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Hotel Surya, Iritty, Represented by Its Managing Partner, K.T. Mathew v/s The State of Kerala, Represented by Secretary To Government, Department of Commercial Taxes, Thiruvananthapuram

    OT. Rev. No. 54 of 2020 & TA. No. 46 of 2017

    Decided On, 03 March 2020

    At, High Court of Kerala

    By, THE HONOURABLE MR. JUSTICE C.K. ABDUL REHIM & THE HONOURABLE MR. JUSTICE T.V. ANILKUMAR

    For the Petitioner: Rajesh Nambiar, Advocate. For the Respondent: C.E. Unnikrishnan, Spl. GP.



Judgment Text

C.K. Abdul Rehim, J.1. Assessment completed against the revision petitioner under the Kerala General Sales Tax Act ('KGST Act', for short) with respect to the year 2011-12 was under challenge in an appeal filed before the Deputy Commissioner (Appeals)-II, Kozhikode. The dispute was mainly relating to additions made on the gross profit, based on the conceded turnover. The Assessing Authority, by rejecting the conceded gross profit at the rate of 31.92%, assessed gross profit at the rate of 65%. The First Appellate Authority reduced the same to 50%. Being not satisfied, the revision petitioner took up the matter before the Appellate Tribunal in a second appeal. The Tribunal had dismissed the second appeal by observing that, there is no reason to accept the contention that the gross profit adopted by the authorities below, at 50%, is excessive. It is aggrieved by the order of the Tribunal that the revision petitioner is before this Court.2. Heard; learned counsel for the revision petitioner and learned Special Government Pleader (Taxes) appearing for the respondent.3. Specific contention raised by the revision petitioner is that, the Books of Accounts with respect to the relevant year was produced before the Assessing Authority at Kuthuparamba (CTO-Kuthuparamba). Therefore it was contended that, the observation that there occurred failure on the part of the revision petitioner in producing the Books of Accounts, is not true and correct. Further contention raised is that, when the assessee had submitted statutory 'Certificate of Audit' and statements in Form Nos. 50A and 50B, through a qualified Auditor, it was not justified in rejecting the claim, merely by assailing the reason that the Books of Accounts were not produced.4. While considering the above contentions, we are of the opinion that, no pure question of law arises for decision by this court. However, we realise that there exists non application of mind by the authorities in properly adverting to the contentions raised. Further, we think it appropriate to permit the revision petitioner to produce the Books of Accounts for verification before the authority concerned. At the same time, we are not inclined to remit the matter unless a considerable portion of the disputed amount is deposited. Therefore, in order to achieve the ends of justice, we think it appropriate to remit the matter for fresh assessment to be done, with opportunity afforded to the assessee to substantiate his claims.5. Incidentally it is pointed out that, the Assessing Authority had taken coercive steps of recovery and the Beverages Corporation was directed to withhold further supply of liquor to the revision petitioner, unless 'Certificate of Payment' of tax due on such goods are issued by the Assessing Authority; and also requesting the Beverages Corporation not to transfer or credit any cash back or discount or incentive etc. to the dealer, unless an intimation is issued from the office of the Assessing Authority with respect to clearance of tax payment by the dealer. It was also intimated that, the indent for delivery to the dealer be withheld for the purpose of assessing such goods to tax. The above steps taken in pursuance of recovery of the disputed amount, is purely without jurisdiction and is a high handed action on the part of the authority, is the contention of the revision petitioner. Question as to whether the Assessing Officer can direct withholding of supply to the petitioner, arises for consideration. Learned Special Government Pleader (Taxes) points out that, under Section 23AA of the KGST Act, the Assessing Authority is conferred with all the powers of the Collector under the Kerala Revenue Recovery Act, 1968, for taking steps of recovery to realise the arrears due. He further points out that, Section 19 of the Kerala Revenue Recovery Act enables the Recovery Officer to make attachment of any movable property which is not in the possession of the defaulter, by virtue of an order of attachment to be issued in writing. Provisions contained in Section 19(1)(c) of the Kerala Revenue Recovery Act are as follows;“19. Attachment of debt, shares, etc.-- (1) In the case of–Xxxxxxxxx(c) other movable property not in the possession of the defaulter except property deposited in, or in the custody of, any Court, the attachment shall be made by a written order of the Collector or the authorised officer prohibiting –(i) in the case of the debt, the creditor from recovering the debt and the debtor from making payment thereof until the further order of the Collector or the authorised officer, as the case may be;(ii) in the case of the share, the person in whose name the share may be standing from transferring the same or receiving any dividend thereon;(iii) in the case of the other movable property (except as aforesaid), the person in possession of the same from giving it over to the defaulter.”6. Of course, sub-section (c)(iii) of Section 19(1) provides about attachment of movable property in the possession of third person, to restrain it from giving it over to the defaulter. But in the case at hand, the Assessing Authority has not issued any order of attachment in writing specifying any quantity of goods belonging to the defaulter which is in the possession of the Beverages Corporation. Instead a blanket direction is issued to the effect of withholding any further supply to be made to the defaulter by the Corporation. The relevant portion of the letter issued by the Assessing Authority to the Corporation Warehouse, is as follows;“Hence, it is requested that the IMFL, Beer, Wine sold by you to M/s.Hotel Surya, Iritty, be withheld unless a certificate of payment tax due on such goods are issued to you by the undersigned. And no cash back/discount/ incentives etc. be transferred/credited to M/s.Hotel Surya, Iritty, unless an intimation is issued from this office on clearance of tax payment by the dealer.Details indent of IMFL, Beer and Wine/Beer and Wine ready for delivery to the dealer be withheld and my please be intimated to this office for assessing such goods to tax for intimation to the dealer for remittance.”7. It cannot be considered in any manner that the direction issued as above is an order of attachment issued in writing with respect to attachment of any movable property belonging to the defaulter, which is in the possession of a third person. If the officer had reason to believe that any movable property belonging to the petitioner/defaulter is in the possession of the Beverages Corporation, it is well within his power to attach the same by issuing a written order of attachment, by specifying the details of the goods. But in the case at hand, the letter is issued to the effect of withholding the entire supply to be made by the Beverages Corporation to the defaulter. In effect, the restrainment will lead to a closing down of the business activity of the petitioner. Further, the Beverages Corporation cannot be compelled to restrain from making any supply against the payments of consideration already made by the defaulter. Therefore, we are of the considered opinion that, the letter issued by the Assessing Authority cannot be considered in any manner as an order of attachment effected within the purview of Section 19 of the Kerala Revenue Recovery Act. Hence we are inclined to quash the same; and we order so.8. Coming back to the merit of the revision petition, we think it appropriate to insist upon the revision petitioner to make deposit of 50% of the disputed amount, for directing a remand of the matter for completing the assessment afresh.9. Hence, the above revision petition is hereby allowed and the impugned assessment made with respect to the year 2011-12 against the revision petitioner is hereby quashed, subject to condition of the petitioner depositing 50% of the disputed tax amount, including the payment if an

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y already made out of the disputed amount. If such deposit is made within a period of one month from today, the Assessing Officer shall make a fresh assessment, after affording opportunity to the petitioner to produce the Books of Accounts and other supporting documents if any; and also an effective opportunity of hearing. Failing compliance of the condition insisted as above, the impugned orders will survive and the respondent will be at liberty to proceed with further steps of recovery. If the condition is complied with, the fresh assessment as directed above shall be completed at the earliest, at any rate, within a period of two months from the date of deposit of the amount. The order of attachment effected with respect to the Bank account operation shall be lifted immediately on deposit of the said amount.All pending interlocutory applications are hereby closed.
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