K.Ganeshan vs State Of Kerala on 26 September, 2019

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Kerala High Court

K.Ganeshan vs State Of Kerala on 26 September, 2019

The revision petitioner challenges an order passed by the Kerala Value Added Tax Appellate Tribunal in T.A. (VAT).No.271 of 2014 by which orders passed by the Assessing Authority had been approved, setting aside the order of the Appellate Authority.

2. The only issue involved in the case is regarding the value of timber at which the assessment has been made. As per circulars issued by the Department advance tax is to be paid based on a notional estimate regarding the value of the goods given under the circular. With reference to the assessment year 2010-11 the assessee had valued the timber at Rs.3,98,39,732.5 and paid a freight of Rs.4,24,179/-. While transporting the timber the assessee declared the purchase value including freight as Rs.4,42,84,997/-. This, according to the assessee, was based on the notional price fixed by the Department. OT.Rev.No.18 OF 2017 ..3..

However, during assessment proceedings without any further enquiry the Assessing Officer applied the very same rate which was seen in the circular and had called upon the assessee to pay the tax at Rs.58,25,288/-. The Appellate Authority however based on a judgment of this Court in U.K.Monu Timbers (M/s.) Vs. State of Kerala [2012 (3) KHC 111 (DB)] set aside the said assessment. When the Department took up the matter before the Tribunal, the Tribunal placed reliance upon an earlier judgment of this Court in Arjuna Raja.B Vs. State of Kerala [(2012) 20 KTR 116 (Ker)] and accepted the assessment made by the Assessing Officer. The learned counsel for the revision petitioner would contend that U.K.Monu Timbers case (supra) was decided based on an earlier judgment of the Division Bench in KMP Timbers & Saw Mills Vs. Commercial Tax Inspector & another [(2012) 50 VST 195 (Ker)]. OT.Rev.No.18 OF 2017 ..4..

In KMP Timbers & Saw Mill's case (supra) Division Bench of this Court while considering the import of timber observed as under:-

"It is common knowledge that timber brought from abroad are mostly from East Asian countries, namely, Malaysia, Myanmar, where they cut and supply large size and grown up timber from the forest which are invariably very big in size. Therefore we do not find any merit in this contention and even if we interfere with the value fixed by the Commissioner on this ground, the same may not lead to the advantage of the appellant. Strangely the appellant has not canvassed for the position that they have sold any imported timber at below the floor rate fixed by the Commissioner. On the other hand, their only contention is that the price declared before customs authorities is much less than the floor rate fixed. We do not think this argument of the appellant can be accepted as the basis for challenging the validity of circular issued by the Commissioner fixing the price because it is for the customs authorities to examine whether invoice price or the declared price for payment of duty is right. In fact the correct procedure to fix the price OT.Rev.No.18 OF 2017 ..5..

for timber for the purpose of collection of advance tax is to collect from the market the prevailing retail market price at a given time and reduce therefrom the dealer margins to fix the dealer's price which is the price at which advance tax could be collected. As we have already observed going by the current market price of varieties of imported timber for which the Commissioner has fixed floor rate price for the purpose of payment of advance tax, the price fixed cannot be said to be unreasonable or arbitrary, more so when the appellant has no case that sales are made at below the floor rate fixed by the Commissioner."

3. Apparently it is without reference to the judgment in KMP Timbers & Saw Mill's case (supra), Arjuna Raja's case (supra) seems to have been decided wherein the same Division Bench held as under:-

"When purchase value accounted by the petitioner itself is not purchase value but is a value declared by the petitioner in the transport document for transporting stock from his own godown in Tamil Nadu to Kerala, to feel there is nothing wrong in the Assessing Officer making gross profit addition to the same for assessment, particularly because OT.Rev.No.18 OF 2017 ..6..

the petitioner paid tax on a higher value at the Check Post on consignments brought to Kerala. On going through the Tribunal's order, we find that the Tribunal has taken note of the fact that the value fixed by the Commissioner for different varieties of timber for collection of advance tax is based on prevalent market value. It is common knowledge that the current price of timber that is, after 3-4 years of the relevant year, is more than double the price fixed by the Commissioner in the Circular based on which advance tax was paid by the petitioner without contest. The petitioner has no case that there was decline in the price of timber after the issuance of Circular by the Commissioner. On the other hand, the steady demand of timber in the market is evident from the fact that the petitioner has "nil" closing stock. We are, therefore, of the view that the Assessing Officer, the first appellate authority as well as the Tribunal rightly rejected the sales turnover declared by the petitioner which was below the value declared at the entry Check Post where tax was paid on all consignments brought and sold in Kerala."

4. Yet another Division Bench had occasion to consider a similar issue in U.K.Monu Timbers case OT.Rev.No.18 OF 2017 ..7..

(Supra) and had approved the judgment in KMP Timbers & Saw Mill's case (supra) at paragraph 15 which reads as under:-

"15. We are not concerned with the validity of the circular so issued which, in any event, has been upheld by a Division Bench of this Court in KMP Timbers & Saw Mills v. Commercial Tax Inspector and another. Upholding the validity of the statutory provision, i.e. Section 47(16A), as also the circular issued under the said provision, this Court held:

"Further, advance tax is only a provisional deposit towards tax and nothing in the Act requires the appellant or any party to pay tax except on actual sale price. The value fixed under the circular for payment of advance tax does not reflect the basis for actual liability. In fact, tax is payable only on actual sale price and the appellant is absolutely free to claim refund of advance tax paid, if it is in excess over tax liability. If there is allegation of under-invoicing, it is for the assessing officer to establish the same in adjudication proceedings".

Hence, there can be no doubt that the value fixed under the said circular was only for the purpose of deciding advance tax liability and does not fetter the assessee from selling at any price depending OT.Rev.No.18 OF 2017 ..8..

upon the market conditions and trade practises. Recognising the often reiterated proposition that tax can be levied only on the apparent or real consideration paid on the transfer of the property in goods, this Court also recognised the right of the assessee to claim refund, if the advance tax paid was found to be in excess of the tax liability. The issue of under-valuation also was found to be one which ought to be established by the assessing officer in assesssment proceedings and that too only on materials available."

5. The learned Government Pleader had also brought to our notice another judgment dated 10.8.2018 in O.T.(Rev).No.104 of 2015 wherein a Division Bench of this Court observed that, though it is possible for the assessee to sell the goods at a lower price than what is declared in the delivery note, the assessee will have to produce records to prove the said facts.

6. On going through the judgments aforesaid, though there is a slight change in the view expressed in Arjuna Raja's case (Supra) the earlier view as well as OT.Rev.No.18 OF 2017 ..9..

the later view is that the notional amount fixed by the Department as per the circular will not bind the assessee and if the assessee can produce materials to prove that the goods had been sold at a lesser price than what has been fixed for the payment of advance tax. In this case, no such enquiry seems to have been conducted and the Assessing Officer merely placed reliance upon the delivery notes and the amounts fixed as per the advance tax. Though it is possible for the assessee to sell the goods at a lesser rate than what is referred to in the delivery note, no materials seem to have been called for nor it is seen produced before the Assessing Authority. Under such circumstances, it is a question of fact to be decided as to whether the goods had been sold at a rate less than the rate as evident from the delivery notes. For that purpose, we are of the view that the matter is to be remitted back to the Assessing Officer itself.

OT.Rev.No.18 OF 2017 ..10..

Accordingly, this revision is allowed. The order passed by the Tribunal is set aside and the matter is remitted back to the Assessing Officer to consider the matter afresh. It shall be open for the revision petitioner to produce the materials showing the sale of goods with reference to the aforesaid delivery notes and order shall be passed in accordance with the procedure prescribed.

Sd/-

A.M.SHAFFIQUE, JUDGE Sd/-

N.ANIL KUMAR, JUDGE skj OT.Rev.No.18 OF 2017 ..11..

APPENDIX PETITIONER'S EXHIBITS:

ANNEXURE A COPY OF ORDER ISSUED BY THE COMMERCIAL TAX OFFICER, PAYYANNUR.

ANNEXURE B COPY OF APPELLATE ORDER ISSUED BY THE DEPUTY COMMISSIONER (APPEALS)-II COMMERCIAL TAXES, KOZHIKODE.

ANNEXURE C COPY OF ORDER ISSUED BY THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, KOZHIKODE IN TA(VAT)271/14

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