STATE OF KERALA Vs. SEVEN STAR HOTEL

JUDGEMENT

(1.) These Sales Tax Revision cases are filed by the State against majority decision of the Sales Tax Appellate Tribunal allowing the appeals filed by the respondent-assessee against sales tax assessments completed under the Kerala General Sales Tax Act (hereinafter called "the Act") for the years 1999-2000 and 2000-2001. The respondent- assessee was engaged in running a bar hotel where Indian Made Foreign Liquor, beer, wine etc. are sold in retail. Wholesale distribution of liquor in the State is the monopoly business of the Kerala State Beverages Corporation which is a company under the control of the Government of Kerala. During 2000-2001, the respondent's hotel was searched by the Sales Tax Department and they detected excess stock of liquor over the accounted quantity valued at Rs.8,519/-. When the Income Tax Department carried out search in the premises of the respondent under Section 132 of the Income Tax Act on 21.6.2001, they found that the quantity and value for sale of liquor accounted in the books of accounts is not the same as the quantity and value found in the computer records seized by them. The sales as per seized computer statements were far higher than the sales as per Trading Profit and Loss Account furnished by the respondent along with the returns. In view of the seizure of computer statements maintained by the respondent pertaining to actual sales in excess of the accounted sales, the Assessing Officer rejected the accounts and estimated turnover by making addition for the actual sales suppression found in the computer statements seized by the Income Tax Department and furnished to the Sales Tax Officer. The Assessing Officer after collecting details of purchases made by the assessee from Kerala State Beverages Corporation, made assessment of excess quantity of liquor sold over the quantity of accounted sales as first sales of liquor procured by the respondent through illicit channels. When the assessments were questioned in first appeal, first appellate authority, in principle, upheld the rejection of books of accounts and adoption of turnover based on actual sales seen recorded in the seized computer statements maintained by the respondent. However, the appellate authority found that if the sales recorded in the computer statements include so much of the turnover returned by the dealer and found in the Trading Profit and Loss Account, then there is duplicity of turnover on so much of the turnover and he remanded the cases to the Assessing Officer for reconsideration of the question of duplicity in the turnover assessed after giving opportunity to the assessee and after verifying the records. The department did not contest the orders of the first appellate authority remanding the assessments for reconsideration for the purpose stated above. However, the assessee filed second appeals before the Tribunal contending that the only legal source of liquor in Kerala is from the Kerala Beverages Corporation Ltd. and therefore, assessment of first sales of liquor cannot be made at the hands of the assessee. Even though the Departmental Member through a detailed order and by reference to various decisions of this court rejected the appeal, the majority constituting the Accountant Member and Chairman held that there cannot be first sale of liquor in Kerala other than by KSBC which is the only agency authorised to procure and sell Indian Made Foreign Liquor in the State. It is against these orders the revisions are filed by the State. We have heard Special Government Pleader appearing for the State and Senior Counsel Sri.Aravind P. Dattar appearing for the respondent-assessee.

(2.) On going through the Tribunal's order, we find that the Accountant Member who wrote the majority order has accepted the argument of the respondent about the presumption available that Indian Made Foreign Liquor can only be purchased in Kerala from Beverages Corporation in the following words:

(3.) The question to be considered is whether there is any justifiable evidence to assess first sale of liquor on the respondent. Respondent does not deny the seizure of the computer by the Income Tax Department with the data thereon which clearly disclose full details of sale of items in the hotel such as Indian Made Foreign Liquor, sales in the restaurant, sale of soft drinks etc. It is seen that the Bar sales found in the respondent's computer for the assessment year 1999-2000 was Rs.58,93,563/- as against sales accounted by the respondent to the department at Rs.37,52,122/-. Similarly for the year 2000-2001, Bar sales seen from the computer was Rs.96,47,739/-, whereas the sales turnover accounted to the department by the respondent was Rs.61,86,043/-. Besides the seizure of computer statements of sales found in the computer of the respondent, the Sales Tax Department had carried out physical inspection and noticed stock variation during 2000-2001. Further, the Assessing Officer collected details of purchases of liquor by the assessee from Kerala State Beverages Corporation and found that the quantity and value of liquor sold and seen recorded in the computer is far in excess of the purchases from authorised channels. In our view, the finding of the Tribunal that assessment cannot be sustained in the absence of evidence of physical handling of liquor sourced from unauthorised channels by the respondent is not tenable. In the first place, frequent cases of seizure of illicit liquor, trade in spurious liquor etc. are reported in Kerala on a regular basis. This court in the decisions abovereferred has taken note of the fact that there is parallel liquor trade in Kerala besides the authorised sales starting from State Beverages Corporation. The respondent does not deny the seizure of computer statements of the actual sales made by them which do not tally with purchases from the authorised channel that is, Beverages Corporation. Respondent has also no case that assessment cannot be based on accounts maintained by the dealer. However, their case is that the seized accounts cannot be used against them. We are of the view that when actual sales figures found in the computer statement maintained by the assessee are found to be much higher than the turnover accounted to the Department, the only course open to the Assessing Officer is to take the figures from the assessee's computer and make assessment treating the same as actual sales. It is absurd to assume that Excise case is booked against everyone involved in illicit trade of liquor in the State. May be few cases get caught by the Excise Authorities and in many cases the culprits escape from the clutches of the Excise Department. However, there is no presumption available in law that when trade in a commodity is controlled by State agencies, all sales of the commodity in the State should be deemed to have been done by such agency. In our view, the conclusion arrived at by the Tribunal that all first sales of liquor in Kerala is deemed to be made by State Beverages Corporation is absurd. When there is positive evidence of clandestine sales made by the assessee and seen accounted in the computer, the Assessing Officer is perfectly justified in relying on the same for making assessment. We are of the view that the sustainable order of the Tribunal is the one issued by the Departmental Member who wrote the dissenting order. Even though Senior counsel appearing for the respondent contended that documents seized by Income Tax Authorities cannot be relied on in sales tax assessments and in support of the contention he has relied on the decision of the Supreme Court in ITTYMATHEW's case referred above, we do not think the said decision applies here because that was a case where the Sales Tax Authorities have drawn certain inferences from disclosures made by the assessee before the Income Tax Authority. On the other hand, in this case the actual accounts maintained by the respondent and seized by the Income Tax Authorities were transmitted to Sales Tax Authorities for the purpose of assessment of escaped turnover. In fact, the Assessing Officer verified purchase details of liquor by assessee from authorised channel, that is the Beverages Corporation and found that the excess quantity sold is liquor purchased clandestinely from illicit sources. We are of the view that assessee cannot object against department relying on their accounts maintained in the seized computer. In fact, first appellate authority took a reasonable stand by giving opportunity to the assessee to prove before the Assessing Officer that the turnover found in the computer statements covers even the disclosed turnover for the purpose of avoiding duplicity. In our view, there was no justification for the Tribunal to interfere with the first appellate authority's order. We, therefore, allow the revision cases filed by the State by reversing the majority order of the Tribunal for both the years and by restoring the appellate authority's order remanding the matter.