SOUTH ASEAN TRADE LINKS Vs. STATE OF KERALA

JUDGEMENT

(1.) THE essential question that was raised and considered in the Sales Tax Revision was whether on the basis of suppression of turnover detected on inspection, the assessee; the second seller of goods taxable at the point of first sale, could be mulcted with the liability to pay tax, since the evasion of tax would be by the first seller. Definitely the said question could only be answered in the negative as a pure question of law. But in the instant case it was found, on facts, by the Tribunal that the alleged second seller was in fact, the first seller. The revision was dismissed affirming the fact finding authorities' orders. Admittedly the goods involved, being wheat and resin, are goods taxable at the first point of sale within the State as per Section 5 (1)(i) of the Kerala General Sales Tax Act, 1963 (hereinafter referred to as "the Act") read with Entry 9A of the Second Schedule. The revision petitioner, who is styled as the assessee in the order under review, is the review petitioner herein. The contention raised in the revision was that the assessee was the purchaser from a registered dealer and was only a second seller within the State. The mere fact that the first seller, being the registered dealer from whom the assessee purchased the goods, did not pay the tax, cannot result in an assessment being made against the assessee, was the contention.

(2.) THE assessee filed its returns under Section 17(4) of the Act and on the allegation of suppression, detected on inspection, penalty proceedings were initiated, which concluded in the assessee compounding the offence. Subsequently the assessment made under Section 17(4) was re -opened under Section 19(1) of the Act and the tax sought to be evaded was assessed in the name of the assessee finding the assessee to be the first seller in the State. In fact the alleged seller, from whom the assessee is alleged to have made the purchases, filed 'Nil' returns. The Tribunal rejected the claim of second sale made by the assessee and on facts found that the alleged transaction of first sale was in fact bogus. The assessee having failed to prove the purchase from the registered dealer, the exemption claimed in the return filed under Section 17(4) was found to be irregular. This Court found that the claim of second sale made by the assessee was only on the basis of an invoice and suspicion having been raised on the veracity of the invoice, the assessee ought to have proved the first sale by better evidence, that is, movement of goods from the alleged first seller, especially since the quantity of goods were quite substantial. This Court also found that the invoice relied on was not one under the Kerala General Sales Tax Rules, 1963 (hereinafter referred to as "the Rules"). The discovery of blank sale bill of the alleged first seller from the premises of the assessee, noticed by the Tribunal, was also taken into account by this Court. It was in such circumstance that the finding of the Tribunal, rendered on appreciation of the facts leading to the re -opening of the assessment, was confirmed and the Sales Tax Revision dismissed.

(3.) SUBSEQUENTLY , the review petitioner placed on record an order dated 30.03.2013, produced as Annexure -H (though Annexure -H was produced earlier, again this order was numbered as Annexure -H; we refer to it as "Annexure -J") by an Interlocutory Application (I.A.No.1930 of 2013) dated 27.07.2013. The said Annexure -J order dated 30.03.2013 is one in which penalty has been imposed on M/s.Star Trading, the alleged first seller as contended by the assessee. By the said order, the Intelligence Officer found that with respect to the entire suppression of sales turnover detected on inspection of M/s.Star Trading, Cochin and its branch at Kottayam, it is found that the first seller of wheat during the assessment years 1998 -1999 to 2000 -2001 is M/s.Star Trading itself. A number of transactions are seen pertaining to M/s.Star Trading and the total turnover suppressed for the year 1998 -99 as disclosed in Annexure -J, is Rs.25,66,69,108/ -, which comprises the turnover suppression alleged against the review petitioner/assessee, is the contention raised by the review petitioner. The penalty order having found the turnover assessed as first sale of the review petitioner; to be actually the first sale of M/s.Star Trading, the final order in the Sales Tax Revision is sought to be reviewed.