STATE OF KARNATAKA Vs. SREE SAPTHAGIRI INDUSTRIES

JUDGEMENT

(1.) The Revenue has preferred this appeal challenging the order passed by the Karnataka Appellate Tribunal which has set aside the order of the appellate authority as well as the assessing authority holding that the assessee has maintained accounts which clearly discloses that the seeds which are purchased and utilised in the manufacturing process and for the preparation of the oil and transporting the same to the other State by way of stock transfer, both are substantiated by way of forms C and F and therefore, the order passed by the lower authorities disallowing a portion of the input tax is erroneous. The assessee is a partnership firm engaged in the activity of manufacture and sale of sunflower oil and cake besides trading in sunflower seeds, sunflower oil and soyabean oil. It is a registered dealer under the Karnataka Value Added Tax Act, 2003. For the month of January 2006, they have filed monthly return of turnover in form VAT 100 declaring net tax carried forward for succeeding month at Rs. 3,83,003. The case was taken up for reassessment proceedings under section 39(1) of the Karnataka VAT Act, 2003. On receipt of the notice, partners appeared and produced books of accounts. On verification of books of accounts, the assessing authority found that the assessee having utilised the S. F. seeds held in stock as well as so purchased, manufactured S. F. oil and cake and sold the same during the month in question. However, he did not furnish the stock account, balance sheet and trading account in order to verify the correctness of the sale declared and therefore, a pre-assessment notice dated May 17, 2007 was issued. In compliance with the said notice, the assessee furnished the copy of the balance sheet and trading account. On verification of the same, the assessing authority noticed the consumption of S. F. seeds in the manufacture of S. F. oil and cake and declared that the sales appear to be correct. Further, the amount of Rs. 1,79,480 shown as carried forward for the succeeding month is not correct as the net tax carried forward for the month of January 2006 is at Rs. 1,66,765. The assessee also furnished declarations in form C in respect of inter-State sales of S. F. oil to the extent of Rs. 6,98,100 and the assessee declared the turnover of consignment sale of S. F. oil at Rs. 8,83,383 and furnished the declarations in form F for the entire turnover and showed that the goods have been dispatched outside the State not as a result of direct sale but for sale. Therefore, the claim of the assessee for exemption was considered and it was held that the assessee is not entitled to get input-tax rebate on the corresponding purchase of raw material consumed as the same is consumed in the manufacture of finished goods as such the non-deductible input tax is worked out and a demand was raised. Aggrieved by the same, he preferred an appeal, which came to be dismissed. The assessee appealed before the Karnataka Appellate Tribunal. The Appellate Tribunal on a careful consideration of the entire material on record held that the assessee has maintained separate day-to-day stock account in respect of S. F. seeds purchased in the course of inter-State trade. It has further maintained separate day-to-day stock account in respect of S. F. oil produced from such S. F. seeds. The assessee has also established that the S. F. oil was dispatched to the other State on stock transfer basis for consignment sales. The said transaction of consignment relates to the S. F. oil, obtained by crushing of S. F. seeds purchased in the course of inter-State trade exclusively. This has been promptly declared in VAT 100. Then, it found that the lower authorities resorted to partial rebating of input-tax claim as per the formula prescribed under rule 131 on the assumption that S. F. seeds locally purchased have also been consumed in the manufacture of S. F. oil sent/dispatched on stock transfer basis to the other State. There is no evidence to substantiate the said reasoning. Therefore, in the absence of any material to dispute the claim of the assessee that whatever seeds which was purchased in the inter-State sales has been used in the preparation of oil and then dispatched to the other State by consignment sale, remains unrebutted. In those circumstances, the authorities were not justified in granting partial rebating. It is against this order, the present appeal is filed.

(2.) Heard the learned counsel for the parties. The material on record discloses that the assessee has maintained separate accounts showing the quantity of seeds purchased in inter-State sales, which is also reflected in the form C. It has also maintained separate account to show the supplies made outside the State by way of consignment sales, which is also evidenced by form F. It has also maintaining records to show the sale of seeds within the State and outside the State. When the accounts maintained by the assessee is not found fault with and when he has produced all the said records before the assessing authority and when the assessing authority did not find fault with the said account or forms C or F, it was not open to them to deny relief to which the assessee was entitled to. In the facts of the case, rule 131 has no application and that is precisely what the Appellate Tribunal has held. The said finding is based on the material on record and is in accordance with law and as such we do not find any infirmity, which calls for any interference. Therefore, the appeal is rejected as no substantial question of law arises, which deserves admission.