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2025 DIGILAW 1243 (KER)

State of Kerala v. Esskay Industries

2025-05-19

A.K.JAYASANKARAN NAMBIAR, P.M.MANOJ

body2025
ORDER : A.K. Jayasankaran Nambiar, J. 1. These O.T. Revisions preferred by the State impugn the common order dated 28.02.2022 of the Kerala Value Added Tax Appellate Tribunal, Ernakulam in T.A. (VAT) Nos. 51/2021 and 52/2021 preferred by the respondent assessee. 2. The brief facts necessary for disposal of these O.T. Revisions are as follows: During the assessment years 2012-13 and 2013-14, the respondent assessee, which was engaged in the business of running a metal crusher unit, had opted for payment of tax at the compounded rate under Section 8(b) of the Kerala Value Added Tax Act (hereinafter referred to as the “KVAT Act”). In the declaration filed before the statutory authorities under the KVAT Act, the assessee had declared only two machines, namely, a secondary crusher (Cone crusher) and a primary crusher as the machines installed in the premises. The assessee also paid tax on compounded basis in the light of the declaration so furnished to the authorities under the KVAT Act. 3. In an inspection that was carried out by the authorities under the KVAT Act, it subsequently came out that the assessee had sought for permission from the State Mining and Geology Department in respect of three machines, namely, the primary crusher, the secondary crusher (Cone crusher) and another secondary crusher. The affidavit filed by the assessee before the State Mining and Geology Department also mentioned the installation of the additional secondary crusher in the premises. The installation of the said additional secondary crusher is also borne out by the report of the State Mining and Geology Department which states, among other things, that the additional secondary crusher was seen installed in the premises of the assessee. It is based on the said evidence and findings of the Mining and Geology Department that the Assessing Authority and the First Appellate Authority found against the respondent assessee on the aspect of differential tax payable on compounded basis under Section 8(b) of the KVAT Act. 4. In an appeal preferred by the assessee before the Appellate Tribunal, however, the Appellate Tribunal found as follows at paragraph 17 of the impugned order: “17. A perusal of the assessment order clearly revealed that the assessee/appellant had taken the very same contention before the assessing authority itself. 4. In an appeal preferred by the assessee before the Appellate Tribunal, however, the Appellate Tribunal found as follows at paragraph 17 of the impugned order: “17. A perusal of the assessment order clearly revealed that the assessee/appellant had taken the very same contention before the assessing authority itself. The order of the assessing authority clearly shows that the assessing authority had failed to conduct any independent enquiry to the allegations raised by the appellant to the proposed assessment u/s. 25A of the KVAT Act. The assessing authority as well as the first appellate authority made the assessment u/s. 25A merely based on the report submitted by the Officer of the Mining and Geology Department without testifying the correctness of the same. Though the first appellate authority heavily relied on the affidavit submitted by the appellant, its veracity and purpose was not seen enquired either by the assessing authority or the first appellate authority. The assessing authority could have very well avoid the contentions raised by the appellant by conducting a physical verification at the business premises of the appellant. In the present case, the assessing authority did not venture into such an option to testify the correctness of the contentions raised by the appellant. The appellant from the very inception is maintaining a stand that the appellant is not using machinery as alleged in the report of the Geologist. When that be the position, there was a duty cast on the assessing authority to conduct a physical verification and enquiry regarding the truth of the contentions raised by the appellant. A mere report from another department ipso-facto is not sufficient to cast tax liability on an assessee. It is the duty of department of tax to establish that the appellant is liable to pay a higher tax than what actually compounded. In the present cases, apart from the report of the Geologist there is nothing in evidence to show that the appellant is using crushers other than what are mentioned in the compounding applications. In the absence of an independent enquiry into the impugned mattes, the assessing authority as well as the first appellate authority is not justified in making a higher demand merely on the strength of a report of the Geologist. Therefore, we are of the considered opinion that the demand made by the assessing authority u/s. 25A for the years 2012-13 and 2013-14 are unsustainable.” 5. Therefore, we are of the considered opinion that the demand made by the assessing authority u/s. 25A for the years 2012-13 and 2013-14 are unsustainable.” 5. The State has preferred the O.T. Revisions rasing the following substantial questions of law: 1. Whether on the facts and circumstances of the case, Appellate Tribunal has erred in law in canceling the assessment stating that enhanced compounded tax is made without conducting a physical inspection of the Unit; particularly considering the facts that the documents relied on by department are applications, declarations and affidavit filed by the assessee before the Mining and Geology Department, wherein assessee themselves have mentioned the details of machineries installed in their unit? 2. Whether on the facts and circumstances of the case, Annexure 3 order is perverse and is liable to be set aside? 6. We have heard Sri. V.K. Shamsudeen the learned Senior Government Pleader appearing on behalf of the Petitioner State and Sri. P.S. Soman, the learned counsel appearing for the respondent assessee. It can be seen from a perusal of the above extracted portion of the Appellate Tribunal's order that the Tribunal virtually ignored the specific findings of fact by the First Appellate Authority, placing reliance on the documents obtained from the Mining and Geology Department, which clearly suggested that the assessee had installed the additional secondary machine also in its premises but had not declared the same before the KVAT Authority while paying tax on compounded basis under Section 8(b) of the KVAT Act. 7. In our view, in the light of the documents relied upon by the First Appellate Authority which clearly showed that the assessee itself had admitted the installation of the additional secondary machine in the premises, and the inspection report which clearly found this to be factually correct, it was not open to the Appellate Tribunal to fault the Assessing Authority for relying merely on the reports obtained from the Mining and Geology Department and for not conducting a physical inspection at the premises of the assessee. It is trite that factual aspects that have been admitted by the Assessing Authority can be relied upon by the Assessing Authority and if the assessee had in fact a case that the additional secondary machine was not installed in the premises, then the burden of proof was on the assessee to establish that fact before the assessing Authority/Appellate Authority as the case may be. This not having been done by the assessee, we cannot find it in ourselves to agree with the reasoning of the Tribunal that led to a reversal of the findings of the First Appellate Authority. Resultantly, these Revisions succeed and are allowed by answering the questions of law raised in favour of the State and against the assessee.