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 MONDAY, THE 4TH AUGUST 2008 / 13TH SRAVANA 1930 S.T.Rev..No. 322 of 2006 ---------------------------------------- ORDER DATED 16.1.2006 IN TA.679/2004 OF THE KERALA SALES TAX APPELLATE TRIBUNAL, THIRUVANANTHAPURAM .................... REVISION PETITIONER/APPELLANT/ASSESSEE -------------------------------------------------------------------- S.JAMEELA BEEVI, PROPRIETOR, J.S.CASHEW EXPORTERS, KOLLAM. BY ADV. DR.K.B.MUHAMED KUTTY (SR.) & SRI.K.M.FIROZ RESPONDENT/RESPONDENT/REVENUE --------------------------------------------------------- THE STATE OF KERALA, REPRESENTED BY THE SECRETARY TO GOVERNMENT, TAXES DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM. BY SR.GOVERNMENT PLEADER SRI.MUHAMMED RAFIQ THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 04/08/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: H.L.DATTU, C.J. & A.K.BASHEER, J. ------------------------------------------- S.T.Rev.No.322 of 2006 ------------------------------------------ Dated, this the 4th day of August, 2008 ORDER H.L.Dattu, C.J. This sales tax revision pertains to the assessment year 1999-2000. 2. The assessee in this sales tax revision filed under Section 41 of the Kerala General Sales Tax Act, 1963 ('the Act' for short), calls in question the correctness or otherwise of the well considered order passed by the Kerala Sales Tax Appellate Tribunal in T.A.No.679 of 2004 dated 16th January, 2006. 3. The assessee has framed the following questions of law for our consideration and decision. They are as under: “i) Whether on the facts and in the circumstances of the case, has not the Appellate Tribunal committed error in estimating the taxable turnover by incorporating the value of imported raw nuts for the purpose of arriving at the alleged suppression? Has not the appellate Tribunal failed to deal with the specific contention raised by the petitioner in this regard vide Para 4, 5 and 6 of the grounds of appeal? ii) Is not the addition of two times retained by the Appellate Tribunal excessive and arbitrary in view of the S.T.Rev.No.322 of 2006 2 fact that 164 bags of imported raw nuts were taken for quantifying suppression and the period of two inspection covers the whole year?” 4. The assessee is a dealer registered under the provisions of the KGST Act. The assessee primarily effects import of raw cashewnuts and after processing the aforesaid commodity effects both intra and inter- state sales. 5. Shop inspections had been conducted by the Intelligence Officers of the Department not once, but twice in the assessee's business premises. The first one was on 22.4.1999 and the second one was on 18.3.2000. On both these occasions, the Intelligence Officer had noticed certain discrepancies in the books of accounts maintained by the dealer in the regular course of business. 6. The assessee had filed her annual returns before the assessing authority conceding a particular total and taxable turnover. In view of the shop inspections that was conducted by the Intelligence Officer of the Department and further, since the assessee has compounded the offence departmentally in lieu of prosecution proceedings, the assessing authority after rejecting the books of accounts and the returns filed by the assessee for the assessment year 1999-2000, had issued a pre-assessment notice. In the said notice he had pointed out, apart from S.T.Rev.No.322 of 2006 3 others, that, the petitioner had accounted for the purchase turnover of the imported raw cashewnuts in a sum of Rs.28,96,24,712.17 and in so far as the purchase turnover of Rs.44,08,600/- of imported raw cashewnuts, the assessee had not produced any documents in support of such purchase. Apart from this omission, the assessing authority had also pointed out various other omissions found by the Intelligence officer of the Department at the time of the shop inspections and, therefore, while rejecting the returns filed by the assessee had issued a pre-assessment notice, inter alia, directing the petitioner to offer her explanation, if any, to the proposal made in the pre-assessment notice. 7. In this revision petition, Dr.K.B.Mohammed Kutty, the learned senior counsel appearing for the assessee, confines this revision case, only to the omission pointed out by the assessing authority in regard to the shortage of imported raw cashewnuts of 164 bags valued at Rs.6,15,328/- . According to the learned senior counsel, the shortage so noticed by the Intelligence Officer of the Department and also the assessing authority was in fact, sent for processing and after such processing and roasting, has been sold within the State and, therefore, the Intelligence Officer and the assessing authority were not justified in holding that there was shortage of 164 bags of cashew nuts valued at S.T.Rev.No.322 of 2006 4 Rs.6,15,328/- in the stock register maintained for imported raw cashewnuts. 8. The assessing authority has taken this aspect of the matter into consideration and has come to the conclusion that since the explanation offered by the assessee is not satisfactory, has made an addition of the actual suppression detected at the time of shop inspections and also has made an addition of four times to the actual suppression. The order so passed by the assessing authority is modified by the first appellate authority by reducing the addition made by way of estimation to the actual plus 2 ½ times. 9. Even with this the assessee was not satisfied. Therefore, she had ventured to file second appeal before the Tribunal. The Tribunal has also come to the rescue of the assessee and while allowing the claim of the assessee in part, has sustained the addition made by the assessing authority in so far as the actual suppression and has reduced the addition made by the assessing authority from 2 ½ times to 2 times. 10. Aggrieved by the orders so passed by the appellate Tribunal, the assessee is before us in this sales tax revision. 11. Time and again we have observed, that, Section 41 of the Act can be pressed into service by the parties to the lis, if for any S.T.Rev.No.322 of 2006 5 reason, the Tribunal has failed to decide a question of law or has erroneously decided a question of law. Here we add that if the finding of the Tribunal on facts is a perverse finding, then also a question of law would arise for consideration and decision by this Court. 12. In the instant case, a best judgment assessment order is passed by the assessing authority purely based on the shop inspection report conducted by the Intelligence Officer of the Department, not once, but twice. The assessing authority by making use of the mahazars drawn by the Intelligence Officer of the Department at the time of the shop inspections had issued a pre-assessment notice to the assessee, inter alia, proposing to make certain additions towards the probable suppressions and omissions said to have been made by the assessee during the course of her business for the assessment year 1999-2000. One of the omissions that was pointed out by the assessing authority in the pre-assessment notice is with regard to the shortage of the imported raw cashewnuts. Though the assessee had filed her explanation, since the same was unsatisfactory, the assessing authority has rejected the explanation and thereafter has proceeded to pass the best judgment assessment. 13. The apex Court in the case of Commissioner of Sales Tax v.H.M.Esufali H.M.Abdulali [(1973) 32 STC 77] has observed as under: S.T.Rev.No.322 of 2006 6 “In estimating any escaped turnover, it is inevitable that there is some guess-work. The assessing authority while making the best judgment assessment, no doubt, should arrive at his conclusion without any bias and on a rational basis. That authority should not be vindictive or capricious. If the estimate made by the assessing authority is a bona fide estimate and is based on a rational basis, the fact that there is no good proof in support of that estimate is immaterial. Prima facie, the assessing authority is the best judge of the situation. It is his best judgment and not anyone else's. The High Court cannot substitute its best judgment for that of the assessing authority”. 14. Dr.Mohammed Kutty, learned senior counsel appearing for the assessee, would contend before us that it was unwarranted on the part of the assessing authority to have made any addition towards the possible and probable suppressions and omissions in so far as the shortage of imported raw cashewnuts of 164 bags valued at Rs.6,15,328/- is concerned. Apart from that, the learned senior counsel would submit that the addition made by the assessing authority is excessive and therefore, interference by this Court is called for. 15. None of the contentions canvassed by the learned senior counsel appearing for the assessee would impress us. S.T.Rev.No.322 of 2006 7 16. It is a best judgment assessment. For passing a best judgment assessment there must be a rational basis and such rational basis must be found in the order itself. If such a basis is not available then the best judgment assessment passed by the assessing authority cannot be sustained by this Court. In the instant case, as we have already stated, there is a rational basis for the assessing authority to come to the conclusion that there was shortage of the imported raw cashewnuts. This conclusion is based on the shop inspection report made by the Intelligence Officer of the Department, which offence the assessee has compounded departmentally. This shortage should have been properly explained by the assessee. Merely saying that the said imported raw cashewnuts had been processed, roasted and thereafter sold in the market cannot be accepted either by the assessing authority or by any reasonable person unless the same is supported by documentary evidence. Mere assertion will not help the assessee in any manner whatsoever. 17. However, the first appellate authority as well as the Tribunal, being of the opinion, that the addition made by the assessing authority is on a higher side have come to the aid of the assessee by reducing the addition made by the assessing authority from four times to two times. This is once again on estimation basis. The estimation basis so S.T.Rev.No.322 of 2006 8 made by the authorities under the Act can be interfered by this Court only if such estimations are either perverse or arbitrary. We do not see any such arbitrariness in the orders passed either by the first appellate authority or by the Tribunal. 18. In that view of the matter, while rejecting this sales tax revision we answer the questions of law raised by the assessee against the assessee and in favour of the Revenue. Ordered accordingly. (H.L.DATTU) CHIEF JUSTICE (A.K.BASHEER) JUDGE vns/dk.