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TMI Blog2008 (8) TMI 820X X X X Extracts X X X X X X X X Extracts X X X X ..... fied in merely relying on the so-called credit notes and debit notes to grant relief to the assessee. In that view of the matter the revision petition requires to be allowed and the orders passed by the Tribunal requires to be set aside. Decided against the assessee - S.T. Rev. No. 363 of 2006 - - - Dated:- 26-8-2008 - DATTU H.L. C.J. AND BASHEER A.K. , JJ. ORDER:- The order of the court was made by H.L. DATTU C.J. The Revenue is before us in this revision petition filed under section 41 of the Kerala General Sales Tax Act, 1963 being aggrieved by the orders passed by the Sales Tax Appellate Tribunal, Additional Bench, Palakkad in T.A. No. 10 of 2006 dated March 30, 2006. By the impugned order, the Tribunal has cancelled the orders passed by the first appellate authority in S.T.A. No. 6469 of 2005 dated November 24, 2005. The respondent in this revision petition is a Government company and is engaged in the manufacture and sale of cement. The assessee-company has several cement manufacturing units including one at Cherthala. It is only in their unit cement is manufactured using fly ash as basic raw material. The unit had started its commercial production with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... headquarters at Walayar up to the month of July, 2004. But to my surprise the sales turnover of cement and its collected tax due from your grinding unit at Cherthala is not seen furnished along with your sales turnover of your headquarters at Walayar in the month of August, 2004. Thus you have intentionally concealed a portion of your sales turnover and its collected tax due in the return filed for the month of August, 2004. This is a clear violation punishable under section 45A(1)(d) of the KGST Act, 1963. In the above circumstances you are requested to file a revised return including the sales turnover of your branch unit at Cherthala and the collected tax due on the above sales turnover with proof of payment of tax, failing which you will be proceeded under section 46 of the KGST Act to recover the collected tax kept by you with interest and the tax already paid will be appropriated first towards interest accrued on such tax due and the balance available shall be appropriated towards principal outstanding under section 55C and also provisional assessment will be initiated under rule 21(13) of the KGST Rules. You are also given an opportunity to be heard in person or throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for the project vide GO(MS) No. 83/2004/ID dated July 20, 2004. Also as per the notification dated August 9, 2004 cited above, the tax exemption is applicable from the date of commencement of commercial production, i.e., August 7, 2003 and as such an amount of Rs. 4,40,59,643, i.e., sales tax remittance from August 7, 2003 to July 31, 2004 is to be refunded to us. As we require funds to purchase land and for other preliminary activities of the project we have retained the collected tax for the month of August, 2004 with us. Viewing the situation in totality and considering the intention of the Government in allowing the relief to this PSU, kindly allow us to retain the amount of tax with us and to continue the project activities and no penal action may kindly be initiated. We are moving separately for the refund of the amount already remitted for the period from August 7, 2003 to July 31, 2004. Not being satisfied with the reply so filed, the assessing authority had issued yet another demand notice dated September 30, 2004 which is produced along with the revision petition papers. In the said notice, the assessing authority had directed the assessee to deposit a sum of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing authority dated January 17, 2005, directing the assessee to deposit the tax collected for the month of August, 2004 and also to pay penal interest for the belated payment of the tax collected. After receipt of the said notice, a reply dated January 20, 2005 came to be filed by the assessee. In that except stating that they have issued credit notes to its purchasers of cement, they had not whispered anything with regard to the debit notes that was issued by the assessee to its customers. The reply filed by the petitioner dated January 20, 2005 is as under: Kindly refer your notice cited above directing to remit the collected sales tax with interest due on cement sales made by our CGU during the month of August 2004. As you are please aware, the Cherthala CGU has been exempted from payment of sales tax for nine years from the date of commencement of commercial production vide Government Gazette Notification S.R.O. No. 859/2004 and G.O. (P) No. 129/2004/TD dated August 9, 2004. We furnish the following facts for your kind perusal. The exemption was effective from the date of commencement of commercial production which is August 7, 2003. However, the above referred exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inion, rightly understanding the colourable device that was adopted by the assessee to deprive the Revenue from payment of the sales tax due to it, in its well considered order has stated as under: The appellant-company ought to have remitted the tax collected up to August 12, 2004 to Government invariably and thereafter the company would either return the tax collected to persons from whom the amount was collected or to pay over the same to Government. If the amount is not returned to the persons from whom it is collected, the amount so collected is liable to be forfeited to Government. In any event, the company is not entitled to retain the amount collected by way of tax. In view of section 22 and section 46A and the scheme of tax exemption granted in S.R.O. No. 854 of 2004 the appellant cannot retain the amount collected by way of tax. Any later arrangement by the company does not alter the very nature of tax collected from customers on its sales during August 2004. The appellant did not give effect to the Government Notification in S.R.O. No. 859/04 till August 31, 2004 in respect of transaction made during August 2004 despite it received copy on August 12, 2004. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur consideration and decision. They are as under: (A) Whether the Appellate Tribunal is right in law in annulling the well considered order of the appellate authority which has sustained the demand of the Assessing Authority to collect and forfeit the admitted tax collections of the assessee for the month of August 2004, especially when the assessee has admittedly not reimbursed the amount to the buyers from whom they have collected tax? (B) Is not the Tribunal in error in its understanding on section 22 and section 46A of the KGST Act while disposing of the TA? (C) Whether under the facts and circumstances of this case the very appeal filed by the assessee before the first appellate authority maintainable? We have heard Sri Vinod Chandran, learned Special Government Pleader (Taxes) appearing for the Revenue and Sri V.P. Narayanan, learned counsel appearing for the assessee. Sri Vinod Chandran, learned Special Government Advocate, would submit that it was expected of the assessee-company to have remitted the tax collected by them for the month of August, 2004 within the due date, to the Sales Tax Department and since that has not been done the notices were issued b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enalty, in exercise of his powers under section 45A of the Act and, therefore, the first appellate authority was not justified in sustaining the demand notices issued by the assessing authority, wherein he had directed the assessee to deposit the tax collected by them for the month of August, 2004 in so far as its Cherthala unit is concerned. The learned counsel would further submit that the assessee is a Government Company and it did not have any intention to defeat the lawful claim of the Revenue. Lastly, the learned counsel would submit that since the assessee had issued credit and debit notes to its customers, it cannot be said that a colourable device is adopted by the assessee to retain the tax collected from its customers. One and the only question that arises for our consideration and decision is, whether the assessing authority was justified in issuing demand notices to the assessee to remit the tax collected by its Cherthala unit for the month of August, 2004. The assessee is a Government company. It has several manufacturing units at different places, for manufacture of cement. It has a unit at Cherthala also. At Cherthala unit, it manufactures cement using fly as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gust, 2004. For the first time, in the memorandum of appeal filed before the first appellate authority, the assessee had stated that it had not only issued credit notes to its customers but also issued debit notes and in the debit notes the tax collected has been merged with the sale price of cement and, therefore, the assessee need not have to remit any tax collected from its customers for the month of August, 2004. The apex court in McDowell's case [1985] 59 STC 277 (SC); [1985] 154 ITR 148 (majority view) has observed that tax planning may be legitimate provided it is within in the framework of law and colourable devices cannot be part of tax planning. The apex court in the aforesaid decision has observed that: (page 286 of STC and 161 of ITR) ...It is up to the court to take stock to determine the nature of the new and sophisticated legal devices to avoid tax and consider whether the situation created by the devices could be related to the existing legislation with the aid of 'emerging' techniques of interpretation as was done in Ramsay [1982] AC 300, Burma Oil [1982] Simon's TC 30 and Dawson [1984] 1 ALL ER 530, to expose the devices for what they rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tax planning may be legitimate, provided it is within the framework of law. The tax planning in the instant case, was done only when they were asked to remit the tax collected. As observed by the courts, colourable devices cannot be part of the tax planning and it is wrong to encourage such devices. In our considered view, the assessee cannot retain the tax collected by it from its customers, and the same requires to be remitted to the State Government within the time prescribed under the Act, along with its monthly returns. In the instant case, as we have already stated in detail, the assessee, in fact, had collected tax for the month of August, 2004, but failed to remit the same with the Sales Tax Department and it is only as an afterthought it has issued the so-called credit notes and debit notes to its customers. This colourable device adopted by the assessee, in our view, is only a sham transaction and the same cannot be sustained. In that view of the matter, in our opinion, the Tribunal was wholly unjustified in merely relying on the so-called credit notes and debit notes to grant relief to the assessee. In that view of the matter the revision petition requires to b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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