2019 (3) TMI 299 - HC - VAT and Sales Tax

Interpretation of statute - holding of stock - scope of the word held - Section 8(f)(ii) of the Kerala Value Added Tax Act 2003 - Held that - The Tribunal found favor with the assessee s argument that the holding of stock, as found in the provision, can only be running stock and not the turnover in any event. The Tribunal, while taking note of the argument did not feel fit to remand the matter for consideration of the issue. The finding of the Tribunal is correct, but however, the question has to be dealt with as interpreted by the Tribunal. The Assessing Officer will have to necessarily look at the running stock of the business which should have to be compared with the previous year and if the same is double the running stock of the previous year, necessarily the cancellation would be proper - revision allowed by way of remand.

Summary

Issues: Correct interpretation of holding of stock under Section 8(f)(ii) of the Kerala Value Added Tax Act 2003.

In this judgment by the Kerala High Court, the primary issue was the interpretation of the provision regarding the holding of stock under Section 8(f)(ii) of the Kerala Value Added Tax Act 2003. The court examined whether the stock held should be double the quantity held in the previous year, based on the actual stock or the sales turnover. The petitioner argued that the sales turnover in the current year should determine the stock held, while the respondent contended that it should be based on the actual stock from the previous year. The court analyzed the arguments presented by both sides and referred to a relevant case law for guidance.

The court considered the facts of the case where the petitioner had a significant increase in sales turnover in the subject assessment year compared to the previous year. The court noted that the sales had gone up substantially, indicating a higher stock turnover. However, the respondent argued that the term "held" in the provision should refer to the actual stock held in the previous year and not the turnover. The court acknowledged the Tribunal's decision that the holding of stock should be interpreted as running stock and not turnover. The court agreed with the Tribunal's interpretation but decided to remand the matter for fresh consideration by the Assessing Officer.

In the final decision, the court allowed the revision and remanded the matter for fresh consideration, emphasizing that the Assessing Officer should focus on the running stock of the business compared to the previous year to determine if it is double. The court clarified that the Assessing Officer could also consider the quantity of gold held by the assessee with goldsmiths for making ornaments in this evaluation. The judgment highlighted the importance of correctly interpreting the provision regarding the holding of stock for tax purposes and the need for a thorough assessment based on running stock rather than turnover.