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1993 DIGILAW 386 (KER)

Jaihind v. State of Kerala

1993-08-16

K.P.BALANARAYANA MARAR, K.S.RADHAKRISHNAN

body1993
Judgment :- K.S. Paripoornan, J. These are connected cases. The petitioner in this batch of five revisions is the same assessee. The respondent is the Revenue. The revision petitioner is an assessee under the Kerala General Sales Tax Aet, 1963. He is a leading jewellery at Broadway, Ernakulam. We are concerned with the assessment years 1980-81,1982-83,1983-84,1985-86 and 1987-88. For all the five years, the accounts and returns of the dealer were rejected and best judgment assessments were made. In first appeals, the assessments for the years 1980-81,1982-83 and 1985-86 were confirmed and slight modifications were made in the assessments for the years 1983-84 and 1987-88. In second appeals filed by the assessee, the Sales Tax Appellate Tribunal, Additional Bench, Ernakulam, disposed of the mailer for all the five years by a common order dated October 29, 1992. The appeals were partly allowed. In brief, there was reduction in the quantum of the estimates for all the years. The assessee has come up in revisions, assailing the common order passed by the Appellate Tribunal dated October 29,1992. 2. We heard counsel. 3. Admittedly, there were surprise inspections of the assessee's business place in all the five years. For the year 1980-81, there were two inspections, on October 4,1980 and January 17,1981. For the year 1982-83, the surprise inspection was on February 19, 1983. For the year 1983-84, the inspection was conducted on December 27,1983. For the year 1985-86, the surprise inspection was on December 11,1986 and for the year 1987-88, the inspection was on May 16, 1987. During all these inspections, stock variations were found. The variations related cither to cold ornaments or "old. In some cases, excess stock was found. In some other cases, the stock was found to be lesser. The accounts were rejected for all the five years and best judgment assessments were made. The plea of the assessee was that the percentage of variation worked out to far below 1 per cent in many cases and only in some cases, the variation worked out to lilllc more than 1 per cent. Since the variation found during the inspections worked out only to 1 per cent or 1.1. per cent, the accounts should not have been rejected. The assessing authority rejected the said plea and held that the variation in stock showed that the accounts were not kept correctly and regularly. Since the variation found during the inspections worked out only to 1 per cent or 1.1. per cent, the accounts should not have been rejected. The assessing authority rejected the said plea and held that the variation in stock showed that the accounts were not kept correctly and regularly. Even if the stock difference was small in some cases, the difference found out in stock showed that the accounts were not regularly kepi. The first appellate authority concurred with the said view. The Sales Tax Appellate Tribunal also noticed that there were variations in stock found out during inspections for all the five years. The above factor is sufficient' to hold that the accounts are not regularly and correctly kept. So, the plea of the assessee that the accounts and 'returns slum Id not have been rejected is not acceptable. We are of the view that the Sales Tax Appellate Tribunal was justified in holding that the rejection of accounts is proper and valid for all the five years. The order of the Appellate Tribulations not disclose any error of law on this score. 4. When once the accounts are rejected, an estimate of the taxable turnover is called for. On that aspect, ordinarily, the best judgment assessment should be to the best of judgment of the assessing authority. This has been so held by the Supreme Court in Commissioner of Sales Tax v. H.M. Esitfeili ILM. Abilulali [1973] 32 STC 77. In jewellery business, multiple of running stock is one of the well-known methods to estimate the taxable turnover. The assessing authority estimated the turnover by adding three limes to the running stock for the years 1980-81,1982-83,1983-84 and 1985-86. He adopted the' multiple of four times the running stock for the year 1987-88. The Appellate Tribunal reviewed the entire materials in the case, found out the quantum of stock variation for each year and look the view that the estimate of Volumes the running stock will meet the ends of justice for all the years. In other words, though three limes the running stock was adopted for four assessment years and four times the running stock multiple was adopted for the fifth year, the Appellate Tribunal reduced the estimate to two limes the running stock for all the five years. Relief was afforded in the quantum of estimate for the live years. 5. In other words, though three limes the running stock was adopted for four assessment years and four times the running stock multiple was adopted for the fifth year, the Appellate Tribunal reduced the estimate to two limes the running stock for all the five years. Relief was afforded in the quantum of estimate for the live years. 5. On a perusal of the appellate order as a whole, we are satisfied that the Appellate Tribunal evaluated the facts in a proper perspective and has limited the addition to two limes the running stock for valid and proper reasons. As a final fael finding authority, it is open to the Appellate Tribunal to fix the quantum of estimate to be made according to the faels and circumstances appearing in each case. There has been individual and separate consideration of the facts for each year by the Appellate Tribunal and after such appreciation, the estimate has been reduced to two times the average running stock. The said finding of the Appellate Tribunal is largely a finding of fact. There is no error of law in the order of the Appellate Tribunal on this score also. We decline to interfere with the quantum of estimates sustained by the Appellate Tribunal. 6. It was vehemently argued before us that as per Circular No.C1.18180/90/TX dated June 5,1990 of the Board of Revenue (Taxes), certain instructions have been given which will go to show that no "penal action" against gold merchants need be taken if the difference in weighment of gold jewellery is below 2 per cent when the total stock of gold jewellery is 10 kgs. or less and 1 percent difference for the stock above 10 kgs. The circular brought to our notice is to the following effect: No.C1.18180/90/TX Office of the Board of Revenue (Taxes), Trivandrum. Dated 17-5-1990. CIRCULAR No. 6/90 Sub: Kerala General Sales Tax Act, 1963 - Inspection at the business places of gold merchants - Certain instructions. During discussion with the representatives of the gold merchants by the Honourable Minister for Finance, it was pointed out that for very small differences in the stock of gold ornaments, the Inspecting Officers are penalizing the gold merchants. It is stressed that this difference can occur because of weighing the ornaments in the balance piecemeal, the weight of tags attached to the ornaments, etc. It is stressed that this difference can occur because of weighing the ornaments in the balance piecemeal, the weight of tags attached to the ornaments, etc. It was further emphasised that Central excise authorities have issued directions not to take any action against gold merchants if the excess stock found out on inspection is 2 per cent of the total stock. In the circumstances, it was agreed by Government that no penal action against gold merchants need be taken if the difference in weighment of gold jewellery is below 2 percent when the total stock of gold jewellery is 10 Kgs. or less and 1 per cent difference for the stock above 10 kgs. This is brought to the notice of all officers for information and compliance. Sd/- Secretary (Taxes-II) It was argued that reckoning the said circular, since the difference in weighment was 1 per cent in certain cases and little more than 1 per cent in certain other cases, the accounts and returns should not have been rejected. We are of the view that this plea should fail for reasons more than one. No reliance was placed on the above circular . before the statutory authorities. The statutory authorities had no occasion to consider the matter from the angle of the above circular. Secondly, the circular will be applicable only in the case of penal action. In the five cases, we are not concerned with the penal action, but only with the regular assessments. The circular quoted above may not apply to such cases. Finally, the circular was not in force during the relevant assessment years. 7. It was then argued that the substance of the circular, is to the effect that small difference or variation should not be made much of and that a lenient view should be taken. But it is for the Board of Revenue (Taxes) to consider this aspect of the mailer as to whether any administrative relief should be given in marginal or borderline cases. Just as in the case of penal action the difference of 1 percent for the stock above 10 kgs. and the difference of 2 per cent when the stock is 10 Kgs. or less is ignored, in the case of assessment, some similar indulgence or margin can be considered by the Board of Revenue. Just as in the case of penal action the difference of 1 percent for the stock above 10 kgs. and the difference of 2 per cent when the stock is 10 Kgs. or less is ignored, in the case of assessment, some similar indulgence or margin can be considered by the Board of Revenue. But it is not for this Court to substitute its own opinion in the matter. We should state that no argument was addressed about the legality or validity of the circular mentioned above in any respect. The various aspects focused about the circular may be matters to be brought before the Board of Revenue for such action as the Board may deem fit. We do not propose to examine the matter at length since this was never raised before any of the authorities. The revisions are dismissed.