IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM MONDAY, THE 11TH OCTOBER 2010 / 19TH ASWINA 1932 WP(C).No. 26920 of 2010(L) -------------------------- TRIBUNAL APPEAL NOS.274 AND 275 OF 2003 OF SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, KOZHIKODE. .................... PETITIONER(S): -------------------------- M/S. SUMADRI AGENCIES, CALICUT (DEFUNCT), REP. BY ALPHONSE WILLIAM, PARTNER. BY ADVS. SRI.P.RAGHUNATHAN, SRI.PREMJIT NAGENDRAN RESPONDENT(S): --------------------------- THE ASSISTANT COMMISSIONER, SPECIAL CIRCLE-I, KOZHIKODE-673 006. BY SR. GOVERNMENT PLEADER SRI. C.K.GOVINDAN THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 11/10/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: Kss C. K. ABDUL REHIM, J. =~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~= W.P.(C) No. 26920 of 2010 =~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~= Dated this the 11th day of October, 2010 JUDGMENT Exts.P6 and P7 notices issued by the respondents proposing finalization of assessment under the KGST Act and CST Act for the year 1993-'94, are under challenge in this writ petition. 2. The assessments were originally finalized as per Exts.P1 and P2 orders during the year 1998. The petitioner was dealing in Vertiver oil, Lemongrass oil, Palmrosa oil, which are generally known as “Natural Essential Oils” in common parlance. During the relevant year the petitioner sold these oils to certain dealers at Allahabad and other cities in North India. According to the petitioner, since the smell of these oils will last only for a short period, the goods were air-lifted to the purchasers, specifying the item as 'Natural Essential Oils”, in the Air Way Bills. Whereas the exact details of the oils were mentioned in the invoices. The W.P.(C) No. 26920/2010 2 sales were made against issuance of 'C'-Form declarations by the purchasers. 3. The respondent took the stand that the goods described as “Natural Essential Oils” are different from the goods described in the invoices, which are Vertiver oil, Lemongrass oil, Palmrosa oil, and that the “Natural Essential Oil”, sold was actually “Sandalwood Oil”. The main reason for arriving at such a conclusion was that the freight charge incurred is about 41% of the invoice value and the purchase bills do not reveal the full address of person from whom the goods were purchased. 4. According to the petitioner, he never dealt with Sandalwood oil and there is absolutely no evidence in support of the allegatons. The respondent estimated turnover, treating the quantity 4450 kgms. sold as per the invoices, as “Sandalwood oil” and applying the rate of “Sandalwood oil” declared by other dealers. 5. The matter was taken up in appeal by the petitioner. The first Appellate Authority dismissed the W.P.(C) No. 26920/2010 3 appeals. But in second appeals filed before the State Appellate Tribunal, the assessments were set aside on the basis of a majority view, holding that the assessing authority had failed to prove that the petitioner had transported 'Sandalwood oil'. The majority members held that there was no reliable evidence or materials for resorting to best judgment assessment and hence appeals are to be allowed. The matter was further agitated in revision filed by the State before this Court. In Ext.P4 order passed in ST.(Rev) Nos.141 of 2007 and 195 of 2007 this Court observed as follows:- “..The Tribunal's finding is that there is no evidence of sale of sandal wood by the respondent. However, such a finding is rendered only because the assessing officer has not established it. If value, volume and freight cannot be correlated and assessee's case is unbelievable, then it was open to the officer to identify the actual goods sold under cover of bogus name and levy tax on estimated turnover of the identified goods. It was the duty of the Tribunal to consider the respondent's challenge against the assessment pertaining to fixation of W.P.(C) No. 26920/2010 4 turnover which includes identity and valuation of the goods sold. We are of the view that the Tribunal has only considered one aspect of the issue and has not disposed of the appeal completely in as much as they had not tried to identify the oil sold or the value thereof for the purpose of modifying the assessment. We therefore allow the S.T. Revisions by setting aside the orders of the Tribunal and remit the matter to the Tribunal for the fixation of turnover. 6. On the basis of the remand the matter was again considered by the Appellate Tribunal and remanded to the assessing authority, observing as follows:- “.. However, in order to fix the value of the goods transported by the assessee, there must be some materials to prove the identity of the oil sold by him. If the Revenue had produced any materials to show that at any point of time, the assessee had transactions in sandalwood oil, based on the fact that the Hon'le High Court had found that the assessee had made under-valuation by misdeclaring identity of product, this Tribunal will be justified in determining the turnover of the assessee on the W.P.(C) No. 26920/2010 5 basis of the value of sandal wood oil fixed by the assessing authority. It is also to be noticed that apart from the casual observation that in commercial circles, sandal wood oil is also described as essential oil, the assessing authority had not cited any instances of transportation of sandalwood oil under the description of essential oil. These materials, even if available, according to us, could not be gathered by this Tribunal and the assessing authority will be the best person to collect such details in order to determine the identity and the value of the oil sold in order to determine the taxable turnover of the assessee. So, according to us, the matter will have to be sent back to the assessing authority for the limited purpose of collecting details if any, of similar transactions in sandal wood oil under the description of essential oil and also to ascertain whether the assessee had dealings in sandal wood oil. We make it clear that the remand is only for the limited purpose mentioned above and the assessing authority shall not be competent to reopen the finding of the W.P.(C) No. 26920/2010 6 Hon'ble High Court of Kerala regarding under- valuation made by the assessee by misdeclaring identity of product.” 7. It is evident from Ext.P5 order of the Appellate Tribunal that specific directions were given to the respondent to collect details if any of similar transaction in Sandalwood oil under the description of “Essential oil” and also to ascertain whether the assessee was dealing in Sandalwood oil. It is pertinent to note that Exts.P6 and P7 proposals do not in any way indicate that any such enquiry has been made by the assessing authority, on the other hand, notice only revealed the following:- “It is an admitted fact that you had transported essential oil namely palm Rosa Oil, Lemongrass oil, Citronella Oil and Vertiver oil. Enquiry conducted revealed that various names used by you are the common names using for perfumeries like sandal wood oil. The main producers of citron oil are China and Indonesia, the palm Rosa are extracting from cymbo pogon martini a Turkish genarium and in W.P.(C) No. 26920/2010 7 India especially in Kerala Sandal Wood oil is extracting from sandal wood. All the above items are perfumeries, commonly known as essential oil. As per encyclopedia an essential oil is “an oil concentrated hydrophobic liquid containing volatile aroma compounds from plants. An oil is essential in the sense that it carries a distinctive scent or essence of the plant which need to have chemical properties in common conveying characteristic fragrance. Essential oil are generally extracted by distillation. From the above it is proved beyond doubt that the oil is nothing but sandal wood oil. The value already fixed is on the basis of proper material evidences. In the above circumstances, I do not find any reason to deviate from the turnover already fixed and the value fixed as per original assessment.” 8. From the above facts it is clear and evident that the proceedings now initiated by the respondent for finalizing the assessments, is not at all in conformity with W.P.(C) No. 26920/2010 8 the directions issued by the Appellate Tribunal. The assessing authority has totally failed in conducting any enquiries and in arriving at any conclusions, as directed by the Tribunal. Needless to say that without any materials collected on the basis of the specific directions contained in the order of the Tribunal, no steps can be initiated to finalize the assessment against the petitioner. The directions and observations contained in Ext.P4 order of this Court and the remand order of the Tribunal were seen totally omitted and not complied with. It is evident that if assessment as proposed is finalized, the petitioner will be put to severe prejudice and such assessment will be totally baseless and lacking from any material evidence. Therefore, I am of the view that the impugned notices are liable to be quashed. 9. In the result, the writ petition is allowed and Exts.P6 and P7 are hereby quashed. The respondent is directed to finalize the proceedings afresh, after due compliance of the directions contained in Ext.P5 order of W.P.(C) No. 26920/2010 9 the Appellate Tribunal, taking note of the observations contained in Ext.P4 order of this Court, at the earliest possible. C. K. ABDUL REHIM, JUDGE. mn.