Kerala High Court
M/S.Kavan Healthcare Services Ltd vs State Of Kerala on 3 June, 2020
Bench: K.Vinod Chandran, T.R.Ravi
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN
&
THE HONOURABLE MR.JUSTICE T.R.RAVI
WEDNESDAY, THE 03RD DAY OF JUNE 2020 / 13TH JYAISHTA, 1942
O.T.Rev.No.88 OF 2018
AGAINST THE ORDER IN TA(VAT).104/2015 DATED 28-09-2017
OF KERALA ValUE ADDED TAX APPELLATE TRIBUNAL, ERNAKULAM
[ASSESSMENT YEAR/PERIOD 2010-11]
REVISION PETITIONER/APPELLANT/APPELLANT/ASSESSEE:
M/S.KAVAN HEALTHCARE SERVICES LTD.,
CHAKKUNGAL ROAD, PALARIVATTOM,
REPRESENTED BY ITS DIRECTOR,
PRANAV R SHAH
BY ADVS.
S.K. DEVI
SRI.SANTHOSH P.ABRAHAM
RESPONDENT/RESPONDENT/RESPONDENT/REVENUE:
STATE OF KERALA,
REPRESENTED BY ITS FINANCE SECRETARY,
SECRETARIAT, THIRUVANANTHAPURAM, 695001
BY SENIOR GOVERNMENT PLEADER SRI.MOHAMMED RAFIQ.
THIS OTHER TAX REVISION (VAT) HAVING BEEN FINALLY HEARD ON
03.06.2020, ALONG WITH O.T.Rev.36/2019, THE COURT ON THE SAME DAY
PASSED THE FOLLOWING:
O.T.Rev.88/2018 & - 2 -
36/2019
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN
&
THE HONOURABLE MR.JUSTICE T.R.RAVI
WEDNESDAY, THE 03RD DAY OF JUNE 2020 / 13TH JYAISHTA, 1942
OT.Rev.No.36 OF 2019
AGAINST THE ORDER IN TA(VAT).104/2015 DATED 28-09-2017
OF KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, ERNAKULAM
[ASSESSMENT YEAR 2010-11]
REVISION PETITIONER/RESPONDENT/REVENUE:
STATE OF KERALA,
REP. BY DEPUTY COMMISSIONER (LAW),
ERNAKULAM.
BY SENIOR GOVERNMENT PLEADER SRI.MOHAMMED RAFIQ.
RESPONDENT/APPELLANT/ASSESSEE:
M/S. KAVAN HEALTH CARE SERVICES LTD.,
PALARIVATTOM, PIN-682025.
R1 BY ADV. SMT.S.K.DEVI
R1 BY ADV. SRI.SANTHOSH P.ABRAHAM
THIS OTHER TAX REVISION (VAT) HAVING BEEN FINALLY HEARD ON
03.06.2020, ALONG WITH O.T.Rev.88/2018, THE COURT ON THE SAME
DAY PASSED THE FOLLOWING:
O.T.Rev.88/2018 & - 3 -
36/2019
K. Vinod Chandran & T.R.Ravi, JJ.
----------------------------------
O.T.Rev.Nos.88/2018 & 36/2019
----------------------------------
Dated, this the 03rd day of June, 2020
ORDER
Vinod Chandran, J.
Both the assessee and the State are in revision from an order of the Tribunal in an appeal filed by the assessee. The assessee is a dealer in cardiac stents and assessment for the relevant year was completed relying on the result of the inspection of the business premises on 09.06.2010. The Shop Inspection Report (SIR) disclosed a stock variation to the tune of Rs.4,08,81,975/-. The assessee compounded the offence. The Assessing Officer took note of the suppression as detected in the inspection file as also made an addition with respect to the value of the stock allegedly transferred to various hospitals as per the delivery note issued by the assessee. This addition came to Rs.69,03,320/-. The total addition thus came to Rs.4,77,85,295/-, to which a further addition of two times the estimated suppressed turnover was added.
O.T.Rev.88/2018 & - 4 -
36/2019
There was yet another addition of purchase return,
amounting to Rs.65,10,575/-.
2. In first appeal, the further addition made at two times the suppressed turnover was reduced to half, i.e., one time addition was confirmed for probable omissions and suppression. The addition of purchase return was confirmed by the first appellate authority. The Tribunal refused to interfere with the one time addition as confirmed by the first appellate authority of the stock variation and also affirmed the addition made on purchase return. With respect to the undervaluation found, the Tribunal deleted the addition made of Rs.69,03,320/-.
3. The assessee's revision raises the question of law as to whether the Tribunal was right in upholding the alleged stock variation merely for reason that departmental delivery notes were not issued.
4. The modus operandi of the business as submitted by the learned Counsel, is that the assessee had supplied the cardiac stents to various hospitals on delivery invoices, but without conducting actual sale. It is stated that only when the cardiac stents are used O.T.Rev.88/2018 & - 5 -
36/2019on a patient the actual sale is effected. There was no requirement for the supply by way of departmental delivery notes, is the specific contention taken.
5. We are unable to find any question of law arising on a reading of the order of the Tribunal. The Tribunal has categorically found that the assessee had merely asserted the stent having been delivered to the hospital and stocked in their premises without any further evidence. It is also pertinent that the assessee does not have any branch or an agency agreement with the hospitals in which the cardiac stents were said to be stocked. The stock variation as found on inspection, cannot be interfered with on such assertions without any substantiating material produced. In the above circumstances, we do not find any reason to entertain the revision filed by the assessee. We reject O.T.Rev.88 of 2018, finding no question of law arising in the revision.
6. The revision filed by the State raises one question of law, as to whether the Tribunal is justified in deleting the turnover addition with respect to under-valuation as disclosed from the O.T.Rev.88/2018 & - 6 -
36/2019accounts of the assessee.
7. To better understand the addition made, we looked at the assessment order. The assessee admittedly had been stocking cardiac stents in various hospitals, which were not supported by the delivery notes issued by the Department under the sales tax enactment. This continued till September of the assessment year 2010-11. The stock variation was detected on that basis and the same has been reckoned for best judgment assessment in making an addition of Rs.4,08,81,975/- and a further one time addition for probable omissions and suppression. We have already rejected the assessee's revision against such addition and estimation made. The addition made on purchase return has also been confirmed by the Tribunal. We are only concerned with the reporting of sales which even according to the Assessing Officer, is between October to March of the assessment year. The assessee is said to have used departmental delivery notes after the inspection was conducted for supply of cardiac stents to hospitals. However, the value shown in the departmental delivery notes differed considerably with O.T.Rev.88/2018 & - 7 -
36/2019the sale conceded in the accounts.
8. The assessee's contention is that all the cardiac stents sent to various hospitals are not used in the very same months and, hence, the difference in the value shown in the departmental delivery note and the sale conceded in that particular month. However, we pertinently observe that there is nothing produced by the assessee before the lower authorities to establish such a contention. The contention has also not been related with the figures of stents remaining in hospitals, which also have not been specifically named. We think that the Tribunal erroneously deleted such additions made on the ground that addition would be taken care of in that made with respect to suppression. The addition made on the basis of the stock variation, to cover probable omissions and suppression is only that up to September of the assessment year; till which date the assessee had not been using departmental delivery notes. The under-valuation is insofar as the months from October to March of the assessment year.
9. While affirming such addition made, we have serious doubt about the quantum noticed by the O.T.Rev.88/2018 & - 8 -
36/2019Assessing Officer to the tune of Rs.69,03,320/-. We do not see such a figure arising between October to March. The learned Senior Government Pleader argued that the higher of the tax liability for each month as conceded in the return or as disclosed from the delivery notes was adopted. This would be akin to accepting the contention of the assessee that the entire stents transferred on delivery notes in a month is not sold in that month itself. The assessee has not produced any substantiating material to support the same. We have hence taken the value of the delivery notes from October to March and the same being higher than the sales conceded in that period, the difference is adopted. Computing the figures from the table available in the assessment order, the total products sent on departmental delivery note had a value of Rs.3,50,01,765/- between October and March. The sale conceded as disclosed in the list available in the assessment year is Rs.3,21,54,750/-. The difference comes to Rs.28,47,015/-. The addition hence could be only of Rs.28,47,015/-. In the facts and circumstances, we do not think there need be any further addition on O.T.Rev.88/2018 & - 9 -
36/2019lower sales reported, other than the difference arrived at from the value disclosed and the sale conceded. In the above circumstances, we affirm the addition to the turnover of Rs.4,08,81,975/- with an equal addition as also the purchase return of Rs.65,10,575/- and the under-valuation of sale coming to Rs.28,47,015/-. We direct the Assessing Officer to modify the assessment order in accordance with our directions. The revision of the State, O.T.Rev.36 of 2019, is allowed to the limited extent of answering the question of law in favour of the State and against the assessee; but, however, making modification in the quantum of the addition made.
Ordered accordingly. Parties are left to suffer their respective costs.
Sd/-
K.VINOD CHANDRAN JUDGE Sd/-
T.R.RAVI JUDGE Vku/-
O.T.Rev.88/2018 & - 10 - 36/2019 APPENDIX OF OT.Rev 88/2018 PETITIONER'S/S ANNEXURES: ANNEXURE - I TRUE COPY OF THE ASSESSMENT ORDER NO.32071390942 FOR 2010-11 DATED 14-10-2011. ANNEXURE - II TRUE COPY OF THE APPLICATION FOR COMPOUNDING DATED 04/11/2010. ANNEXURE - III TRUE COPY OF THE COMPOUNDING ORDER
NO.ESE-6/2010-11 DATED 04/11/2010. ANNEXURE - IV TRUE COPY OF THE FIRST APPELLANT ORDER NO.KVAT NO.2995/11 & 3145/2011 DATED 30/12/2014.
ANNEXURE - V TRUE COPY OF THE APPELLATE ORDER NO.T.A.(VAT)NO.104 OF 2015 DATED 28/09/2017.
O.T.Rev.88/2018 & - 11 - 36/2019 APPENDIX OF OT.Rev 36/2019 PETITIONER'S/S ANNEXURES: ANNEXURE A TRUE COPY OF THE ASSESSMENT ORDER
NO.32071390942/2010-11 DATED 14.10.2011. ANNEXURE B TRUE COPY OF THE APPELLATE ORDER KVATA NO.3145/2011 DATED 30.12.2014.
ANNEXURE C CERTIFIED COPY OF THE ORDER OF THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL IN TA(VAT) NO.104.2015 DATED 28.09.2017 [TRUE COPY]