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1980 DIGILAW 281 (KER)

DEPUTY COMMISSIONER, ERNAKULAM v. P. V. VARGHESE

1980-11-05

K.BHASKARAN, V.BALAKRISHNA ERADI

body1980
JUDGMENT BALAKRISHNA ERADI, C.J. These three tax revision cases arise out of assessment to sales tax under the Kerala General Sales Tax Act (for short the Act), made against the same assessee for the years 1971-72 and 1972-73. The State is the revision petitioner in T.R.C. Nos. 161 and 162 of 1979 which relate respectively to the years 1971-72 and 1972-73. T.R.C. No. 175 of 1979 has been filed by the assessee and that relates to the year 1972-73. 2. The assessee is carrying on business in jewellery at Chengannur. It is said that he purchases old gold ornaments, melts them, manufactures new ornaments and sells them. The purchase turnover of the old gold ornaments was brought to tax under section 5A of the Act and assessed at the general rate for all the three years aforementioned by the assessing authority. The assessing authority found that the accounts of the assessee could not he relied upon for the reasons stated by him in the orders of assessment and accordingly he rejected those accounts and estimated the taxable turnover of the assessee for the three years to the best of his judgment. The process adopted by the assessing authority was to estimate the taxable turnover by taking it as three times the running stock for each concerned year. Appeals were filed by the assessee before the concerned Appellate Assistant Commissioner of Sales Tax. The Appellate Assistant Commissioner confirmed the rejection of the accounts but substantially modified the estimated taxable turnover determined by the assessing authority by fixing it at 1 1/2 times the running stock in respect of each year. The assessee had reiterated before the first appellate authority a contention which he had unsuccessfully put forward before the Sales Tax Officer that the turnover relating to the purchase of old gold ornaments was taxable only at 1 per cent since it came within the scope of item No. 50 of the First Schedule to the Act, namely, "bullion and specie". This contention was rejected by the Appellate Assistant Commissioner. 3. This contention was rejected by the Appellate Assistant Commissioner. 3. The assessee filed second appeals before the Sales Tax Appellate Tribunal (hereinafter called the Tribunal) contending firstly that the rejection of his accounts was not justified by the facts and circumstances of the case and that in any event the rate applicable was only 1 per cent since the purchase turnover of the old gold ornaments came within the scope of item No. 56 of the First Schedule to the Act. The Appellate Tribunal upheld both the contentions of the assessee in relation to the assessment year 1971-72. Following the decision of this Court in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. G. S. Pai & Company ([1978] 41 S.T.C. 440.), the Appellate Tribunal held that the purchase turnover of old gold ornaments could be taxed only at the rate of 1 per cent provided for bullion and specie (item No. 56 of the First Schedule). This conclusion was recorded by the Tribunal in respect of both the assessment years in question. As regards the plea of the assessee that the assessing authority was not justified in rejecting his books of account, the Tribunal held that there were material differences in the facts and circumstances brought out in the case in respect of the year 1971-72 and those pertaining to the year 1972-73. The Tribunal was of the opinion that there was no valid justification for rejecting the accounts of the assessee with respect to the year 1971-72. Accordingly the Tribunal held that the Sales Tax Officer acted illegally in adopting the procedure of making a best judgment assessment against the assessee in respect of the said year. In this view, the Tribunal set aside the assessment made by the assessing authority for the year 1971-72 and directed the assessment to be done afresh after applying the rate of 1 per cent to the purchase turnover relating to the purchase of old gold ornaments. 4. In regard to the year 1972-73 the Tribunal came to the conclusion that there was ample material on record to show that the books of account maintained by the assessee did not reflect a true state of affairs pertaining to his business and hence the rejection of those accounts by the assessing authority was absolutely justified. 4. In regard to the year 1972-73 the Tribunal came to the conclusion that there was ample material on record to show that the books of account maintained by the assessee did not reflect a true state of affairs pertaining to his business and hence the rejection of those accounts by the assessing authority was absolutely justified. The contention taken by the revenue in the appeal filed by it against the decision of the Appellate Assistant Commissioner that the interference made by the first appellate authority with the estimate of the taxable turnover made by the Sales Tax Officer to the best of his judgment was wholly unwarranted in law, was upheld by the Tribunal. The Tribunal found that the basis adopted by the assessing authority, namely, of determining the taxable turnover by taking it as three times the running stock of the assessee during the relevant accounting period could not be regarded as arbitrary, unreasonable or perverse and hence there was no justification for the appellate authority to interfere with the said fixation and substitute in its place the best judgment of the appellate authority which was not what was contemplated by the statute. Accordingly, the Tribunal restored the estimate of the taxable turnover made by the assessing authority but directed the assessing authority to apply to it the rate of 1 per cent and redetermine the tax liability of the assessee for the year 1972-73 on the said basis. 5. In the revision petitions filed by the State (T.R.C. Nos. 161 and 162) the only point taken before us is that the Tribunal was wrong in holding that the turnover relating to the purchase of old gold ornaments fell within the scope of item No. 56 of the First Schedule to the Act and was hence taxable only at the concessional rate of 1 per cent. The learned Government Pleader submitted before us that the decision of this Court in Deputy Commissioner of Sales Tax v. G. S. Pai & Co. ([1978] 41 S.T.C. 440.) which has been relied on by the Tribunal has been subsequently reversed by the Supreme Court in Deputy Commissioner of Sales Tax v. G. S. Pai & Co. The learned Government Pleader submitted before us that the decision of this Court in Deputy Commissioner of Sales Tax v. G. S. Pai & Co. ([1978] 41 S.T.C. 440.) which has been relied on by the Tribunal has been subsequently reversed by the Supreme Court in Deputy Commissioner of Sales Tax v. G. S. Pai & Co. ([1980] 45 S.T.C. 58 (S.C.).), wherein it has been held that purchase of old gold ornaments and other articles of gold for melting them and making new ornaments or other articles will not constitute purchase of bullion and specie within the meaning of item No. 56 of the First Schedule to the Act. The counsel appearing for the assessee frankly stated before us that in view of the decision of the Supreme Court referred to above it is no longer possible for him to support the view taken by the Tribunal that the turnover relating to the purchase of old gold ornaments is not taxable at the general rate but only at the concessional rate of 1 per cent under item No. 56 of the First Schedule. Accordingly, T.R.C. Nos. 161 and 162 of 1979 filed by the State have to he allowed. 6. The contention urged by the assessee in T.R.C. No. 175 of 1979 is that the Tribunal was not justified in upholding the rejection of his accounts in respect of the year 1972-73 and in restoring the estimate of the taxable turnover fixed by the assessing authority after setting aside the finding entered in that behalf by the Appellate Assistant Commissioner. We see no substance in either of the aforesaid points raised before us by the counsel appearing for the assessee. All the authorities have concurrently found that the books of account maintained by the assessee did not truly reflect the state of affairs relating to his business and valid reasons have been stated by them for arriving at the said conclusion. There is no scope at all for any interference by this Court with the said finding concurrently entered by the assessing authority as well as by the first and second appellate authorities. There is no scope at all for any interference by this Court with the said finding concurrently entered by the assessing authority as well as by the first and second appellate authorities. On the question relating to the reasonableness of the quantum of taxable turnover, we consider the Tribunal was perfectly right in holding that the Appellant Assistant Commissioner had no justification at all in interfering with the estimate made by the assessing authority since it could not he said to he arbitrary, unreasonable or perverse. What the assessing authority had done was to estimate the taxable turnover of the assessee by taking it as three times the running stock for the relevant period of account. We are unable to discern any error of law in the view expressed by the Tribunal that the said mode adopted by the assessing authority for arriving at the taxable turnover was reasonable and proper having regard to the whole facts and circumstances of the case. 7. In the result, T.R.C. No. 175 of 1979 will stand dismissed. T.R.C. Nos. 161 and 162 of 1979 will stand allowed and in supersession of the direction given by the Tribunal in its order regarding the rate to be applied by the assessing authority in bringing the purchase turnover to tax, we hold that the said turnover will not fall within the scope of item No. 56 of the First Schedule to the Act and that it is taxable only at the general rate. We direct the parties to bear their respective costs in all these cases. Ordered accordingly.