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Sree Krishna Traders Vs. Sales Tax Officer. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberO.P. No. 1382 of 1975
Reported in(1976)5CTR(Ker)0195B
AppellantSree Krishna Traders
RespondentSales Tax Officer.
Cases ReferredA. P. Mariappa Mudaliar vs. State of Madras
Excerpt:
.....and proposing a best of judgment assessment for the reasons indicated therein. according to the learned counsel, the petitioners accounts cannot be rejected for this reason for making a best of judgment assessment. in the above decision this court has said :the proposition is well settled that accounts regularly maintained in the course of business have to be taken as correct unless there are strong and sufficient reasons to indicate that they are unreliable. the department has to prove satisfactory that the account books are unreliable, incorrect or incomplete before it can reject the accounts. though it may not be possible to lay down in general terms the exact circumstances in which the accounts should be considered as unreliable or incorrect. the accounts could be rejected as..........to the learned counsel, quantification of the tax payable is always referred to as the tax assessed. learned counsel then refers to the following passage on page 444 in principles of statutory interpretation by g. p. singh (1975 edn.);'in construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of the law. if the revenue satisfied the court that the case falls strictly with the provisions of the law, the subject can be taxed. if, on the other hand, the case is not covered within the four corners or by analogy or by trying to probe into the intentions of the legislature and by considering what was the substance of the matter. shah, j. has formulated the principle thus : in interpreting a taxing statute, equitable.....
Judgment:

K. K. Narendran, J. - The petitioner in this original petition is an assessee sales-tax under the Kerala General Sales Tax Act, 1963, for short the Act. The grievance of the petitioner is against Exts. P-1 and P-3. Ext. P-1 is a notice issued under the proviso to S. 17(3) of the Act for making a best of judgment assessment, Ext. P-3 is the final assessment for the year 1972-73. The main question that arises for consideration is whether the benefit of a Notification exempting purchase of firewood and clay by the manufacturers of tiles within the State under S. 10 of the Act issued after the assessment year before the actual assessment can be claimed by the assessee in the assessment for that year. A decision of this question depends upon the fact as to when the liabilities to sales-tax in respect of a transaction arises. The petitioner has also a contention that the petitioners accounts cannot be rejected on the ground that the quantity of gum used was insufficient.

2. The petitioner is a dealer in copra, coconut oil, cakes, bricks, tiles etc. The petitioner produced his books of account and other connected records of the year 1972-73 before the respondent Sales-tax Officer, Thodupuzha. But the respondent issued Ext. P-1 notice u/s. 17(3) of the Act rejecting the accounts and proposing a best of judgment assessment for the reasons indicated therein. The petitioner filed his objections to Ext. P-1 on 25-2-1975. In this objections to Ext. P-1 the petitioner pointed out that the quantity of gum used for crushing copra would vary with the quality of copra crushed. It was also pointed out that the calculation of gum at a uniform rate of 500 gms. per quintal as stated in Ext. P-1 was wholly arbitrary. The petitioner also claimed exemption of the purchase turnover of firewood an clay as per Ext. P-2 notification dt. 19-11-1973. But the respondent overruled the petitioners objections and assessed the petitioner as per Ext. P-3 order dt. 25-2-1975. The petitioner challenges Exts. P-1 and P-3 in this original petition.

3. A counter-affidavit has been filed on behalf of the respondent. The statement in para 3 of the counter-affidavit is that assessments for the years 1970-71 and 1971-72 made on similar lines are pending in appeal before the Appellate Assistant Commissioner, Ernakulam and in the case of the assessment of the year 1972-73 the petitioner has approached this Court without filing an appeal. It is pointed out in para 7 that the petitioner has not kept accounts for the use of gum. The petitioner has filed a reply affidavit. In para. 3 of the reply affidavit it is reiterated that in any event on a correct interpretation of Ext. P-2 notification the petitioners purchase turnover of clay and firewood is not to be taxed.

4. Learned counsel for the petitioner contends that simply because the petitioner has not kept any accounts for the use of gum the respondent cannot arbitrarily fix a uniform rate of 500 gms. per quintal of copra crushed. According to the learned counsel, the petitioners accounts cannot be rejected for this reason for making a best of judgment assessment. Learned counsel relies on St. Teresas Oil Mills vs. State of Kerala 1969 KLJ 857 and contends that the petitioners account cannot be rejected on filmsy grounds. In the above decision this court has said :

'The proposition is well settled that accounts regularly maintained in the course of business have to be taken as correct unless there are strong and sufficient reasons to indicate that they are unreliable. The department has to prove satisfactory that the account books are unreliable, incorrect or incomplete before it can reject the accounts. The rejection of accounts is not a matter to be done light-heartedly; though it may not be possible to lay down in general terms the exact circumstances in which the accounts should be considered as unreliable or incorrect. The accounts could be rejected as unreliable if important transactions are omitted or if proper particulars and vouchers are not forthcoming if they do not include entries relating to one particular class of business.'

Learned counsel then contends that the exemption granted as per Ext. P-2 notification is in respect of the tax payable under section 5A of the said Act and the tax becomes payable after the assessment is completed. Hence, since Ext. P-2 notification dated 19-7-1973 was issued long before Ext. P-3 order of assessment determining the tax payable by the petitioner for the assessment year 1972-73 the petitioner is entitled to the exemption granted by Ext. P-2 notification. In support of the contention, learned counsel relies on Vir Bhan Bansi Lal vs . Commissioner if Income-tax, Punjab wherein interpreting section 28 of the Indian Income-tax Act, 1922, it is said :

'The word payable in the latter portion of the section means to which he has been assessed, whether the amount has been paid or not'.

Learned counsel also relies on C.I.T. vs . Vegetable Products Ltd. : [1973]88ITR192(SC) wherein the Supreme Court construing section 271(1)(a)(i) of the Income-tax Act, 1961 has said :

'We must first determine what is the meaning of the expression the amount of tax, if any, payable by him, in S. 271(1)(a)(i). Does it mean the amount of tax assessed under S. 271(1)(a)(i). Does it mean the amount of tax assessed under S. 143 or the amount of tax payable under S. 156. The word assessed is a term often used in taxation law. It is used in several provisions in Act. Quantification of the tax payable is always referred to in the Act as a tax assessed. A tax payable is not the same thing as tax assessed. The tax payable is that amount for which a demand notice is issued under S. 156. In determining the tax payable is not the same thing as tax assessed. The tax payable is that amount for which a demand notice is issued under S. 156. In determining the tax payable, the tax already paid has to be deducted. Hence, there can be no doubt that the expression the amount of the tax, if any, payable by him referred to in the first part of S. 271(1)(a)(i) refers to the tax payable under demand notice'.

Learned counsel then contends that no sales-tax becomes payable until it is assessed and support of this contention learned counsel relies on Thomas vs. State of Kerala 1960 KLJ 27 of the above judgment reads :

'we proposed to assume, without deciding, that the expression tax payable relates to a tax assessed and demanded as contended by the State. Even then it does not follow that the levy of surcharge in these cases is valid.'

According to the learned counsel, quantification of the tax payable is always referred to as the tax assessed. Learned counsel then refers to the following passage on page 444 in Principles of Statutory Interpretation by G. P. Singh (1975 Edn.);

'In construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of the law. If the revenue satisfied the court that the case falls strictly with the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners or by analogy or by trying to probe into the intentions of the legislature and by considering what was the substance of the matter. Shah, J. has formulated the principle thus : In interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any assumed deficiency.'

5. Learned Government Pleader appearing in the case contends that the estimate of gum at 500 gms. per quintal of copra crushed. The Sales-tax Appellate Tribunal in its order in T.A. 548 of 1968 has held that the quantity of gum used in an Oil Mill would vary from 3/4 Kgs. to 11/4 Kgs. per quintal of copra crushed and the estimate made in this case is less than fixed by the Tribunal. It is also pointed out that the petitioner assessee has a duty to keep accounts for the gum used. Referring to the contention of the learned counsel for the petitioner that by virtue of Ext. P-2 notification the petitioners purchase turnover in respect of the clay and firewood must be exempted for the assessment year 1972-73 learned Government Pleader contends that the notification has no retrospective effect. It is also contended by the learned Government Pleader that the tax liability under Act is attracted as soon as the sale or the purchase, as the case may be, is effected. Learned Government Pleader, points out that the decision under the Income-tax Act are not applicable here for the above reason. It is also pointed out that Ext. P-2 notification was actually issued long after the assessment year in question was over and by no stretch of imagination it can be said that such a notification is applicable to that assessment year.

6. There is considerable force in the contentions of the learned Government Pleader. In the absence of any accounts kept by the petitioner assessee for the gum used the quantity estimated by assessing authority cannot be considered at arbitrary in view of the decision of the Sales-tax Appellate Tribunal in T.A. 548 of 1968. There is substantial difference in the nature of the tax liability under the Income-tax Act and under the Sales-tax Acts. The scheme of the Sales-tax Acts is that a sale or purchase attracts tax immediately the transaction takes place. The fact that the computation of the turnover in made annually cannot later the nature of the lability to tax. In this case, the taxable event as far as the purchase of firewood and clay is concerned happened when the actual purchase took place. This was long prior to the issue of Ext. P-2 notification. In the absence of any indication in Ext. P-2 notification that it is retrospective or the exemption therein is available in respect of transactions made in the assessment year 1972-73 also, by no stretch of imagination it can be said that the exemption is available to the assessee in respect of his purchase turnover of firewood and clay made in the assessment year 1972-73. The tax became payable long before the issue of Ext. P-2 notification though the demand as per Ext. P-3 assessment order can only be after its issue. Hence the assessee cannot take shelter under the notification and get the exemption claimed.

7. In arriving at the above conclusion I am supported by a decision of the Madras High Court in A. P. Mariappa Mudaliar vs. State of Madras 13 S.T.C. 746 wherein it has been said :

'The taxable event under the Act is either sale or purchase and the scheme of the act is that each transaction of sale or purchase by a dealer attracts tax at the point of time when the transactions take place though for the purpose of convenience the computation of the turnover is made annually. The liability to pay tax therefore arises on the happening of the taxable event though collection may be postponed till after the total turnover is determined, the tax levied and the actual demand made. A sum of money is said to be payable when a person is under an obligation to pay it. The word payable may therefore signify an obligation to pay at a future time.'

8. The original petition is dismissed. There will be no order as to costs.


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