Shylendra Kumar, J.
(This STA is filed under Section 22-A(1) of the KST Act against the revision order dated 22.04.2009, passed in No.ZAC-1/BNG/SMR-60, 60A/08-09 on the file of the Additional Commissioner of Commercial Taxes, Zone-I, Bangalore, setting aside the appeal orders and restoring the re-assessment order with penalty and etc.)
Appeal by a dealer registered under the provision of the Karnataka Sales Tax Act (hereinafter referred to as ?the Act? for brevity) and under Section 24 of the Act.
2. This appeal is directed against the order dated 22.4.2009 passed by the Additional Commissioner of Commercial Taxes, Zone-1, Bangalore, in ZAC-1/BNG/SMR-60, 60A/08-09, who had, by exercising his revisional jurisdiction under Section 22-A(1) of the Act had set aside the appellate order passed by the Joint Commissioner of Commercial Taxes (Appeals)-1, Bangalore, passed on 15.4.2008 in KST.AP.No.231/07-08 and had restored the assessment order as had been passed by the Assessing Authority dated 21.1.2008, who had brought to tax some additional turnover, relating to the period 2004-2005 in exercise of his jurisdiction under Section 12-A of the Act.
3. The basis dispute is as to whether the total amount of Rs.5,79,06,193/- was a turnover, which in fact had escaped assessment in terms of the original assessment order and if so, was required to be brought to tax and the assessee/dealer called upon to pay the commensurate tax liability, as it arises under the provisions of the Act.
4. The Assessing Authority was of the view that a turnover adding to Rs.5,79,06,193/- which comprised of stock transfer of iron and steel, in the form of M.S. plates and hot plates, which had been transferred from the head office of the dealer at Bhavanagar in Gujarat to its branch office, at the very place of its new production unit at Hassan, representing the value of Rs.25,81,737/- against ?F? Form No.89985-6 and a further amount of Rs.1, 24,84,077/- under ?F? form No.959937-45 and the balance amount, that is, the turnover was attributable to inter state purchases, local purchases and such other acquisition of iron and steel as scrap or in any other form.
5. It is the version of the assessee that M/s. Haryana Steel and Power, the dealer is a division of M/s Haryana Ship Breakers Limited, Bhavanagar, which was indulging in breaking of ships and conversion of the metal scrap into useful metal, mainly of iron and steel and had been transporting such scrap generated at the site of ship breaking, for the purposes of its factory at Hassan and for utilization of the same towards iron and steel requirement of setting up of the factory and it is in respect of transportation of such scrap, the dealer was filing form ?F? declaration, to claim exemption form levy of tax under the Central Sales Tax Act, as the transfer was from a place at Bhavanagar in Gujarat State to Hassan Town in the State of Karnataka and but for such transfer would have amounted to an inter State sale.
6. The Assessing Officer being of the opinion that the assessee had not come up with commensurate material to sustain its claim of having utilized this quantity of iron and steel namely, of the value of Rs.5,46,30,493/- itself having been actually used or consumed in the erection of its so-called plant and machinery at the Hassan plant, issued a notice under Section 12-A of the Act indicating that the Assessing Officer proposes to add back this amount with commensurate profit margin, as the additional turnover during the period 01.04.2004 to 31.03.2005 which had escaped assessment, unless the assessee was able to come up with a satisfactory explanation and proof of he actual utilization of this quantity of iron and steel, in the erection of its plant and machinery at Hassan.
7. The assessee caused a reply to this notice in terms of its belated reply. Initially the, assessee asked for additional 20 days time and sought further time.
8. However, by reply dated 16.8.2007 which was received in the office of the Assessing Officer on 1.9.2007, objected to the proposed reopening. It was claimed that the assessee/dealer, M/s. Haryana Steel and Power is a division of M/s. Haryana Ship Breakers Limited, Bhavanagar; that the assessee had established ?medium scale unit?, manufacturing sponge iron a plant located in Hassan to take advantage of the incentives provided under the Karnataka New Industrial Policy, 2001-2006 and that the assessee had completed the setting up of the unit during the year 2004-05 and had gone into production and commercial operations.
9. It was also pointed out that there were some discrepancies in the adding up of the amount of Rs,5,73,62,019/- and it was the corrections of the figures that were disputed and it was also clarified that the stock transfer was during the year only, as noticed earlier under the Form ?F? declaration 89985-6 and 959937-45 and it did not add upto 5 crores etc., but it was only 1.5 crore and odd. The assessee claimed that its books of accounts and balance sheet have reflected the capital addition to its assets, particularly, capital addition of the assets of the assessee?s factory at Hassan and it had commensurate bills, books of accounts and other supporting material to demonstrate that the iron and steel representing the value of Rs.5,73,62,019/- had actually been utilized by capitalizing the same into plant and machinery at it?s Hassan unit.
10. The Assessing Officer though gave opportunities to the assessee to come up with supporting material to demonstrate that the iron and steel representing turnover of Rs,5,79,06,193/- was actually utilized for erecting plant and machinery of the assessee at its Hassan Sponge Iron Production Plant, but the assessee having not availed of the opportunity to come up with commensurate proof or supporting material, was forced to confirm to the show cause notice and accordingly, in terms of the assessment order dated 21.1.2008 concluded the proceedings of the show cause notice and brought to tax the additional turnover of Rs.5,75,34,653 and issued commensurate demand notice and other consequences.
11. Aggrieved by this order the assessee had appealed to the Joint Commissioner (Appeals) under Section 20(5) of the Act. The Appellate Commissioner held it proper to accept all the contention of the assessee, the grounds and additional grounds and thought it proper to accept whatever material was placed before the Appellate Authority, which according to the Appellate Authority, was the additional evidence in the form of Audited balance sheet evidencing the value of plant and machinery, ledger account extracts showing capitalization of these purchases, copies of few bills and invoices and certificate issued by the Department of Industries and Commerce confirming that the appellant has commenced construction of its plant and machinery and wanted to placed some additional material of the assessee, having taken the bold step of setting up of a sponge iron manufacturing unit, in the backward area of Hassan District of Karnataka State and such material clearly demonstrated that the assessee had not sold the scrap and other iron and steel items, which it had transported or gathered at its factory unit at Hassan but it was utilized for the setting up of its sponge iron unit at Hassan.
12. The Appellate Authority was fully convinced that the assessee had utilized the inter state purchase of iron and steel, by way of stock transfer on the strength of ?F? form, in the manufacture of plant and machinery, require for production purposes and being also satisfied about the Hassan Unit had been recognised by the competent department namely, the Department of Industries and Commerce, in terms of certificate dated 26.6.2004 etc., allowed the appeal and set aside the reassessment order of the Assessing Authority.
13. The assessee?s woes would have ended with this but for attracting the adverse attention of the Commissioner, who thought it proper to exercise his revisional jurisdiction under Section 22-A of the Act and caused issuance of notice dated 21.2.2009, calling upon the assessee to explain as to why the order passed by the Appellate Commissioner should not be set aside and the order passed by the Assessing Authority should not be restored.
14. The assessee responded to this notice in terms of reply dated 1.4.2009.
15. The Additional Commissioner examined the correctness or otherwise of the order passed by the Appellate Commissioner within the scope of Section 22-A of the Act and the facts as it prevailed and in the light of the reply caused by the assessee.
16. The Additional Commissioner found that while the reasoning and the conclusion of the Assessing Authority was fully justified in the facts and circumstances of the case and in the wake of assessee, failing to establish with commensurate evidence that the iron and steel of the value of Rs,5,46,30,493/- had actually been utilized in the setting up of plant and machinery at Hassan, the Appellate Commissioner had without any corresponding material or proof, placed before him, had merely on the basis of basis of some claims and on the production of some books and balance sheet etc., had erroneously reversed that finding and conclusion that the order was not only not correct but prejudicial to the interest of revenue and in this view of the matter, set aside the order of the Appellate Commissioner and restored the order of the Assessing Authority.
17. It is aggrieved by this order of the Additional Commissioner, the present appeal as noticed earlier.
18. Appearing on behalf of the appellant assessee, initially, Shri. Chidanand Urs. Counsel and later Shri. Indra Kumar, Senior Counsel, who joined the submissions midway have vehemently urged that the Additional Commissioner is clearly wrong in setting aside the order of the Appellate Commissioner, that the Additional Commissioner has turned a blind eye to the material and evidence which was available on record which clearly demonstrated that the assessee had utilized the entire turnover which in the opinion of the Assessing Officer had escaped the liability for tax and as the Appellate Commissioner had rightly recognised the value and the inferences to be drawn, on the basis of the material placed by the assessee before the Appellate Commissioner, the order of the Joint Commissioner is bad in law and warrants interference for being set aside and for restoring the order passed by the Joint Commissioner (Appeals).
19. It is for achieving this object, the present appeal on the following substantial questions of law, as indicated in the memorandum of appeal.
20. The questions that are projected before us for consideration are as under:
?a) Whether in facts, figures and circumstances of the case the Respondent Authority was justified in exercising the jurisdiction under Section 22-A of the Act as the provision provides for review of only erroneous orders?
b) Whether in facts, figures and circumstances of the case the Respondent Authority was justified in discarding all the expert evidence adduced by the Appellant and hold that the evidence was not ?clinching evidence? and hence the order of the First Appellate Authority being rejected and reinstating the order of the assessing authority?
c) Whether in facts, figures and circumstances of the case the Respondent Authority was justified in not passing any order on merits under the provisions of Section 22A of the KST Act, 1957 and summarily rejecting the order of the First Appellate Authority when the provisions of the Act clearly empowers the authority to make such inquiry as deemed necessary under the Act and pass reasoned order?
d) Whether in facts, figures and circumstances of the case the Respondent Authority was justified in deeming a purchase transactions as ?deemed sale? without recording any evidence to show that the sales of iron and steel was effected and on the contrary the expert evidence show capitalization of such iron and steel procured from another division of the same company?
e) Whether in facts, figures and circumstances of the case the Respondent Authority was justified in rejecting all the expert evidences and certificates produced to hold that iron and steel is not used in the factory for construction of plant and machinery?
21. After hearing Chidananda Urs at the threshold for admission, of the appeal as we were not very satisfied that the appellant had made out any valid and tenable question of law, which merited examination in this appeal, but nevertheless, to be fully satisfied of the legality of the order of the Commissioner, we had thought it fit to issue notice to the respondents through the learned Additional Government Advocate, in terms of out order dated 08.09.2009 as under and the matter has come up there after.
22. Today, we have further heard Shri Indra Kumar, learned Senior Counsel appearing for the appellant and for our satisfaction sought clarification from Smt. Geetha Menon learned Additional Government Advocate, appearing for the respondent State.
23. Shri Indra Kumar has again reiterated that the material on record was good enough to arrive at the conclusion, the assessee had actually utilized the value of iron and steel representing the turnover of Rs.5,79,06,193/-, in the erection of plant and machinery at Hassan unit of the assessee.
24. For our satisfaction, we had also requested learned Counsel appearing for the assessee to show us atleast even now as to what exactly was the kind of plant that was set up and what was the policy of the assessee to fabricate the iron and steel manufacturing plant for production of sponge iron at its Hassan unit, what was the actual value of the plant and machinery, what part of the turnover had been actually utilized etc and as had been claimed by the assessee.
25. While we are not provided with any satisfactory answer to such queries, we find on a perusal of the record and orders passed the findings by the Additional Commissioner as reflected in para Nos.8 and 9 are unexceptionable. We also find the discussion in para No.6 which proceeds as under:
?6. The order of appeal of the Appellate authority was found to be illegal and prejudicial to the revenue for the reason that even without proof by way of evidences in regard to utilization of iron and steel scraps in fabrication of plant and machinery of the unit in Hassan district, he came to an opinion that such iron and steel scrap is actually used in consideration of plant and machinery of the unit. His opinion is based on assumption without the support of evidences. The respondent has failed to establish that the iron and steel and scrap purchased and also by stock transfers have actually been used in the manufacture of plant and machinery of the unit in the State. The evidences produced as explained before the Appellate authority do not establish the fact that the Iron and steel brought from outside the State is actually used in the manufacture of plant and machinery of the unit in the State. Photographs are not at all evidences and they do not prove anything except they may be the photographs of the unit in the State. They do not establish that Iron and steel bough from outside the State is actually used in the manufacture of iron and steel of the unit in the State. The other statements viz., Auditors report, statements of inter State purchases and receipts of iron and steel, Memorandum and Articles of association do not also establish this fact, When the Respondent has failed to establish this fact, it is absolutely irregular to consider such plea of use of iron and steel in the fabrication of plant and machinery. In the circumstances the Assessing authority is justified in estimating the turnover of Iron and Steel against inter State receipt/purchases of Steel scraps. It is important to note that books of accounts and evidences in support of the claim of use of iron and steel scrap in captive consumption were never produced before the Assessing authority. Same is the position before the Appellate authority except the statements, audit reports and the like filed before him. The Respondent did not produce books of accounts and evidences deliberately before the Assessing authority due to the fact that he cannot prove the fact of alleged use of iron and steel scrap in captive consumption. In the absence of clinching evidences, it was wrong for the Appellate authority to consider the said claim. The Assessing authority is seem to have closely verified monthly statements and the returns in addition to the requisitions for F forms and certificate dated 26-06-2004 issued by District Industries Centre in regard to entry tax exemption for this new unit. It is a fact that the receipts/purchases of iron and steel are actually disclosed in monthly statement under Section 12-B(1). It is a fact declared by the respondent. In fact such purchases/receipt as per monthly statements available in the assessment records are aggregating to Rs.5,66,55,329-00 and they are not at Rs.5,46,30,493-00 as adopted by the Assessing authority. Therefore it is not either imagination of assumption by the Assessing authority in regard to this matter. The respondent has unduly disputed the adoption of the said figure in estimation of turnover of steel scrap by the Assessing authority. When taxable goods were established as purchased and received from out of the State it is for the Respondent as assessee to establish as to what happened to these goods. He has to establish with evidences that no sale has taken place and thereby no liability of tax arises in case of such purchases or receipts. It is not for the Assessing authority even to establish that sale has actually taken place. Such an event is with in the knowledge of the respondent as assessee. In the absence of proof of having utilized iron and steel in the manufacture of plant and machinery of the unit in the State, the obvious inference that should be drawn by the assessing authority is that such goods have been sold. He cannot be called upon to establish the suppressed or concealed material fact in regard to disposal of iron and steel scrap. In view of the aforesaid reasons, the appeal order is erroneous in Law which factually causes loss of revenue. Deletion of penalty in regard to suppressed turnover and tax evident as it was willful and male fide on the part of the respondent in regard to such assessable turnover is also illegal causing loss Of revenue?..
as the reason for which the Additional Commissioner had proposed to exercise his suo motto revisional jurisdiction also a cogent, convincing, legible one meriting acceptability.
26. On an examination of the material on record and the orders by the assessing authorities, we find that the Assessing Officer as well as the Additional Commissioner are very correct, in concluding that the assessee had in fact not come up with any supporting, clinching material to demonstrate that the assessee h
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ad actually utilized the turnover in of Iron and Steel of the value of Rs.5,79,06,193/- and inspite of several opportunities, the assessee had not produced the books of accounts and evidences, before the Assessing Authority and in terms of the material subsequently placed before the Joint Commissioner (Appeals), the position did not improve in any manner. 27. This was a case where the assessee itself was a dealer in the sale of iron and steel and its products and had acquired considerable quantity of the different versions of the raw material namely, iron and steel at its place of business at Hassan in Karnataka, where incidentally its manufacturing unit is also located. This is a clear case where the provisions of Section 6-A was attracted and there is not much dispute on this aspect and the burden was very heavy on the assessee to make it to the hilt, that the iron and steel, that it had purchased/acquired by any other mode including stock transfer had actually been used only for the erection of the plant and machinery at its Hassan unit and which the assessee failed to do so on the strength of the material was placed before the authorities. 28. There is no other way, than concluding that on the failure of the assessee to discharge the burden cast under Section 6-A, the value of the iron and steel acquired by it, has to be presumed to have been sold within the State and more so, the assessee itself being a dealer dealing with such products, the Assessing Authority and the Commissioner have rightly arrived at the proper conclusion. The joint Commissioner was wrong in varying the order of the Assessing Authority. We do not find any question of law which is erroneously decided by the Additional Commissioner, as is sought to be made out in the question of law raised in the memorandum of appeal. We do not find any merit in this appeal and accordingly, the appeal is dismissed. 29. We had sought for the assistance of the learned Government Advocate and therefore, a sum of Rs.5,000/- is imposed on the appellant by way of cost payable to the respondents. 30. Appeal dismissed.