KRISHNANLAL AND CO Vs. STATE OF KERALA

JUDGEMENT

(1.) THIS tax revision case is filed against the order of the Sales Tax Appellate Tribunal, Ernakulam in T. A. No. 370 of 1996. Revision petitioner was engaged in arrack business. There were three inspections in the petitioner's shop. It was found that the petitioner was not properly maintaining the account. On inspection, there was a shortage of arrack. As per the records, the shortage was 1,660 litres of arrack, which according to the petitioner will be worth only Rs. 100. Hence, an addition of an amount of Rs. 3,34,110 was proposed for the said variation. The assessing authority increased the valuation by Rs. 2,000 while the appellate authority reduced it by Rs. 1,000. In addition to that, an assessment was made with regard to curry rent.

(2.) SO far as the first question is concerned, it is true that the accounts were rejected. But according to us, the addition made on the ground that sale of arrack was suppressed is not correct. As was stated in Kuruvila Chacko v. State of Kerala 1991 KLJ (Tax Cases) 665, the petitioner is only a second seller and is not therefore liable to pay tax on the sales effected by him. There is no reason therefore, for the petitioner to suppress sales of liquor inasmuch as he is not liable for payment of tax in any event. The discrepancy noticed at the time of the inspection is not by way of excess in the quantity of liquor, but only by way of shortage. From this circumstance of shortage alone, it cannot be inferred that the petitioner has effected unaccounted purchases and effected unaccounted sales. It is noteworthy that the department has not established a single instance of suppression of purchase of liquor by the petitioner either within or outside the State. The sale and purchase of liquor is subject to restrictions under the Abkari Act and any purchase or sale effected by the petitioner should normally be referable to the excise records. In Lovely Thomas v. State of Kerala [1999] 113 STC 505, this Court has held that "since arrack could be purchased only from the Government distilleries, it was for the respondents to explain as to wherefrom the unaccounted purchases were made by the revision petitioner. No cogent explanation whatsoever had been given by the respondents. Simply because the books of accounts were not found to be fully posted at the time of the inspection, no addition could be made only for that reason drawing the inference that the books of accounts were not fully and regularly posted because the petitioner involved herself in unaccounted purchases. " A Division Bench decision of this Court in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Kurian Joseph and P. J. Stephen [1996] 103 STC 186, was cited before us. In that case, on inspection, it was found that there was shortage of 1,435 litres of arrack. "the Tribunal has also considered the other irregularities showing flimsy character of shortage by referring to the fact that 2,500 empty bottles and 500 caps were not supported by purchase bills. The Tribunal has also in addition emphasized that with regard to this situation of offence so compounded for a sum of Rs. 250 the Tribunal has been more particular to note that in the process of compounding this value of shortage has not at all been considered which is a factor to show the nature of the shortage. Similarly with regard to the inspection on September 12, 1985 of the business place at Kozhencherry shortage of 7 bottles of brandy was the result, and the offence was departmentally compounded. . . . . . . . . . . . . . ". Learned counsel for the petitioner brought to our notice the above decision in order to counter argument of the respondent that when offences are compounded, there is a presumption that there is suppression. This is not correct.