THE PRINCIPAL COMMISSIONER OF INCOME TAX, vs. KANNAN DEVAN HILLS PLANTATIONS COMPANY PVT. LTD.,

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE T.R.RAVI THURSDAY, THE 04TH DAY OF JUNE 2020 / 14TH JYAISHTA, 1942 OT.Rev.No.92 OF 2019 AGAINST THE ORDER/JUDGMENT IN TAVAT 181/2016 DATED 08-04-2019 OF KERALA VAT APPELLATE TRIBUNAL, ERNAKULAM REVISION PETITIONER: C.K.RAJAN, AGED 53 YEARS CHEMBARA HOUSE, POOCHUNNIPPADAM, OORAKAM P.O., THRISSUR DISTRICT. BY ADVS. SRI.HARISANKAR V. MENON SMT.MEERA V.MENON RESPONDENT: STATE OF KERALA, REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT, GOVT. SECRETARIAT, THIRUVANANTHAPURAM. R1 BY GOVERNMENT PLEADER V.K.SHAMSUDHEEN THIS OTHER TAX REVISION (VAT) HAVING BEEN FINALLY HEARD ON 04.06.2020,

ALONG

WITH

OT.Rev.98/2019,

OT.Rev.147/2019, OT.Rev.13/2020, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:

O.T.Rev.Nos.92/2019, 98/2019, 147/2019 and 13/2020 ::2:: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE T.R.RAVI THURSDAY, THE 04TH DAY OF JUNE 2020 / 14TH JYAISHTA, 1942 OT.Rev.No.98 OF 2019 AGAINST THE ORDER/JUDGMENT IN TAVAT 206/2016 DATED 08-04-2019 OF KERALA VAT APPELLATE TRIBUNAL, ERNAKULAM REVISION PETITIONER/S: C.K.RAJAN AGED 53 YEARS CHEMBARA HOUSE, POOCHUNNIPPADAM, OORAKAM.P.O., THRISUR DISTRICT BY ADVS. HARISANKAR V. MENON SMT.MEERA V.MENON RESPONDENT/S: STATE OF KERALA REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT GOVT. SECRETARIAT, THIRUVANANTHAPURAM. R1 BY GOVERNMENT PLEADER V.K.SHAMSUDHEEN THIS OTHER TAX REVISION (VAT) HAVING BEEN FINALLY HEARD ON 04.06.2020, ALONG WITH OT.Rev.92/2019, OT.Rev.147/2019, OT.Rev.13/2020, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:

O.T.Rev.Nos.92/2019, 98/2019, 147/2019 and 13/2020 ::3:: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE T.R.RAVI THURSDAY, THE 04TH DAY OF JUNE 2020 / 14TH JYAISHTA, 1942 OT.Rev.No.147 OF 2019 AGAINST THE ORDER/JUDGMENT IN TAVAT 181/2016 OF KERALA VAT APPELLATE TRIBUNAL, ERNAKULAM REVISION PETITIONER/S: THE STATE OF KERALA REPRESENTED BY THE DEPUTY COMMISSIONER OF STATE TAX (LAW), DEPARTMENT OF KERALA STATE GOODS AND SERVICE TAX, ERNAKULAM. BY GOVERNMENT PLEADER V.K.SHAMSUDHEEN RESPONDENT/S: C.K. RAJAN CHEMBARA HOUSE, GOLD JEWELLERY, POOCHUNNIPADAM P. O., URAKAM, THRISSUR - 680 562. R1 BY ADV. SRI.HARISANKAR V. MENON R1 BY ADV. SMT.MEERA V.MENON THIS OTHER TAX REVISION (VAT) HAVING BEEN FINALLY HEARD ON 04.06.2020, ALONG WITH OT.Rev.92/2019, OT.Rev.98/2019, OT.Rev.13/2020, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:

O.T.Rev.Nos.92/2019, 98/2019, 147/2019 and 13/2020 ::4:: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE T.R.RAVI THURSDAY, THE 04TH DAY OF JUNE 2020 / 14TH JYAISHTA, 1942 OT.Rev.No.13 OF 2020 AGAINST THE ORDER/JUDGMENT IN TAVAT 206/2016 OF KERALA VAT APPELLATE TRIBUNAL, ERNAKULAM REVISION PETITIONER: THE STATE OF KERALA REPRESENTED BY THE DEPUTY COMMISSIONER OF STATE TAX (LAW) DEPARTMENT OF KERALA STATE GOODS AND SERVICE TAX, ERNAKULAM. BY GOVERNMENT PLEADER RESPONDENT: C.K. RAJAN CHEMBARA HOUSE, GOLD JEWELLERY, POOCHUNNIPADAM, P.O, URAKAM, THRISSUR-680 562 R1 BY ADV. SRI.V.M.HARI SANKAR R1 BY ADV. SMT.MEERA V.MENON OTHER PRESENT: SENIOR GOVERNMENT PLEADER SRI. V.K.SHAMSUDHEEN THIS OTHER TAX REVISION (VAT) HAVING BEEN FINALLY HEARD ON 04.06.2020, ALONG WITH OT.Rev.92/2019, OT.Rev.98/2019, OT.Rev.147/2019, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:

O.T.Rev.Nos.92/2019, 98/2019, 147/2019 and 13/2020 ::5:: O R D E R [O.T.Rev.Nos.92 of 2019, 98 of 2019, 147 of 2019 and 13 of 2020]

Dated, this the 04th day of June, 2020 Vinod Chandran, J. Two revisions filed by the State and two by the assessee are before us. The revisions arise from the common order of the Tribunal in appeals filed by the State and also by the assessee. 2. The assessee is said to be engaged in manufacturing of gold ornaments carried on behalf of third party jeweller’s on job work basis. The assessee's place of business was subjected to inspection on 26.09.2013 wherein huge stock of gold and ornaments were detected. The Intelligence Wing detected

actual

suppression

sales

of Rs.3,33,69,622/-. The assessee compounded the offences alleged; which also included failure to take registration under the Kerala Value Added Tax Act, 2003 (hereinafter “the KVAT Act”) and paid an amount of Rs.8 lakhs as compounding fee. On assessment proceedings being carried out, the

O.T.Rev.Nos.92/2019, 98/2019, 147/2019 and 13/2020 ::6:: turnover suppression detected by the Intelligence Officer was adopted and the Assessing Officer added 90% of the said turnover as liable to tax on purchases made, under Section 6(2) of the KVAT Act. An equal addition was made towards probable omissions and suppression. The total turnover on best judgment came to Rs.12,68,04,563/-. The Assessing Officer also declined the special rebate under Section 12 since the assessee was not a registered dealer. 3. In first appeal, the addition made under section 6(2) as also the estimation made towards the probable omission and suppression on that aspect was deleted. The declining of special rebate stood confirmed. The State filed an appeal before the Tribunal against the deletion of the addition made under Section 6(2) and prayed for restoration of the same. The assessee filed an appeal against the sales turnover adopted by the Assessing Officer, asserting that he was engaged only in job-works and the stock found belongs to a third party Jeweller. The assessee contended that there was no purchase or

O.T.Rev.Nos.92/2019, 98/2019, 147/2019 and 13/2020 ::7:: sale effected of gold or gold ornaments by the assessee. The Tribunal, in the State's appeal restored the additions made under section 6(2) as also the estimation made of a further equal addition towards the probable omissions and suppression. In the assessee's appeal, the Tribunal while affirming the best judgment assessment, specifically with respect to the adoption of sales turnover and the equal addition made; permitted special rebate under section 12. 4. Sri.Harisankar V Menon, learned Counsel for the appellant argued that there was enough evidence to substantiate the contention that the assessee confined their work to job works for jeweller’s. Invoices issued by JOSCO Jewellery was produced before all the authorities which were not taken into account. The learned Counsel relies on Velimparambil Hardwares v. State of Kerala [92 STC 98] to contend that, having proved the factum of the assessee having not indulged in any purchase or sale of gold or gold jewellery, necessarily there could not have been a best judgment assessment made, despite the

O.T.Rev.Nos.92/2019, 98/2019, 147/2019 and 13/2020 ::8:: assessee having compounded the offence detected on inspection. On the contentions raised by the State in its revision, it is argued that the assessee had subsequently taken registration and in such circumstances, the special rebate ought to be granted to the assessee. At the time of assessment, the assessee was a registered dealer and there was nothing prohibiting the special rebate under Section 12. 5. The learned Senior Government Pleader Sri.Shamsudheen pointed out that on inspection, it was also found that the assessee had made purchase of gold of more than Rs. 19 lakhs and had made sale of ornaments worth Rs.2 lakhs. It is submitted that there could be no reliance placed on the invoices and receipts issued by the Jeweller which is a registered dealer and any transfer of goods for the purchase of job works should have been supported by delivery notes issued by the Department to the registered dealer. Sub-section(2) of Section 12 is specifically pointed out to refute the contention of the assessee that there should be a special rebate granted to the assessee.

O.T.Rev.Nos.92/2019, 98/2019, 147/2019 and 13/2020 ::9:: 6. We find the following questions of law in the revisions filed by the assessee: 1. Whether the assessment made adopting the turnover suppression detected by the Intelligence Officer for the purpose of determining the turnover under Section 6 could be sustained in the light of the dictum in Velimparambil Hardwares (supra)? 2. Whether the assessee was liable to be mulcted with the liability under Section 6(2) on the basis of the estimation made by the Assessing Officer at 90% of the sales turnover suppression detected and the further addition of an equal amount? 3. Whether in the facts and circumstances of the case is not the estimation made; perverse?

O.T.Rev.Nos.92/2019, 98/2019, 147/2019 and 13/2020 ::10:: of the assessee that they were only carrying on job works especially finding purchase and sales having been carried out. The purchases made are of more than Rs.19 lakhs which itself is above the limit prescribed under Section 15 of the KVAT Act for the purpose of compulsory registration. We also accept the contention of the State that the invoices and receipts of a particular jeweller produced before the lower authorities were not sufficient to prove that the stock found in the premises of the assessee belonged to such jeweller, who is a registered dealer. Any transfer of goods for the purpose of job works ought to have been supported by the delivery note of the registered dealer. 9. Velimparambil Hardwares (supra) is only an authority for the proposition that “the facts found in a compounding proceeding may constitute a relevant material in the assessment proceedings, though it may not be conclusive”(sic). It was held so: “But it is open to the assessee to demonstrate by specific pleading and evidence in the assessment proceedings that the details or facts contained in the compounding proceedings

O.T.Rev.Nos.92/2019, 98/2019, 147/2019 and 13/2020 ::11:: are incorrect or untrue or the admissions and statements made in those proceedings were mistakenly made or rendered under peculiar context or circumstances. It should be so proved by cogent and substantial material. Vague generalisations or evasive references or casting doubts will not be enough. We are unable to accept the plea of the Revenue that the materials or statements in the compounding proceedings will in any way be “conclusive” in the assessment proceedings. We make it clear that the compounding proceedings or statements or admissions therein will only be relevant, but not conclusive in assessment proceedings.” 10. In the present case, as was found on facts in Velimparambil Hardwares, what assumes significance is that the assessee failed to establish that the stock available belongs to a registered dealer; and that it reached the assesse’s hands as per the permissible mode and with supporting prescribed documents, under the KVAT Act. In such circumstances, we do not find any reason to interfere with the assessment made adopting the sales turnover as detected by the Intelligence Officer. 11. With respect to the purchase turnover,

O.T.Rev.Nos.92/2019, 98/2019, 147/2019 and 13/2020 ::12:: it is very clear from the records that the assessee had not been maintaining proper books of accounts and there were purchases made of gold and sale of ornaments. The mere fact that the sale effected was minimal would not detract from the fact that the assessee would have probably suppressed other transactions also for which there would be no material available. The purchases found on inspection, to have been made, were above the limit prescribed under Section 15, for registration. The sale made of the goods purchased after manufacture would definitely have been higher. The Intelligence Officer had only adopted the actual turnover suppression and in the best judgment assessment, the Assessing Officer was well within his power to make an estimation of the purchase made which also had to suffer tax under Section 6(2). When there is no material to evidence the purchases or the tax paid on that count, the estimation made is perfectly in order. 12. Now we come to the question of special rebate which according to the learned Counsel is

O.T.Rev.Nos.92/2019, 98/2019, 147/2019 and 13/2020 ::13:: covered by a decision of another Division Bench reported in State of Kerala v. Collins C.A [(2019) 27 KTR 87 (Ker)]. It is also argued by the learned Counsel for the assessee that before the assessment was taken up, the assessee had obtained the registration which enables grant of special rebate 13. The registration obtained is subsequent to the detection of offence. The turnover adopted by the Intelligence Officer is on the actual suppression detected on inspection which also is prior to the registration. The estimation made of the purchases liable to tax under Section 6(2), also is prior to the registration obtained. Sub Section (2) of Section 12 specifically prohibits special rebate to unregistered dealers. In such circumstances we find that the Tribunal erred insofar as allowing the special rebate under Section 12 which would run contrary to the statutory provision. 14. On the above reasoning question No.1 and 2 with respect to the adoption of suppression of sales turnover and the estimation made of the

O.T.Rev.Nos.92/2019, 98/2019, 147/2019 and 13/2020 ::14:: purchase turnover at 90% of the sales turnover is found to be perfectly in order and in accordance with the provisions of the Act. The said questions are answered against the assessee and in favour of the Revenue. 15. We are quite conscious of the fact that there would be no question of law arising from the assessment made insofar as the equal addition as made by the Assessing Officer and affirmed by the Tribunal with respect to both the liability under Section 6 and Section 6(2). However considering the contention of the assessee that the assessee had been carrying on job-works as also the fact that the assessee is dis-entitled from claiming special rebate we modify the further addition to be at 25% (1/4th )of the actual addition made on account of the sales and purchases as adopted by the Assessing Officer. We partly allow OT Revision Nos. 92 and 98 of 2019 only making modification in the addition for probable omissions and suppression. 16. As far as O.T Revisions 147/2019 and 13/2020 the State has filed two revisions as an

O.T.Rev.Nos.92/2019, 98/2019, 147/2019 and 13/2020 ::15:: abundant caution from a common order, where as the question raised is only of special rebate. We have already found that the special rebate is not applicable to the assessee who was not registered at the time the suppression was detected, which detection alone led to the subsequent registration taken out by the assessee. We answer the said question in favour of the State and against the assessee. Ordered accordingly. Parties are left to suffer their respective costs. SD/-

K. Vinod Chandran,

Judge

SD/-

T.R.Ravi,

Judge jma

O.T.Rev.Nos.92/2019, 98/2019, 147/2019 and 13/2020 ::16:: APPENDIX OF OT.Rev 92/2019 PETITIONERS EXHIBITS: ANNEXURE A COPY OF VOUCHER ISSUED BY M/S.JOSCO JEWELLERS, KOTTAYAM DATED 20.03.2014. ANNEXURE B COPY OF VOUCHER ISSUED BY M/S.JOSCO JEWELLERS, KOTTAYAM DATED 11.03.2014. ANNEXURE C COPY OF VOUCHER ISSUED BY M/S.JOSCO JEWELLERS, THRISSUR DATED 31.01.2014. ANNEXURE D COPY OF VOUCHER ISSUED BY M/S.JOSCO JEWELLERS, THRISSUR DATED 31.01.2014. ANNEXURE E COPY OF LABOUR BILL CALCULATION OF JOSCO GOLD CORPORATION PVT.LTD. DATED 31.01.2014. ANNEXURE F COPY OF VOUCHER ISSUED BY JOSCO FASHION JEWELLERS, THRISSUR DATED 22.07.2013. ANNEXURE G COPY OF VOUCHER ISSUED BY JOSCO FASHION JEWELLERS, THRISSUR DATED 22.07.2013. ANNEXURE H COPY OF LABOUR BILL CALCULATION OF JOSCO FASHION JEWELLERS DATED 22.07.2013. ANNEXURE I COPY OF INCOME TAX RETURN FOR ASSESSMENT YEAR 2013-14 OF THE REVN.PETITIONER DATED 04.10.2013. ANNEXURE J COPY OF INCOME TAX RETURN FOR ASSESSMENT YEAR 2014-15 OF THE REVN.PETITIONER DATED 28.11.2014. ANNEXURE K COPY OF DAILY STOCK ACCOUNTS OF ORNAMENTS FOR JOB WORK DATED NIL. ANNEXURE L COPY OF ORDER ISSUED BY THE INTELLIGENCE OFFICER, SQUAD NO.IV, COMMERCIAL TAXES, THRISSUR DATED 26.09.2013. ANNEXURE M COPY OF ORDER ISSUED BY THE COMMERCIAL TAX OFFICER, 2ND CIRCLE, THRISSUR FOR THE YEAR 2013-14 DATED 30.06.2015. ANNEXURE N COPY OF ORDER ISSUED BY THE

O.T.Rev.Nos.92/2019, 98/2019, 147/2019 and 13/2020 ::17:: ASST.COMMISSIONER (APPEALS), THRISSUR FOR THE YEAR 2013-14 DATED 11.04.2016. ANNEXURE O COPY OF STATEMENT OF CASE FILED BY THE REVISION PETITIONER BEFORE THEN KERALA VAT APPELLATE TRIBUNAL, ERNAKULAM DATED 06.08.2018. ANNEXURE P COPY OF STATEMENT OF CASE FILED BY THE REVISION PETITIONER BEFORE THEN KERALA VAT APPELLATE TRIBUNAL, ERNAKULAM DATED 14.02.2019. ANNEXURE Q COPY OF ORDER ISSUED BY THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, ERNAKULAM IN TA(VAT)NOS.206/2016 AND 181/2016 DATED 08.04.2019.

O.T.Rev.Nos.92/2019, 98/2019, 147/2019 and 13/2020 ::18:: APPENDIX OF OT.Rev 98/2019 PETITIONER'S/S EXHIBITS: ANNEXURE A COPY OF ORDER ISSUED BY THE COMMERCIAL TAX OFFICER, 2ND CIRCLE, THRISSUR FOR THE YEAR 2013-14 ANNEXURE B COPY OF ORDER ISSUED BY THE ASST.COMMISSIONER (APPEALS), THRISSUR FOR THE YEAR 2013-14 ANNEXURE C COPY OF STATEMENT OF CASE FILED B THE REVISION PETITIONER BEFORE THEN KERAAL VAT APPELLATE TRIBUNAL, ERNAKULAM

O.T.Rev.Nos.92/2019, 98/2019, 147/2019 and 13/2020 ::19:: APPENDIX OF OT.Rev 147/2019 PETITIONER'S/S EXHIBITS: ANNEXURE A TRUE COPY OF THE ASSESSMENT ORDER DATED 30.6.2015 RELATING TO THE ASSESSMENT YEAR 2013-14 PASSED UNDER SECTION 25(1) OF THE KVAT ACT. ANNEXURE B TRUE COPY OF THE ORDER DATED 11.4.2016 IN KVATA NO.287/2015 PASSED BY THE ASSISTANT COMMISSIONER (APPEALS), COMMERCIAL TAXES, THRISSUR. ANNEXURE C CERTIFIED COPY OF THE COMMON ORDER IN T.A.(VAT) NOS.206/2016 AND 181/2016 DATED 8.4.2019 PASSED BY THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, ERNAKULAM.

O.T.Rev.Nos.92/2019, 98/2019, 147/2019 and 13/2020 ::20:: APPENDIX OF OT.Rev 13/2020 PETITIONER'S/S EXHIBITS: ANNEXURE A TRUE COPY OF THE ASSESSMENT ORDER DATED 30.06.2015 RELATING TO THE ASSESSMENT YEAR 2013-14 PASSED UNDER SECTION 25(1) OF THE KVAT ACT. ANNEXURE B TRUE COPY OF THE ORDER DATED 11.04.2016 IN KVATA NO. 287/2015 PASSED BY THE ASSISTANT COMMISSIONER (APPEALS), COMMERCIAL TAXES, THRISSUR. ANNEXURE C TRUE COPY OF THE COMMON ORDER IN T.A. (VAT) NOS. 206/2016 AND 181/2016 DATED 08.04.2019 PASSED BY THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, ERNAKULAM.