1996 (7) TMI 536 - HC - VAT and Sales Tax

Summary

Issues:
1. Assessment of taxable turnover for the assessment year 1987-88.
2. Claim for exemption as a second seller and objections to assessment notice.
3. Dispute regarding additions made in turnover and alleged suppression in accounts.
4. Interpretation of burden of proof under section 12 of the Kerala General Sales Tax Act, 1963.
5. Verification of stock variations and irregularities found during inspection.
6. Confirmation of the Tribunal's order and dismissal of the tax revision case.

Analysis:
1. The petitioner, an assessee, challenged the assessment order for the assessment year 1987-88, which fixed the taxable turnover at Rs. 1,34,329.65. The petitioner claimed total exemption on the grounds that the sales represented second sales, leading to objections being filed against the assessment notice under section 17(3) of the Kerala General Sales Tax Act, 1963. The assessing authority added an estimated 5% towards suppression in accounts, which was later reduced to 2.5% by the Appellate Assistant Commissioner. The Tribunal ultimately dismissed the appeal, leading to the tax revision case.

2. The counsel for the assessee contended that the additions made in turnover lacked basis and argued for exemption as a second seller. The assessee also claimed that minor stock variations should be accepted. However, the burden of proof lies on the assessee to establish exemption under section 12 of the Act. The lack of evidence regarding unaccounted purchases or shortages from locally purchased turnover weakened the assessee's case.

3. The Full Bench decision in Sreekrishna Trading Co. v. State of Kerala established that the burden of proving exemption from tax lies with the dealer. If turnover originates from unaccounted purchases, the dealer is treated as a first seller unless evidence shows otherwise. In this case, the petitioner failed to provide evidence to support their claim as a second seller exempt from tax liability. Therefore, the assessment was deemed not arbitrary or unjust.

4. During an inspection of the petitioner's business premises, unaccounted sales were discovered, leading to proposed prosecution proceedings. The petitioner opted to compound the offense departmentally by paying a fee in lieu of prosecution, indicating the correctness of stock variations reported by the assessing authority. The existence of irregularities was confirmed by this action.

5. After a thorough review, the Court found no irregularity or illegality in the Tribunal's order. Consequently, the Tribunal's decision was upheld, and the tax revision case was dismissed without costs. The judgment confirmed the assessment of taxable turnover and the denial of exemption as a second seller, based on the lack of evidence provided by the assessee.