2019 (7) TMI 914 - HC - VAT and Sales Tax

Reversal of assessment - excess of purchase turnover - Section 25 of the Kerala Value Added Tax Act, 2003 - annual return rejected for the reason that, discrepancy was noted in the amount of total purchase reflected in the annual return with that of the audited statement - the authorities have not found any discrepancy in the sales figures returned, it cannot be found that there occurred any escapement of sales turnover which is taxable HELD THAT - The Department has no case that the materials covered under the omitted purchase were not converted into finished goods, which was not reflected in the sales turnover and which had escaped assessment. Therefore, we perfectly agree with the findings of the Tribunal that, at the most the filing of incomplete or incorrect return might have attracted penalization under Section 67 of the KVAT Act. But that alone cannot be used to make an addition in the turnover and to demand tax with respect to the sales turnover of such purchase omitted to be included in the return. We are not convinced that the Tribunal had failed to decide any question of law or had erroneously decided any question of law, which will attract interference of this Court in a revision petition filed under Section 63 of the KVAT Act - revision petition dismissed.

Summary

Issues:
State revision against order of Kerala Value Added Tax Tribunal reversing assessment under KVAT Act for the year 2009-10 due to discrepancy in purchase turnover. Assessment proposed addition to taxable turnover for non-accounted purchases. Assessee contended clerical error, failed to file revised return with reconciliation statement. Deputy Commissioner (Appeals) confirmed assessment. Tribunal found mistake in non-returning of purchase turnover but no discrepancy in accounts or sales turnover. Government Pleader argued addition justified due to suppressed purchase turnover. Tribunal held incomplete return may attract penalization but not addition in turnover. Government Pleader contended Tribunal did not decide any question of law.

Analysis:
The case involved a revision petition by the State against an order of the Kerala Value Added Tax Tribunal which had reversed an assessment made under the Kerala Value Added Tax Act for the year 2009-10. The Tribunal found a discrepancy in the purchase turnover reported by the assessee, leading to the proposed addition of a significant amount to the taxable turnover. The assessing authority confirmed the assessment, noting the failure of the assessee to file a revised return with a reconciliation statement as required under Section 42 of the KVAT Act. The Deputy Commissioner (Appeals) also upheld the assessment, emphasizing the lack of documentary evidence proving the use of materials purchased but not returned in the production of finished goods.

In the appeal before the Tribunal, it was observed that the mistake lay in the non-returning of purchase turnover, with no evidence of any omission in the accounts or discrepancy in sales turnover. The Tribunal highlighted that the failure to file revised returns under Section 42(2) could lead to incomplete or incorrect returns, attracting penal proceedings under Section 67 of the KVAT Act. However, since there was no evidence of unaccounted sales or escapement of sales turnover, the additions made based solely on the non-returning of purchases were deemed unsustainable.

The Government Pleader argued that the addition to the turnover was justified due to the suppressed purchase turnover, emphasizing the legal requirement for filing complete and accurate returns. The Tribunal's findings were supported, stating that penalization under Section 67 might be applicable for incomplete returns but did not warrant additional tax demands based on omitted purchases. The Court dismissed the revision petition, noting that the Tribunal had not erred in its decision or failed to address any significant legal questions, thereby upholding the Tribunal's order and confirming the dismissal of the revision petition.