POLAKULATH WINES Vs. STATE OF KERALA

JUDGEMENT

(1.) THIS T. R. C. has been filed against the order of the Sales Tax Appellate Tribunal, Additional Bench, Ernakulam, in T. A. No. 770 of 1996. Assessee is the petitioner. The assessment year 1993-94. Petitioner is doing the business in Indian made foreign liquor. According to the petitioner, this item is liable to be taxed at the first sale in the State. Petitioner effected the entire purchase from the Kerala State Beverages Corporation. It is stated that the petitioner is the second seller and hence, it is not liable to pay tax. The only liability is under turnover tax. For the said period, petitioner disclosed sales turnover to the tune of Rs. 1,18,82,933. 50. During the relevant period, there was an inspection at the place of business by the sales tax department, on December 10, 1993. The books of account were verified with the SIR and the department came to the conclusion that there was excess stock worked out to Rs. 4,226 and shortage of Rs. 3,295. The total variation thus comes to Rs. 7,521. Considering the quantity dealt with by the petitioner during the year, the suppression according to the petitioner would come to. 006 per cent. According to the petitioner, such a variation is not weighed much. The assessing authority estimated the purchase value by adding kist amount and licence fee, and 20 percent gross profit, and also made a further addition of 10 per cent to the estimated value. Petitioner preferred appeal before the first appellate authority and the first appellate authority reduced the addition on IMFL to five times of the suppression detected on inspection. The sales turnover of soda was reduced to Rs. 50,000 from Rs. 75,000. Against that the State preferred appeal before the Sales Tax Appellate Tribunal. The Tribunal rejected the contention that the accounts should be accepted. So far as the addition made to the sales turnover, it set aside the order of the appellate authority and restored the order of the assessing authority. Regarding the estimation of sale of soda, the Tribunal restored the order of the assessing authority.

(2.) BEFORE us, Smt. S. K. Devi argued on behalf of the petitioner and Sri. V. V. Ashokan argued on behalf of the respondent. Petitioner argued that variation is not much because there is increase in certain items and decrease in certain item, which normally happen in the sale of liquor. It is further submitted that liquor was purchased from the Beverages Corporation, and there can be only a second sale by the petitioner. So far the rejection of accounts is concerned, all the authorities have held that rejection of accounts is proper. Hence, we do not interfere in that finding. The next point is regarding the addition to be made to the total turnover. The original authority took into account the profit, kist amount, etc. , and on that basis, calculated the turnover. But the appellate authority held that addition should be five time of the actual suppressed turnover. When the matter came up before the Tribunal, the Tribunal restored the judgment of the assessing authority and set aside the order of the appellate authority. Learned counsel submitted that it was not right on the part of the assessing authority to take into account the kist amount also in calculating the suppressed turnover. Further, it is stated that, what is relevant for best judgment assessment is what was the assessment that has escaped. Learned Government pleader brought to our notice a Full Bench decision of this Court in Sreekrishna Trading Co v. State of Kerala, [1998] 108 STC 14, wherein it was held that rejection of account books is correct and this Court cannot interfere exercising the revisional power under the Sales Tax Act. We also agree with the rejection of account books. But so far as addition to the suppressed turnover is concerned, we do not agree with the assessing authority and the Tribunal. The best judgment assessment can be based on certain facts when it is found that account cannot be accepted. Only when it is found that there is a pattern of variation that best judgment assessment can be passed. It is related to the suppression found out when the account books are inspected. We do not think that this can be calculated on the basis of kist. Kist is given on the basis of the liquor supplied by the Beverages Corporation. That is not weighed for the purpose of selling unauthorised liquor. The department took the view that in order to pay the kist, the assessee would have resorted to unauthorised sale in pattern. We are not able to agree with the Tribunal. The best judgment assessment is to be made on the basis of material discovered. Here, on the basis of the materials discovered the appellate authority has clearly found that gross profit conceded by the appellant is reasonable and the assessing authority was directed to accept the sales turnover conceded by the appellant for the purpose of assessment. It has also held that addition for suppression is limited to five times of the suppression detected on inspection. Accordingly, we restore the finding of the appellate authority on the addition for suppression. But, so far as the sale of soda is concerned, we do not find any legal infirmity in the order passed by the Tribunal. The Tribunal is justified in upholding the estimate of the assessing authority.