Madeena Timber Industries vs State of Kerala

Manjula Chellur C.J.

Heard learned counsel for the revision petitioner as well as learned Government Pleader representing the Revenue. The brief facts that led to present writ petition are as under:

The revision petitioner is a dealer engaged in timber business and admittedly an assessee under the KVAT Act on the files of the Commercial Tax Officer, Kasaragod. According to the petitioner, in spite of maintaining true and correct accounts which were submitted along with the returns for the year 2010-11 and paying the tax payable, the assessing authority issued a notice alleging that the revision petitioner though effected 12 purchases by purchasing timber from M/s. Oriental Timbers, Kochi, another registered dealer, has concealed the same while monthly returns were filed so far as the 12 purchases. According to the revision petitioner, they immediately replied the notice stating, the purchases were made by one Mr. C.G. Madhu, an agent using TIN number of the revision petitioner, but those purchases were without the knowledge of the revision petitioner. Therefore, as the tax was promptly paid by the first seller, i.e., M/s. Oriental Timbers, the revision petitioner cannot be saddled with any liability on the ground of intention to evade tax under the KVAT scheme. From the contentions of the revision petitioner, what is noticed is, they admit earlier transactions between them and M/s. Oriental Timbers through an agent named Mr. C.G. Madhu, but they denied the 12 purchases said to have been unearthed during the scrutiny of the accounts by the assessing officer. The assessing officer opined that the additions have to be made to the turnover, so far as the 12 purchases and accordingly proceeded to do so.

Aggrieved by the same, the revision petitioner filed appeal contending that there was no opportunity whatsoever was given to the revision petitioner to establish their stand. After receiving the proposed assessment making additions to the turnover, the proceedings were closed within two days. Therefore, according to him, not only principles of natural justice were violated, but the said order of the assessing authority was erroneous.

The first appellate authority proceeded to consider the matter and treated the assessment as penalty. When this was brought to the Appellate Tribunal by the revision petitioner, the Tribunal did not even consider the contrary views expressed by the authorities below and simply proceeded to dismiss the appeal before the Tribunal. Therefore, the revision petitioner is before us.

It is not in dispute that though the assessing officer made additions to the turnover, the appellate authority treated the same as penalty. The Tribunal ought to have looked into the contentions raised by the revision petitioner in order to upheld the opinion of the first appellate Tribunal. According to the revision petitioner, Mr. Madhu their agent, has clandestinely used TIN number of them to make alleged 12 purchases from M/s. Oriental Timbers. In order to appreciate the bona fides of the revision petitioner regarding their contentions they have placed on record annexures E14 and E13, the letter addressed to M/s. Oriental Timbers and the reply received from M/s. Oriental Timbers. The proposed notice of the assessing authority is dated November 2, 2011. By November 30, 2011 orders of assessment came to be passed.

The assessing authority opined that the assessee apart from denying the transaction had not produced any other material to substantiate that they have nothing to do with the 12 purchases made by Mr. Madhu using the TIN Number of the revision petitioner. The information gathered by the assessing officer through the details of sales were uploaded by M/s. Oriental Timbers along with cross-verification of the accounts and the returns of the revision petitioner, 12 purchases were found missing from the turnover of the revision petitioner. Though the assessing officer indicates that no vehicle number or the name of the driver was noted except the bill number and the value of goods, no further verification of any sort came to be made.

On the other hand, the attempt made by the revision petitioner as noted above at annexure E14 and E13 indicates, he was making hectic efforts to unearth the details of alleged 12 purchases. As a matter of fact, they addressed a letter to M/s. Oriental Timbers at annexure E14 to which Oriental Timbers replied by letter dated January 6, 2012. Though Oriental Timbers acknowledged the purchases having being made by Mr. Madhu, they informed that the delivery of timber as per 12 bills was made to the place indicated by Mr. Madhu. So far as the tax payable, the seller M/s. Oriental Timbers have complied with their duty and obligation being the first seller.

It is also evident from the record that a complaint came to be lodged against Mr. Madhu in the court of judicial Magistrate First Class, Kasaragod alleging fraud and cheating.

In the light of above materials, it is clarified that the stand of the revision petitioner is not a ruse to deny the purchases but they had taken further action against Mr. Madhu. Though these documents were not part of the scrutiny by the assessing officer at the time of assessment order by adding to the turnover the amounts shown in the purchase bills, subsequently when these details were brought on record, either the first appellate authority or the Tribunal ought to have paid attention to the contentions raised by the revision petitioner.

Once the denial of purchases twelve in number were made by the revision petitioner in the background of alleging fraud, etc., against their agent, it was incumbent upon the assessing officer to gather further information from Mr. Madhu by examining him and also gather other details from M/s. Oriental Timbers, how the payments were made to Oriental Timbers whether by Mr. Madhu in cash or any bank channel referring to the source of revision petitioner being the payer of the amounts. In the absence of such information, we are of the opinion the concerned authorities have not acted based on the material placed before them totally ignoring the contentions raised by the revision petitioner.

In the light of the above observations, we are of the opinion, as the very genesis for arriving at the conclusion by the assessing authority is defective, the consequential orders are of no value. Hence, all the three orders of assessing authority, first appellate authority and the Tribunal are set aside remitting back the matter to the assessing officer to consider the matter afresh, in the light of the above observations, after giving opportunity to the revision petitioner. The entire exercise has to be completed within a period of three months from the date of receipt of a copy of the judgment. This revision petition is disposed of as above.