2010 (10) TMI 956 - HC - VAT and Sales Tax

Whether the assessment is done only when it is completed and signed? Whether estimation of turnover made by the assessing officer which is essentially bifurcation of taxable and non-taxable turnover based on findings of facts during inspection? Held that - If the assessment is initiated for any return period in the financial year itself, rule 39(5)(iv) does not apply and the assessment can be completed for such return period or return periods through separate orders for each return period. So much so, we do not find any merit in the challenge against the validity of the assessment on the ground that the assessment is completed for each return period, i.e., for each month by separate orders. There is also merit in the finding of the Tribunal that the assessee having not raised any objection against single assessment during the course of assessment, cannot raise a technical objection after monthly assessments are completed through separate orders. We, therefore, answer this question in favour of the Revenue by upholding the validity of separate assessments and rejecting the contentions of the assessee to the contrary. Since the exempted goods, namely, textile, on physical inspection was found only in one of the five shops, we feel the relief granted by the first appellate authority and confirmed by the Tribunal is reasonable and in any case it is not proper for us to interfere with the findings on facts, that too based on data gathered on inspection. We, therefore, do not find the second question raised is a substantial question of law warranting interference under the revisional jurisdiction under section 63 of the KVAT Act. Appeal of assessee dismissed.

Summary

Issues:
1. Validity of separate monthly assessments under rule 39(5)(iv) of the KVAT Rules.
2. Estimation of turnover by the assessing officer based on inspection findings.

Issue 1: Validity of separate monthly assessments under rule 39(5)(iv) of the KVAT Rules:
The case involved a revision filed by the petitioner-assessee challenging the monthly VAT assessments for the year 2005-06 confirmed by the VAT Appellate Tribunal. The primary contention was whether separate monthly assessments completed for each month of the financial year 2005-06 were valid under rule 39(5)(iv) of the KVAT Rules, which mandates a single order for best judgment assessments done after the year-end. The Tribunal upheld the validity of separate assessments, emphasizing that no prejudice was caused to the assessee. The court analyzed the procedural requirements for audit assessments under section 24 of the Kerala Value Added Tax Act, emphasizing the mandatory nature of conducting an inquiry, issuing notices, and providing opportunities for the dealer to respond before finalizing assessments. It concluded that the assessment process began during the financial year and was completed after the year-end, thereby not violating the rule's provisions. The court held that the reference to "where the best judgment assessment is done" in rule 39(5)(iv) encompasses the entire assessment procedure, not just the finalization, and ruled in favor of the Revenue, rejecting the challenge against the validity of separate assessments.

Issue 2: Estimation of turnover by the assessing officer based on inspection findings:
The second question raised pertained to the assessing officer's estimation of turnover, specifically the bifurcation of taxable and non-taxable turnover based on inspection findings. The first appellate authority had granted relief by considering 30% of the turnover as non-taxable, with the rest categorized as turnover from ready-made garments. The Tribunal deemed this modification reasonable, especially since textiles were found only in one of the five shops during inspection. The court declined to interfere with these factual findings, emphasizing that the relief granted was justifiable and not a substantial question of law warranting revisional jurisdiction under section 63 of the KVAT Act. Consequently, the court dismissed the revision case filed by the assessee, upholding the estimation of turnover made by the assessing officer based on inspection results.

In conclusion, the court's judgment addressed the validity of separate monthly assessments under the KVAT Rules and the assessing officer's estimation of turnover, ultimately ruling in favor of the Revenue and dismissing the revision case filed by the assessee.