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 11TH AUGUST 2008 / 20TH SRAVANA 1930 ST.Rev..No.249 of 2007 ----------------------------------------- (ORDER DATED 23-11-2006 IN TA.No.339/2006 OF THE KERALA SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH-II, ERNAKULAM) .................... REVISION PETITIONER/APPELLANT/APPELLANT: ---------------------------------------------------------------------- PRESTIGE PLYWOOD INDUSTRIES PRIVATE LIMITED, MUDICKAL, MARAMBILLY VILLAGE, PERUMBAVOOR, KUNNATHUNADU TALUK, ERNAKULAM DISTRICT, REPRESENTED BY ITS MANAGING DIRECTOR MR.T.A.ABDULLA. BY ADV. SRI.SHAJI CHIRAYATH & SMT.JIJI M. VARKEY RESPONDENTS/RESPONDENTS/RESPONDENTS: ---------------------------------------------------------------------- 1. STATE OF KERALA, REPRESENTED BY COMMISSIONER COMMERCIAL TAXES, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM. 2. SALES TAX OFFICER, 1ST CIRCLE, OFFICE OF THE SALES TAX OFFICER, PERUMBAVOOR, ERNAKULAM DISTRICT, PIN- 683 542. BY SENIOR GOVERNMENT PLEADER SRI.MUHAMMED RAFIQ. THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 11/08/2008, ALONG WITH STRV NO. 256 OF 2007 STRV NO. 264 OF 2007 & STRV NO.265 OF 2007, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: H.L.DATTU, C.J. & A.K.BASHEER, J. ------------------------------------------- S.T.Rev.Nos.249, 256, 264 & 265 of 2008 ------------------------------------------ Dated, this the 11th day of August, 2008 ORDER H.L.Dattu, C.J. Since the legal issues raised in these four revision petitions are common, they are clubbed, heard and disposed of by this common order. 2. These revision petitions pertain to the assessment years 1998-1999 and 1999-2000, both under the Kerala General Sales Tax Act, 1963 ('the KGST Act' for short) and the Central Sales Tax Act, 1956 ('the CST Act' for short). 3. The assessee is before us in these tax revision petitions, being aggrieved by the common order passed by the Kerala Sales Tax Appellate Tribunal, Additional Bench, Ernakulam in T.A.Nos.339, 340, 341 and 342 of 2006 dated 23rd November, 2006. By the impugned order, the Tribunal has sustained the best judgment assessment order passed by the assessing authority for the assessment years 1998-1999 and 1999-2000. 4. The assessee is a dealer registered both under the provisions of the KGST Act and the CST Act. It is a small scale industrial unit. S.T.Rev.No.249 of 2007, etc. 2 5. The assessee, in view of the several Government Orders issued by the State Government from time to time, had approached the General Manager, District Industries Centre, Ernakulam for grant of exemption certificate as provided under the Government Orders. The General Manager by his order dated 7.4.1998, has granted exemption to the assessee from payment of tax under the KGST Act/CST Act for the period from 26.12.1995 to 25.12.2002. In the certificate so issued, it is also stated that the assessee is eligible for tax exemption in a sum of Rs.26,46,766/- 6. For the assessment years in question, the assessee had filed its annual returns before the assessing authority. The assessing authority has rejected the annual returns so filed, in view of the Check Post declarations received from the Commercial Tax Officer. 7. After rejecting the returns so filed, the assessing authority has proceeded to complete the best judgment assessment and in that has also denied the exemption that was granted by the General Manager, District Industries Centre, Ernakulam. For rejecting the claim for sales tax exemption provided under the certificate, the assessing authority has relied upon sub-clause (x) of clause 10 of S.R.O.No.1729/93. The said clause reads as under: “(x) Industrial units in respect of which an offence of S.T.Rev.No.249 of 2007, etc. 3 suppression of purchase or sales turnover is detected shall be debarred from availing of exemption under this notification from the date of detection of the offence. But industrial units which admit the offence, compound the same and pay the Compounding fee under Section 47 of the Kerala General Sales Tax Act, 1963 and twice the tax on the suppressed turnover shall be permitted to continue to avail themselves of the exemption.” 8. The aforesaid clause in a more or less similar case came up for consideration before a Division Bench of this Court in the case of M/s.R.Tech Steel Engineering Furniture v. State of Kerala (S.T.Rev.No.122 of 2007). This Court by its orders dated 13th April, 2007, at paragraph 6, has stated as under: “6. Chapter VIII of the Act deals with offences and penalties. Section 45A deals with imposition of penalty by officers and authorities. Section 47 deals with composition of offences. The mere fact that the assessing authority has noticed the suppression of turnover does not ipso facto leads to the conclusion that the assessee had committed offence as per Chapter VIII of the Act and the proceedings initiated against the assessee. No notice was issued to the assessee saying that he had committed any offence. If any such notice has been issued the assessee can apply for compounding as provided under Section 47 of the Act. On compounding the offence the benefit of S.T.Rev.No.249 of 2007, etc. 4 exemption would be available. In the absence of any offence following an order it would not be possible for the assessee to pray for compounding of the offence. So far as this case is concerned, no notice has been issued to the assessee at any time. In our view, Revenue cannot deny the facility of exemption available under SRO 1729/93 to the assessee on the ground of SRO 295/98. Only in case where it is established by an order that the assessee had committed an offence the authority can compound the same under SRO 295/98. Assessee is disabled from getting the benefit of the above notification. So far as this case is concerned, there is no order to the effect that the assessee had committed the offence. Hence, in our view, the assessee is entitled to get the benefit of SRO 1729/93.” 8. In the instant case, it is not in dispute, nor it can be disputed by the Department, that the General Manager of the District Industries Centre, Ernakulam has granted exemption certificate to the assessee for the period from 26.12.1995 to 25.12.2002 in a sum of Rs.26,46,766/-. It is also not in dispute that the assessee had transported Veneers worth about Rs.1,71,220 to Coimbatore through delivery notes on various dates. The assessing authority being of the opinion that since the offence of suppression of purchase and sales is detected by the Check Post authorities, the assessee is not entitled to the benefit of the exemption S.T.Rev.No.249 of 2007, etc. 5 granted by the General Manager, District Industries Centre, Ernakulam. This thinking of the assessing authority cannot be accepted by us in view of what has been stated by this Court in the case of M/s.R.Tech Steel Engineering Furniture. That order passed by a Division Bench of this Court has attained finality in the sense that the Revenue has not carried the matter further in appeal before the apex Court. 9. In view of that, merely because there are certain Check Post declarations where it is evident that the assessee had effected inter-state sales, but has not reflected the same in the books of accounts, the assessing authority could not have rejected the claim of the assessee granted under the exemption certificate. This aspect of the matter ought to have been taken note of by the first appellate authority as well as by the Tribunal. Since that has not been done, all the orders passed by the assessing authority, the first appellate authority and by the Tribunal for the assessment years in question cannot be sustained by us. 10. Accordingly, we have no other alternative, but to allow these revision petitions and set aside the orders passed by the assessing authority, the first appellate authority and by the Tribunal for the assessment years in question and thereafter remand the matter to the assessing authority to re-do the matter in accordance with law. 11. Accordingly, we pass the following: S.T.Rev.No.249 of 2007, etc. 6 ORDER i) These revision petitions are allowed. ii) The impugned orders passed by the assessing authority for the assessment years 1998-1999 and 1999-2000 both under the KGST Act and the CST Act, and the orders passed by the first appellate authority and by the Tribunal are set aside. iii) The matter is remanded back to the assessing authority to consider the assessment order afresh in accordance with law keeping in view the observations made by us in the course of the order and also the observations made by this court in the case of M/s.R.Tech Steel Engineering Furniture's case. 12. Consequently, I.A.Nos.1953 of 2007, 2076 of 2007, 2194 of 2007 and 2196 of 2007 are also rejected. Ordered accordingly. (H.L.DATTU) CHIEF JUSTICE (A.K.BASHEER) JUDGE vns/dk