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 WEDNESDAY, THE 9TH JULY 2008 / 18TH ASHADHA 1930 S.T.Rev..No. 125 of 2004 --------------------- ------------------------- ORDER DATED 30.4.2003 IN T.A.526/2002 OF THE KERALA SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH-II, ERNAKULAM. (ASSESSMENT YEAR 1994-95) .................... PETITIONER/APPELLANT/ASSESSEE: ----------------------------------------------------- M/S.VETTUKUZHY TRADERS, MARKET ROAD, MUVATTUPUZHA. BY ADV. SRI.JOSE JOSEPH RESPONDENT/RESPONDENT/REVENUE: ---------------------------------------------------------- STATE OF KERALA. BY SENIOR GOVERNMENT PLEADER SRI.MUHAMMED RAFIQ THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 09/07/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: H.L.Dattu, C.J. & A.K.Basheer, J. ---------------------------------------------- S.T.Rev.No.125 of 2004 ----------------------------------------------- Dated, this the 9th day of July, 2008 ORDER H.L.Dattu,C.J. A Division Bench of this Court had doubted the correctness or otherwise of the declaration of law made this Court in M/s.Surya Agencies v. State of Kerala [(2004) 12 KTR 215] and C.O.Varghese v. State of Kerala [(2004) 12 KTR 528] and, accordingly, had referred the matter to a Full Bench to furnish its opinion on the question whether the additions made on account of suppression of inter-State purchases and sales should be only for the value of actual suppression noticed or whether the assessing authority, after rejecting the books of accounts and the returns filed, could make further addition, apart from the actual suppression. 2. The Full Bench has answered the aforesaid question by its order dated 11.04.2008. While doing so, the Court has stated as under: “We are therefore of the view that decision of the Division Benches in the above two decisions restricting addition on account of suppression of inter-State purchases only for the value of actual suppression noticed is not correct law. We therefore overrule this view expressed by the Division Bench in the above two decisions. We further declare that once accounts are found to be incomplete or incorrect on account of material defect found by the Department, S.T.Rev.No.125 of 2004 - 2 - such as purchase or sales suppression, whether it is local or inter-State, the assessing officer is free to reject the books of accounts and proceed for estimation of turnover in accordance with the principles laid down in Section 17(3) of the Act and the law declared by High Courts and Supreme Court”. 3. After furnishing the opinion, the Full Bench has referred the matter to the Division Bench to answer the other issues raised in the revision petition. 4. The assessee is a dealer, registered both under the provisions of the Kerala General Sales Act (“KGST Act” for short) and Central Sales Tax Act (“CST Act” for short). He is a dealer in grocery. He is on the files of the Sales Tax Officer, Muvattupuzha. 5. For the assessment year 1994-95, the assessee had filed its annual returns, conceding total and taxable turnover of Rs.83,79,530.39/- and Rs.49,27,150.90 respectively. 6. The assessing authority, after receipt of the information from the Check Post authorities, had rejected the books of accounts and the returns filed by the assessee and, thereafter, had issued a pre-assessment notice to the assessee, inter alia, informing him that in view of the Check Post declarations received from the Check Post authorities, he intends to make certain additions towards the probable suppression of purchases and sales. S.T.Rev.No.125 of 2004 - 3 - 7. After receipt of the pre-assessment notice, the assessee had filed a detailed reply and in that had contended that he had not received any goods from the consignors noted in the Check Post declarations and, further, had sought an opportunity to cross examine the consignors. Apart from that, the assessee had not produced any other evidence in support of its denial of the transactions reflected in the Check Post declarations. 8. The assessing authority, after considering the reply filed by the petitioner and based on the Check Post declarations, has proceeded to complete the best judgment assessment and, in that, had made certain additions to the conceded total and taxable turnover and, accordingly, had quantified the tax liability. 9. Aggrieved by the orders so passed by the assessing authority, the assessee was before the first appellate authority. The appellate authority had modified the orders passed by the assessing authority, however, had not altered or modified the additions made by the assessing authority based on the Check Post declarations. The orders so passed by the first appellate authority is confirmed by the Tribunal. The assessee is before us in this revision petition questioning the correctness or otherwise of the orders passed by the Tribunal in T.A.No.526 of 2002 dated 30th April, 2003. 10. The assessee has framed the following questions of law for our consideration and decision. They are as under: “(i). Whether the order of the Tribunal affirming the addition of Rs.6,78,270/- on the basis of Check Post Declarations without S.T.Rev.No.125 of 2004 - 4 - affording an opportunity to cross examine the consignors is legal and sustainable? (ii). Whether the finding of the Tribunal that sufficient opportunity was afforded to the petitioner by the Assessing Authority is legal and sustainable in the light of law laid down by the Supreme Court in the decision reported in 39 SCC 478, particularly when a specific request was made before the Assessing Authority to afford to the petitioner an opportunity to cross examine the consignors referred in the pre-assessment notice? (iii). Whether the reliance placed by the Tribunal on the decision of this Court reported in 40 SCC 278 is proper and legal in the light of the principles stated by the Supreme Court in the decision reported in 39 STC 478? (iv). Whether the addition based on check post declarations affirmed by the Tribunal is sustainable in the light of the decision of this Court reported in 2003 (2) KLT SN 106?” 11. At the time of hearing of this revision petition, Sri.Jose Joseph, learned counsel appearing for the petitioner, would contend, that, merely based on the Check Post declarations, the assessing authority could not have passed the best judgment assessment and, further could not have made additions towards the probable suppressions of purchases and sales. Nextly, it is contended that an opportunity to cross-examine the consignors was not afforded by the assessing S.T.Rev.No.125 of 2004 - 5 - authority and, therefore, the orders of assessment passed is in violation of the rules of natural justice and, lastly, it is contended that the additions made by the assessing authority is excessive. 12. Sri.Muhammed Rafiq, learned Government Advocate appearing for the Revenue, has brought to our notice the observations made by a Bench of this Court in the case of M.S.E.S.Attarwala v. State of Kerala [2004 (3) KLT 105] and the decision rendered by a Bench of the Karnataka High Court in the case of Sri.Gopalakrishna Shetty v. State of Karnataka & Another [Sales Tax Revision Petition No.32 of 2005 decided on 23-06-2005]. 13. Before we advert to the contentions canvassed by Sri.Jose Joseph, in our opinion, it would be useful to refer to certain observations made by a Bench of this Court in M.S.E.S.Attarwala's case. The Court, at paragraph 6, has observed as under: “Of course, it may be argued that considering the limited sphere or resources within which a dealer who is a private party can successfully produce or cause the production of the alleged seller of goods or his agents situated beyond the territorial limits of the State and confront him with the check post declarations, the authorities under the Act should render all effective help within their powers to the assessee to make use of the opportunity to adduce evidence in rebuttal including the cross-examination of the declarant or other persons connected with the declaration or invoice and shall not adopt any indifferent or lethargic attitude by sitting with folded S.T.Rev.No.125 of 2004 - 6 - hands. We need not go into those aspects in this case because there is nothing on record to show that the assessee had made any attempt to make use of such opportunities to adduce evidence in rebuttal so as to demolish the probative value of the check post declaration. We do not agree with the contention of the learned counsel for the petitioner that the check post declaration should be discarded as an irrelevant scrap of paper, though there is reason in saying that the declarations made at the check post cannot be blindly accepted as if they are true statements made by honest men. The declaration should be subjected to strict scrutiny. If the assessee challenges the genuineness of the declaration and takes steps to establish his plea, he should be permitted to challenge the correctness of the entries made in the check post declaration. Of course, the onus of establishing that the entries made therein are incorrect or false is on the assessee. In the case on hand, the revision petitioner did not make any attempt to prove that the purchases were not made by it but by someone else using its name. The assessee did not even make a formal request to the authorities to issue notice or summons to the consignee or the declarant. The assessee had no objection against the provisional findings contained in the pre-assessment notice. He simply ignored them. Thereafter when the assessment was completed, he took up the stand that without corroborative materials the check post declarations ought not to have been relied on. In the above circumstances no fault can be found with the authorities below in rejecting the contentions of the assessee. It follows that the question of law raised as No.B does not deserve consideration”. S.T.Rev.No.125 of 2004 - 7 - 14. The Karnataka High Court in Sri.Gopalakrishna Shetty's case, at paragraph 50 has observed as under: “Lastly, the Learned Counsel for the petitioner would contend that the Appellate Tribunal has committed an error in not giving any finding on the ground urged before it did the Check Post Officer has violated the principle of natural justice in not summoning the books of accounts of the consignor of the goods and also the concerned Officials of the consignors for cross-examination to enable the petitioner to rebut the presumption contemplated under Section 28AA(4) of the Act as per which the owner of the goods vehicle is presumed to have sold the goods inside the State if he fails to surrender the transit pass at the exit Check Post before leaving the State. In our view, what is contemplated under the Act, is to provide an opportunity of personal hearing and to adduce evidence in support of the defence to a person, who is alleged to have violated the provisions of the Act. It is for that person to produce the evidence by obtaining copies of the provisional assessment orders passed against the consignors or the consignees that the goods for which transit passes have been issued are actually taken outside the State. It is not expected of the Check Post Officer to collect evidence from various other authorities to sustain the show cause notice issued by him the cardinal rule in this regard is, service of notice is a condition precedent for making an order either to, assess or to levy penalty or interest, etc. The person against whom the show cause notice is issued is in law entitled to rebut allegations made against him, if he so chooses, by producing any evidence, which is in his possession. This would satisfy the requirement of notice and fair hearing. In view of this, in our view, S.T.Rev.No.125 of 2004 - 8 - the contention canvassed by the Learned Counsel for the petitioner that fair opportunity of hearing was not afforded to the petitioner before levying penalty cannot be accepted”. 15. In the instant case, the assessee had filed its annual returns and in that had conceded a particular turnover as total and taxable turnover. Before completion of the assessment proceedings, the Check Post authorities had furnished the Check Post declarations to the assessing authority in regard to the consignments received by the assessee. Since the assessee had not reflected in the books of accounts and also in the returns filed about the goods purchased under those Check Post declarations, the assessing authority, after rejecting the returns filed by the assessee, has proceeded to pass best judgment assessment. The assessee, apart from denying the transaction, had not produced any other material by way of rebuttal evidence before the assessing authority. Therefore, the assessing authority has proceeded to accept the Check Post declarations and has completed the best judgment assessment and while doing so, has made certain additions towards the probable omissions of sales and purchases. While completing the best judgment assessment, the basis that is adopted by the assessing authority is the transactions reflected in the Check Post declarations. It is on rational basis that a best judgment assessment could be passed. The best judgment assessment passed by the assessing authority cannot be replaced by this Court by yet another best judgment assessment unless the said assessment is wholly arbitrary and whimsical. The law on the point is now well settled by the apex Court in the case of S.T.Rev.No.125 of 2004 - 9 - Commissioner of Sales Tax v.H.M.Esufali H.M.Abdulali [(1973) 32 STC 77]. 16. Keeping these aspects of the matter in view, in our opinion, the Tribunal has rightly rejected the assessee's second appeal. 17. In view of the declaration of law made by this Court and the Division Bench of the Karnataka High Court in the decisions aforesaid, we are of the opinion that no interference with the order of the Tribunal is called for by this Court in exercise of its powers under Section 41 of the Act. 18. Accordingly, while answering the questions of law framed by the assessee in the negative and against the assessee and in favour of the Revenue, the revision petition requires to be rejected and it is rejected. Ordered accordingly. H.L.Dattu Chief Justice A.K.Basheer Judge vku/-