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IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH
DATED THIS THE 10TH DAY OF OCTOBER, 2018 PRESENT THE HON’BLE MR.JUSTICE B.VEERAPPA AND THE HON’BLE MR.JUSTICE H.T. NARENDRA PRASAD
STA No.100001 OF 2018
BETWEEN SHRI. N.G. MEHARWADE, PROPRIETOR, AGE 52 YEARS, M/S. MEHARWADE GENERAL STORES, GRAIN MARKET, NEAR JANATA BAZAR, GADAG-582101. TIN NO.29910030018 ... APPELLANT
(BY SRI. S. D. BABLADI, ADV., FOR SRI. H. R. KAMBIYAVAR, ADV., FOR APPELLANT)
AND
THE ADDL. COMMISSIONER OF COMML. TAXES, ZONE-II, 6TH FLOOR, VTK-1, GANDHINAGAR, BENGALURU-560009.
THE JOINT COMMISSIONER COMMERCIAL TAXES, (APPEALS) DHARWAD DIVISION, VANIJYA TERIGE BHAVANA, NAVANAGAR, HUBBALLI.
THE DEPUTY COMMISSIONER OF COMMERCIAL TAXES, (AUDIT & RECOVERY),
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VANIJYA TERIGE BHAVANA, NAVANAGAR, HUBBALLI.
... RESPONDENTS
(BY SMT. VEENA HEGDE, AGA FOR RESPONDENTS)
THIS STA FILED U/SEC. 66(1)OF THE KVAT ACT 2003, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW AND TO ALLOW THE APPEAL AND SET ASIDE THE ORDER OF THE 1ST RESPONDENT BEARING NO.TNO.322/2014-18 ADCOM/ZONE-II/DWD/SMR/CR-41/2016/17 DATED 17.01.2018 VIDE ANNEXURE-A FOR THE ASSESSMENT YEAR 2011-12.
THIS APPEAL COMING ON FOR ADMISSION THIS DAY, B.VEERAPPA J., DELIVERED THE FOLLOWING:
JUDGMENT The present Sales Tax Appeal is filed by the assessee against the order dated 17.01.2018 made in Order bearing No.TNO322/2014-18 ADCOM/ZONE- II/DWD/SMR/CR-41/2016-17, by the Additional Commissioner of Commercial Taxes, exercising the powers under the provisions of section 64(1) of the Karnataka Value Added Tax Act, 2003, (hereinafter
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referred to as ‘KVAT Act’ for short) and to set aside the order passed by the Deputy Commissioner of Commercial Taxes (Audit and Recovery), Hubballi, dated 27.03.2013 and restore the re-assessment dated 01.01.2013 made under Section 39(1) of the KVAT Act by the prescribed authority for the tax periods falling in the financial year 2011-12. 2. It is the case of the appellant that the appellant is a registered dealer under the KVAT Act and also registered dealer under Central Sales Tax Act, 1957, (hereinafter referred to as ‘CST Act’ for short) and he is a proprietor of M/s. Meharwade General Stores, near Janata Bazar, Gadag, who is dealing in grains, groceries, arecanut, tobacco and confectionary goods, having TIN No.29910030018 for the assessment year 2011-12. Accordingly, filed returns under VAT-100, they are deemed to be a self-assessment order, the 3rd respondent (Prescribed Authority) issued proposition notice to reassess for the tax period 2011-12.
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Accordingly, the appellant appeared on 06.12.2012 and produced books of accounts, related documents and other information along with VAT-100 returns. The Deputy Commissioner of Commercial Tax (Prescribed Authority) visited the business premises of the assessee on 18.02.2012 and that the books of accounts are verified on 06.12.2012 and noticed the following discrepancies: i) The physical stock of goods held at the time of inspection is at Rs.48,24,417-00 ii) The appellant has purchased arecanut at Rs.41,61,553-00 during the assessment year on the strength of e- sugam, but not accounted for in the purchase register. iii) The appellant purchased tobacco products like cigarettes and gutkha using e-sugam at Rs.9,17,375-00 but not accounted for in the books of accounts.
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iv) The appellant purchased gutkha from outside the state on e-sugam at Rs.3,69,280-00 but accounted only Rs.2,69,280-00 and thus suppressed the said goods at Rs.1,00,000-00. Thus suppressed purchase of goods and has calculated the sales turnover and tax liability by to for an amount of Rs. 2,46,097-00 . 3. In view of the inspection, the Deputy Commissioner of Commercial Taxes, proceeded to pass the order under the provisions of Section 39 (1) read with Rule 46 of the KVAT Act on 01.01.2013. 4. Aggrieved by the said order, the present appellant filed an appeal before the Appellate Authority under the provisions of Section 62 (6) of the KVAT Act. The Joint Commissioner of Commercial Taxes, after hearing both the parties, by an order dated 27.03.2013 set aside the order passed by the original authority. The Additional Commissioner of Commercial Taxes-Revision
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Authority exercised its power vested under the provisions of Section 64(1) of the KVAT Act and initiated suo-muto revision proceedings and issued notice to the present appellant. 5. In response to the said notice/endorsement the representatives of the appellant appeared before the Revisional Authority and after hearing both the parties, the Revisional Authority found suppression of purchase of arecanut at Rs.41,61,553-00, tobacco products like cigarettes and gutkha at Rs.9,17,375-00, gutkha from outside the state at Rs.3,69,280-00 by accounting only Rs.2,69,280-00 and suppressed the said goods at Rs.1,00,000-00. Therefore, the order passed by the Appellate Authority is prejudicial to the interests of revenue, which warrants revision proceedings under Section 64(1) of the KVAT Act and accordingly the impugned order came to be passed. Therefore, the present Sales Tax Appeal is filed.
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We have heard the learned counsel for the parties to the lis. 7. Sri. S.D. Babladi, the learned counsel for the appellant has vehemently contended that the order passed by the Revisional Authority/1st respondent is erroneous and contrary to the material. There was no error in the order passed by the 2nd respondent- Appellate Authority. He would further contend that the 2nd respondent, in the facts and circumstances of the case, justified in reducing the turnover from two times to one time but the Revisional Authority added one more time of suppressed turnover. The 2nd respondent was justified in reducing the excessive turnover. The Revisional Authority ought not to have invoked suo- muto revisional proceedings. The judgments relied upon by the Revisional Authority are not applicable and therefore, he submits that there are substantial question of law in the present Sales Tax Appeal and sought to allow the appeal.
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In support of his contention, the learned counsel for the appellant relied upon the dictum of this Court in the case of the Commissioner of Income Tax & another Vs. Namdari Seeds reported in 2011 SCC On Line Kar 1150. It was the case where the Original Authority or the Income Tax Officer acting in accordance with law makes certain assessment and the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. We respectfully agree with the law declared by this court in the said judgment to the facts of that case, where the Original Authority passed an original order based on the material available on record. Merely because the different view was possible, the Appellate Authority cannot interfere with. The judgment relied upon by the learned counsel for the appellant has no relevance to the facts and circumstances of the present case on hand. Suppression is admitted fact by the appellant,
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which is not in dispute. Therefore, the said case is not applicable to the present case. 9. Per contra, on taking notice for the respondents, Smt.Veena Hegde, Additional Government Advocate sought to justify the impugned order passed by the Revisional Authority and contended that admittedly, the appellant has not disputed the suppression of the accounts while submitting the inspection records. Original Authority, considering the entire material on record in a proper perspective, passed an order under Section 39(1) of the KVAT Act read with Rule 46 of the KVAT Act, 2003. The Appellate Authority while setting aside the order passed by the Original Authority has not taken into consideration the suppression noticed by the inspecting authority. Therefore, the Appellate Authority was not justified in setting aside the order passed by the Original Authority, which was prejudicial to the interest of the Revenue. Therefore, the Revisional Authority rightly exercised
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suo-muto revisional proceedings under the provisions of section 64(1) of KVAT Act, 2003. Therefore, she sought to dismiss the appeal. 10. We have given anxious consideration to the arguments advanced by the learned counsel for the parties and perused the entire material on record, carefully. 11. It is undisputed fact that the present appellant is a registered dealer under the KVAT Act and wholesale and retail dealer in areca nut, tobacco products, pickles, matches, chocolate, sainted supari etc. In order to verify the returns of income filed by the Assessee, as compared to the books of accounts for the year 2011-12, the Commissioner of Commercial Taxes under the C.A.S has issued proposition notice for visit audit. The Assessee appeared on 06.12.2012 and produced the books of accounts, related documents, other information and VAT returns in Form VAT-100. On verification, it was noticed that the Assessee effected
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sales and purchase of goods during the assessment year giving details of opening stock purchase account. Test checked sales and purchases, it was found that the sales are supported by tax invoices and purchases are supported by purchase bills duly accounted in the regular books of accounts on the strength of C-Forms. When the DCCT (Enf-1), Hubli has visited the business premises of the Assessee on 18.02.2012 found the following discrepancies: • The Physical stock of goods held at the time of inspection is at Rs.48,24,417-00. • You have purchased arecanut at Rs.41,61,553-00 during the assessment year on the strength of e sugama, but not accounted for in the purchase register. • You have purchased tobacco products like cigarettes and gutkha using e sugams at Rs.9,17,375-00
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but you have not accounted for in the books of accounts. • You have purchased gutkha from outside the state on e sugama at Rs.3,69,280-00 but you have accounted only Rs.2,69,280-00. Thus you have suppressed the said goods at Rs.1,00,000-00. 12. Based on the said suppression, the order came to be passed by the Original Authority under Section 39(1) read with Rule 46 of the KVAT Act on 01.01.2013. 13. Though the appeal came to be filed before the Appellate Authority by the Assessee, the Appellate Authority mainly relying upon the statement made in the grounds of appeal without verifying the records has recorded a finding that the respondent relying on intelligence report has erred in estimating the sales at two times without verifying the fact and not placing any material on record. It is to be noted that the facts found in the compounding proceedings before the intelligence
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authority may not themselves be material in the assessment proceedings and further held that the respondent solely relying on the intelligence report without placing any further material on record for estimation, is unsustainable. The estimation of sale is to be restricted to an extent of purchase turnover reported by the intelligence authority. Therefore, the Appellate Authority set aside the order passed by the Original Authority and directed the respondent – Original Authority to issue revised demand notice to the Assessee, accordingly. 14. The Revisional Authority after issuing notice to the Assessee and considering the entire material on record, recorded the categorical finding that the First Appellate Authority while allowing the appeal has not discussed with regard to reduction of addition of tax from two times to one time on the unaccounted purchases, is found to be in order, in view of the dictum of this Court in the Case of M/s Durga Distilleries,
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Kaaaup Vs. CCT, Bangalore reported in (2001) 123 STC 487 Kar. 2001 (51) Kar.L.J 262 (HC) (DB) wherein the Division Bench of this Court held that, “the estimation of turnover in case of detection of suppression of turnover by adding twice the amount of suppression detected cannot be held as without rational basis”. 15. The Revisional Authority after recording the finding that, had it not been inspected the unaccounted purchases and excess stock as noticed by the inspecting authority would have gone unnoticed. The estimation at two times of the suppressed sales of areca nut, tobacco products, and also on the value of excess stock by prescribed authority is found to be in order. The Appellate Authority has not considered the materials and set aside the order passed by the assessing authority, which is prejudicial to the interest of Revenue and which warrants revisional proceedings under the provision of Section 64(1) of KVAT Act.
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The material on record clearly depicts that, the Assessee admittedly has suppressed the purchase of arecanut at Rs.41,61,553/- during assessment year on the strength of e-sugams but has not accounted the same in purchase register and he also purchased tobacco products like cigarettes and gutkha using e- sugam at Rs.9,17,375/- but same was not accounted. Though Assessee purchased gutkha from outside the State on e-sugam at Rs.3,69,280/- but accounted only Rs.2,69,280/-. Thus he suppressed the purchase the said goods of Rs.1,00,000/-. 17. The suppression is not in dispute. When the suppression is not in dispute, the Appellate Authority ought not to have set aside the order passed by the Original Authority. When the Appellate Authority found that the order passed by the Original Authority is without considering any books of accounts, the Appellate Authority ought to have remanded the matter, but the same was not done. When the suppression is
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not is dispute, the Revisional Authority was justified in exercising the powers under the provisions of Section 64(1) of the KVAT Act, 1964. The order passed by the Revisional Authority is in accordance with law. 18. Therefore, the appellant has not made out any case to interfere with the revision order passed by the 1st respondent. No substantial questions of law are involved as urged by the learned counsel for the appellant. In view of the above reasons, the appeal is dismissed on devoid of merits. The Sales Tax Petition stands dismissed accordingly. Ordered accordingly.
Sd/- JUDGE
Sd/- JUDGE
Yan/EM