2008 (7) TMI 856 - HC - VAT and Sales Tax

Whether the Appellate Tribunal was justified in directing the assessing authority to allow deductions towards mortality and weight loss during the transportation of chicken, while quantifying the sales tax liability under the provisions of the Kerala General Sales Tax Act, 1963 read with the Kerala General Sales Tax Rules, 1963? Held that - Sales tax is payable on the real price received or receivable by the dealer in respect of a sale. A dealer is entitled to frame his price structure in a manner conducive to the type of his business. He may base his price structure so as to take care of weight loss and mortality of chicken. But when it comes to taxation under the KGST Act, whatever amounts agreed to be paid to the seller from the buyer should be considered as consideration for the sale and requires to be subjected to tax, after giving those deductions that are provided under the Act and the Rules framed thereunder and no other deductions can be allowed while computing the sales tax liability. In view of the above discussion, we cannot sustain the findings and conclusions reached by the appellate authority and the Appellate Tribunal. Accordingly, revision petitions filed by the Revenue require to be allowed and they are allowed. The questions of law framed by the Revenue are answered in favour of the Revenue and against the assessees-dealers.

Issues Involved:
1. Justification of deductions for mortality and weight loss during chicken transportation.
2. Acceptance of books of account and annual returns filed by the dealers.
3. Validity of best judgment assessment by the assessing authority.
4. Permissibility of deductions under Rule 9 of the KGST Rules.

Issue-wise Detailed Analysis:

1. Justification of Deductions for Mortality and Weight Loss During Chicken Transportation:
The primary question was whether the Appellate Tribunal was justified in directing the assessing authority to allow deductions towards mortality and weight loss during the transportation of chicken while quantifying the sales tax liability. The Tribunal had allowed the claim of the assessee towards weight loss and death loss at 25.99%, based on certificates from veterinary experts. However, the High Court found that the permissible deductions for taxable turnover are only those specified under Rule 9 of the KGST Rules, which do not include deductions for weight loss or mortality. Therefore, the High Court concluded that the Tribunal's decision to allow such deductions was incorrect and unsustainable.

2. Acceptance of Books of Account and Annual Returns Filed by the Dealers:
The assessing authority rejected the annual returns filed by the assessee, noting discrepancies between the purchase value declared in the delivery notes and the value shown in the books of account. The dealers argued that the purchase value in the delivery notes was higher due to directions from check-post authorities and that the actual purchase value was lower. The High Court upheld the assessing authority's rejection of the returns, stating that the check-post declarations are public documents presumed to be correct unless proven otherwise. The court emphasized that the books of account maintained by the dealers were rightly not accepted as they did not reflect the values shown in the delivery notes.

3. Validity of Best Judgment Assessment by the Assessing Authority:
The assessing authority resorted to best judgment assessment due to the discrepancies found in the dealers' books of account and annual returns. The High Court supported this approach, noting that the assessing authority was justified in disallowing the deductions claimed by the dealers for weight loss and mortality. The court highlighted that the sales tax is payable on the real price received or receivable by the dealer, and the deductions claimed by the dealers were not permissible under the statutory provisions.

4. Permissibility of Deductions Under Rule 9 of the KGST Rules:
The High Court analyzed the relevant provisions of the Kerala General Sales Tax Act, 1963, and the Kerala General Sales Tax Rules, 1963. It noted that Rule 9 specifies various deductions that can be excluded from the taxable turnover, but these do not include deductions for weight loss or mortality. The court concluded that the only deductions allowed are those specified under sub-clauses (a) to (k) of Rule 9, and no other deductions can be allowed while computing the sales tax liability. Consequently, the court found that the appellate authority and the Tribunal erred in allowing deductions for weight loss and mortality.

Conclusion:
The High Court allowed the revision petitions filed by the Revenue, answering the questions of law in favor of the Revenue and against the assessees-dealers. The court directed that the permissible deductions for taxable turnover are only those specified under Rule 9 of the KGST Rules, and no deductions for weight loss or mortality are allowed. The assessing authority's best judgment assessment was upheld, and the books of account and annual returns filed by the dealers were rightly rejected due to discrepancies.

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