax Revision Petitions. The following questions of law are raised for our consideration and consequent decision. They are as under: “A. Whether the tribunal was correct in holding that the S.T.Rev.No.56/08 etc. - 10 - assessee is entitled to be granted deduction in turnover for weight loss and mortality occurring in transportation? B. Was not the modification of the first appellate authority's order, increasing the percentage of deduction allowable towards mortality and weight loss perverse especially since evidently the consignment is sold in excess of the purchase value and the assessee is not entitled to any deduction in turn over for weight loss and mortality?” 9. We have heard Sri.Vinod Chandran, the learned Government Advocate for the Revenue and Dr.Mohammed Kutty, learned senior counsel and Sri.Harishankar V.Menon, learned counsel for the assessees in all these tax revision cases. 10. The learned counsel for the dealers while justifying the order passed by the Tribunal, would submit, that, the assessing authority has considered the purchase value as per the delivery note produced at the check post as the turnover of the dealer and the same is impermissible in law and contrary to the statutory provisions. It is next contended, that, the assessing authority had failed to consider the fact, that, while transporting S.T.Rev.No.56/08 etc. - 11 - live chicken there will be mortality as well as weight loss and this omission has been corrected by the Appellate Tribunal and therefore, the Tribunal has not committed any error of law, which calls for interference by this Court. The learned counsels for the assessee would further submit, the assessee's have accounted the actual sales in the books of accounts maintained in the regular course of business and there was no justification for the assessing authority to reject the books of accounts maintained by the dealers and consequently could not have rejected the annual returns filed and then pass the best judgment assessment. 11. Sri. Vinod Chandran, learned Government Advocate (Taxes) contended that, the entire approach of the First Appellate Authority and the Appellate Tribunal is contrary to the statutory provisions and therefore perverse and accordingly, the impugned order requires modification. 12. Our analysis of the case: - In these revision petitions, the contesting respondents are dealers registered under the provisions of Kerala General Sales Tax Act 1963 and the Central Sales Tax Act. They are dealers in chicken. They purchase live chicken from various places in Tamil Nadu and the live chicken so purchased is transported in lorries and S.T.Rev.No.56/08 etc. - 12 - supplied to retail dealers in Kerala. The lorries pass through the entry check post in the State of Kerala. The person in charge of the goods vehicle has to produce before the check post authorities the documents prescribed under the Act, including the delivery note in Form No.26. The consignor is expected to show, apart from others, the value of the goods consigned to the consignee. The check post officer has the power not only to verify the documents, but also to satisfy himself that there is no evasion of tax. Simply because the valuation of the goods could be determined by a best judgment assessment, it cannot be said that the power to detain the goods in transit could not be exercised on the ground of under valuation. 13. Section 5 of the Act is the charging provision under the Act. It provides for levy of tax on sale or purchase of goods. The section provides, that, every dealer other than casual dealer or agent of non-resident dealer, whose total turnover in a year is not less than rupees 2 lakhs and every casual trader or agent of a non-resident dealer, whatever be his total turnover for the year, shall pay tax on his taxable turnover for that year. The definition clause defines the meaning of the expressions - dealer, sale, turnover, total turnover and taxable turnover. 14. Omitting what is not necessary for the purpose of disposal S.T.Rev.No.56/08 etc. - 13 - of these petitions, these definitions are noticed. Section 2 (viii) defines 'dealer' to mean, any person who carries on the business of buying, selling, supplying, distributing goods directly or otherwise, whether for cash or for deferred payment, or for commission, remuneration or other valuable consideration. Section 2 (xxi) defines the word 'sale' to mean, every transfer of property in goods, by one person to another in the course of trade or business for cash or deferred payment or other valuable consideration, but does not include a mortgage, hypothecation, charge or pledge. Section 2(xxvii) defines 'turnover' to mean, the aggregate amount for which the goods are either bought or sold, supplied or distributed by a dealer, on his own account or on account of others, whether for cash or deferred payment or other valuable consideration. Section 2 (xxvi) defines the meaning of the expression 'total turnover' to mean, the aggregate turnover in all goods of a dealer at all places of business in the State, whether or not the whole or any portion of such turnover is liable to tax, including the turnover of purchase or sale in or in the course of export of the goods out of the territory of India or in the course of import of goods into the territory of India. Section 2(xxv) of the Act defines 'taxable turnover' to mean the turnover on which a dealer shall be liable to pay tax as S.T.Rev.No.56/08 etc. - 14 - determined after making such deductions from his total turnover and in such manner as may be prescribed, but shall not include the turnover of purchase or sale in the course of inter-State trade or commerce or in the course of export of the goods out of the territory of India or in the course of import of goods into the territory of India. 15. The expression 'taxable turnover' as defined means, that part of the dealer's gross turnover which remains after allowing deductions under Rule 9 of KGST Rules. 16. Rule 9 of the KGST Rules provides for determination of taxable turnover. In determining the taxable turnover of a dealer, the amounts specified in clause 2 (a) to (k) subject to the conditions specified therein, be deducted from the total turnover of the dealer. 17. In our view, these are the only provisions of the Act and the Rules that requires to be noticed for the disposal of these revision petitions. 18. The dealers in these petitions effects purchase of live chicken from various places in Tamil Nadu viz. Namkal, Palladam, etc. and after such purchase the live chicken are transported in lorries and supplied to retail dealers in Kerala. The point of levy of sales tax on the sales of live S.T.Rev.No.56/08 etc. - 15 - chicken is at the point of first sale in the State by a dealer who is liable to tax under Section 5 of the KGST Act. After entering into the State at the first check post point, apart from other documents, they produce the delivery note in Form No.26. In the delivery note, the value of the goods both in figures and words requires to be written by the consignor or the person transporting the goods. In these Petitions, the purchase value shown in the purchase accounts, does not show the value of the goods shown in the delivery notes. To a specific query made by us in this regard, Sri.Harishankar V.Menon, learned counsel for the assessee, would submit that, those figures had to be shown in view of the directions issued by the check post authorities and he would further submit, that, if for any reason the consignor or the person in charge of the goods vehicle does not carry out the wish or the directions issued by the check post authorities, it would be difficult for the dealers to carry on with their business in the State. These averments and arguments cannot be accepted by us, while considering a revision petition. The check post declarations are public documents and therefore, they are presumed to be correct, unless it is proved otherwise. 19. The assessee in the present case, in the original return S.T.Rev.No.56/08 etc. - 16 - filed for the assessment years in question, had shown the total and taxable turnover in a sum of Rs.17,18,45,761.92. The returns so filed is not accepted by the assessing authority, rightly so, since the assessee himself had shown the purchase value of live chicken in the delivery notes produced before the check post authorities in a sum of Rs.25,25,55,000/-. When the same was brought to the notice of the assessee by issuing pre-assessment notice, the assessee had filed revised returns showing the sale value of the live chicken as per the delivery note value in a sum of Rs.25,25,55,000/- and had claimed deduction in a sum of Rs.8,07,09,238.08 towards weight loss, death (mortality) and price difference and had offered a sum of Rs.17,18,45,761.92 as the net sales for the purpose of taxation under KGST Act. The assessing authority has disallowed the claim of the assessee for deduction from the total turnover, the weight loss and death of chicken while transporting and other sundry claims and has quantified the tax liability on the purchase value of the live chicken as per the delivery notes, and further by adding 5% towards freight, coolies and gross profit. In the appeal filed, the appellate authority has allowed the claim of the assessee partially and the Appellate Tribunal by relying on the certificates issued by the veterinary Surgeons/Doctors/experts in the field, has allowed S.T.Rev.No.56/08 etc. - 17 - the claim of the assessee towards the weight loss and death loss at 25.99% and this figure varies in other revision petitions. In our view, that does not affect in any way for deciding the question of law framed by the revenue. 20. We have seen the definition of sale, total turnover and taxable turnover. The tax under the sales tax law is a levy on the transaction of sale, though it may be calculated on the amount of consideration received or receivable. The word 'payable' used in the definition includes the amount paid immediately on sale, though it normally means the payments promised to be