M/S Shanthakoti Enterprises Vs. State of Karnataka - Court Judgment

SooperKanoon Citationsooperkanoon.com/1194346
CourtKarnataka High Court
Decided OnJul-06-2018
Case NumberSTRP 192/2015
JudgeDR.VINEET KOTHARI AND S.SUJATHA
AppellantM/S Shanthakoti Enterprises
RespondentState of Karnataka
Excerpt:
1/11 r in the high court of karnataka at bengaluru dated this the6h day of july2018present the hon'ble dr.justice vineet kothari and the hon’ble mrs.justice s.sujatha strp no.192 of2015& strp nos.331-341 of2017between: m/s. shanthakoti enterprises quarry owner & exporters of block granites dealer e.w.s. 57 khb colony, chamarajanagar-571313. represented by its partner, mr. k.shanthakumar, aged about 51 years, s/o. mr. kotinayak …petitioner (by mr. m.thirumalesh, advocate) and:1. state of karnataka, represented by principal secretary to government, finance department, government of karnataka, vidhana soudha, bengaluru-560001. date of order 06-07-2018 strp.nos.192 /2015 & 331-341/2017 m/s. shanthakoti enterprises vs. state of karnataka & others. 2/11 commissioner of commercial taxes karnataka, vanijya therige karyalaya, gandhinagar, bengaluru-560009. joint commissioner of commercial taxes (appeals), mysore division, mysore. commercial tax officer, vat-audit-2, mysore.2. 3.4. …respondents these strps are filed under section 65(1) of karnataka value added act, 2003, against the judgment & decree dated 28.07.2014 passed in sta nos.1160- 1171/2011 on the file of the karnataka appellate tribunal at bengaluru, dismissing the appeals filed under section 9(2) of central sales tax act, 1956. these strps coming on dr. vineet kothari j.delivered the following:- for orders, this day order mr. m.thirumalesh, adv., for petitioner-assessee the assessee-m/s shanthakoti enterprises, chamarajanagar, a dealer of granite, engaged in the business of extraction of rough granite blocks from date of order 06-07-2018 strp.nos.192 /2015 & 331-341/2017 m/s. shanthakoti enterprises vs. state of karnataka & others. 3/11 quarries and effecting the sales of the same in the course of inter-state trade and commerce, has filed the present revision petitions in this court aggrieved by the order passed by the karnataka appellate tribunal, bengaluru, dated 28.7.2014 in sta nos. 1160-1171/2011 (m/s. shanthakoti enterprises vs state of karnataka), whereby the learned tribunal upheld the estimate of suppressed turnover by the authorities below adopting the basis of information supplied by the mining department under rules 42 and 43 of the karnataka minor mineral concession rules, 1994 (hereinafter for short referred to as ‘the rules”), upon a survey of the business place of the petitioner on 20.10.2005, where it was found that the assessee was not filing his monthly returns regularly and again during inspection on 25.4.2007 it was observed that there were differences in the measurements of the sales invoices and that given in the permits issued by the department of mines and geology. thus, the suppressed turnover to the tune of rs.28,64,220/- was estimated by date of order 06-07-2018 strp.nos.192 /2015 & 331-341/2017 m/s. shanthakoti enterprises vs. state of karnataka & others. 4/11 in the re-assessment order the assessing authority (annexure-c) dated 26.2.2010 for the period from april 2005 to march 2006.2. the reasons assigned by the learned tribunal in the impugned order (annexure-a) dated 28.7.2014 are quoted below for ready reference : - “7.point no.1:- on perusal of the records of lower authorities we notice that the cto (ms) chamarajanagara had visited the business premises of the appellant on 20.10.2005 and noticed that the appellant is not filing monthly returns regularly. later cto (intelligence1) mysore during inspection on 25.04.2007 has observed the difference in measurements shown in sales invoices and that given in the permits issued by department of mines & geology. the suppressed sales was worked out at rs. 1,07,31,317-00. the appellant failed to produce the books of accounts in response to the notice of the intelligence authority. as per rule 42 & 43 of kmmc rules 1994 the required permit date of order 06-07-2018 strp.nos.192 /2015 & 331-341/2017 m/s. shanthakoti enterprises vs. state of karnataka & others. 5/11 would have detailed measurements of the rough granite blocks permitted to be removed from the quarry. the difference between actual measurement of the physical goods and that shown in permit should not exceed by 0.05 cmt. if the difference exceeds 0.15 cmt penalty at five times the royalty amount is attracted. these provisions are reiterated in the circular dated 24.07.1997 of the director of mines & geology. the cto while entertaining the rectification application, in the proposition notice has furnished month wise details of measurements in permit, measurements in corresponding sales invoices, difference in cu. mts. and value thereof. standard deduction in cubic meters is also allowed. hence, we find that the estimation of suppressed turnover is fair and justifiable. hence, we answer point no.1 in the affirmative.” 3. learned counsel for the petitioner-assessee, mr. thirumalesh submitted that the first appellate authority has referred to a communication dated 8.10.2009 and extracted the table of removal of granite date of order 06-07-2018 strp.nos.192 /2015 & 331-341/2017 m/s. shanthakoti enterprises vs. state of karnataka & others. 6/11 in the case of assessee and on the basis of the said communication issued by the mysore minerals limited (government of karnataka undertaking) dated 8.10.2009 though the learned joint commissioner (appeals) found that the difference between the quantity mentioned in the permits and sales invoices was more than 15% but he has dismissed the contention of the assessee that more deduction toward wastage in the production process should be allowed, and affirmed the assessment order passed by the assessing authority giving deduction of only 15% while estimating the suppressed turnover in the hands of the assessee.4. learned tribunal has upheld the order passed by the two authorities below.5. the argument raised by the learned counsel for the petitioner-assessee before us are two folds (i) that rules 42 and 43 of the rules are not relevant for the purpose of assessment under the provisions of the date of order 06-07-2018 strp.nos.192 /2015 & 331-341/2017 m/s. shanthakoti enterprises vs. state of karnataka & others. 7/11 karnataka value added tax act, 2003 (for short hereinafter referred to as “the kvat act”). (ii) that the deduction of only 15% while estimating the suppressed turnover is not justified because even if such an evidence was to be relied upon by the assessing authority, the difference as estimated by the mining department or the government of karnataka undertaking, m/s mysore minerals limited, was more than 15% as would be evident from the table or chart so quoted in the order of the joint commissioner (appeals).6. we may observe here that none of the arguments raised by the learned counsel for the petitioner-assessee is tenable and acceptable. firstly, the estimate of suppressed turnover by the authorities under the kvat act are findings of fact in the realm of best judgment assessment by the authorities and unless there is a perversity in the same, no question of law arises requiring consideration by this court under section 65 of the kvat act. date of order 06-07-2018 strp.nos.192 /2015 & 331-341/2017 m/s. shanthakoti enterprises vs. state of karnataka & others. 8/11 7. secondly, the contention raised by the learned counsel that the information or the documents maintained under rules 42 and 43 of the rules could not have been relied upon by the assessing authority under the provisions of the kvat act is misconceived. as a matter of fact, the actual removal of goods, minerals (granite in present case), the information and documents maintained by the mining department is indeed the best evidence which could be relied upon by the assessing authorities under the provisions of the kvat act. while estimating the suppressed turnover, once during the course of survey at the business place of the petitioner-assessee, the officers of the commercial tax department found that the measurements and quantum of granite sold by the petitioner-assessee during the said period did not tally with the information available with the mining department, such authority could always resort to the best judgment assessment for estimating the suppressed turnover in the hands of the petitioner-assessee and imposing additional date of order 06-07-2018 strp.nos.192 /2015 & 331-341/2017 m/s. shanthakoti enterprises vs. state of karnataka & others. 9/11 tax thereon. therefore, the information yielded from the documents maintained and compiled under rules 42 and 43 of the rules by the mining department cannot be said to be an irrelevant evidence for the authorities under the provisions of the kvat act.8. as far as assessment of suppressed turnover is concerned, we have already indicated above that it is a matter of fact finding and best judgment assessment by the authorities under the act. the assessee cannot claim as a right that deduction from gross turnover to the extent of more than 15% ought to have been given in the hands of the assessee based upon a communication by the mysore minerals limited dated 8.10.2009 as extracted by the joint commissioner (appeals) in annexure-d dated 10.3.2011. even though the said letter is extracted in the said order of the first appellate authority, the said authority has upheld the estimate of the suppressed turnover by the assessing authority giving deduction only to the extent of 15%. a perusal of the said table by us date of order 06-07-2018 strp.nos.192 /2015 & 331-341/2017 m/s. shanthakoti enterprises vs. state of karnataka & others. 10/11 also indicates that the percentage of difference between permit quantity and sales invoices ranges between 13.93% to 33% or so. it may be more than 15% on an average but that does not establish any standard of deduction from gross turnover to be estimated on the basis of such records maintained by the mining department to any exact extent. the deduction given by the assessing authority and as upheld by the two appellate authorities to the extent of 15% on the basis of which the suppressed turnover in the present case has been finally estimated to the extent of rs.28,64,220/- appears to be reasonable and justified and therefore we cannot hold that such orders are perverse requiring our interference under section 65 of the kvat act.9. we do not find any force in the revision petitions. no question of law arises from such finding of tribunal. the revision petitions are liable to be dismissed and accordingly they are dismissed. no costs. date of order 06-07-2018 strp.nos.192 /2015 & 331-341/2017 m/s. shanthakoti enterprises vs. state of karnataka & others. 11/11 copy of the order may be sent to the respondent department. ckl list no.1, sl. no.2 sd/- judge sd/- judge
Judgment:

1/11 R IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE6H DAY OF JULY2018PRESENT THE HON'BLE Dr.JUSTICE VINEET KOTHARI AND THE HON’BLE Mrs.JUSTICE S.SUJATHA STRP No.192 OF2015& STRP Nos.331-341 OF2017Between: M/s. Shanthakoti Enterprises Quarry Owner & Exporters of Block Granites Dealer E.W.S. 57 KHB Colony, Chamarajanagar-571313. Represented by its Partner, Mr. K.Shanthakumar, Aged about 51 years, S/o. Mr. Kotinayak …Petitioner (By Mr. M.Thirumalesh, Advocate) And:

1. State of Karnataka, Represented by Principal Secretary to Government, Finance Department, Government of Karnataka, Vidhana Soudha, Bengaluru-560001. Date of Order 06-07-2018 STRP.Nos.192 /2015 & 331-341/2017 M/s. Shanthakoti Enterprises Vs. State of Karnataka & others. 2/11 Commissioner of Commercial Taxes Karnataka, Vanijya Therige Karyalaya, Gandhinagar, Bengaluru-560009. Joint Commissioner of Commercial Taxes (Appeals), Mysore Division, Mysore. Commercial Tax Officer, VAT-Audit-2, Mysore.

2. 3.

4. …Respondents These STRPs are filed under Section 65(1) of Karnataka Value Added Act, 2003, against the judgment & decree dated 28.07.2014 passed in STA Nos.1160- 1171/2011 on the file of the Karnataka Appellate Tribunal at Bengaluru, dismissing the appeals filed under Section 9(2) of Central Sales Tax Act, 1956. These STRPs coming on Dr. VINEET KOTHARI J.

delivered the following:- for orders, this day ORDER

Mr. M.Thirumalesh, Adv., for Petitioner-Assessee The assessee-M/s Shanthakoti Enterprises, Chamarajanagar, a dealer of granite, engaged in the business of extraction of rough granite blocks from Date of Order 06-07-2018 STRP.Nos.192 /2015 & 331-341/2017 M/s. Shanthakoti Enterprises Vs. State of Karnataka & others. 3/11 quarries and effecting the sales of the same in the course of inter-State trade and commerce, has filed the present Revision Petitions in this Court aggrieved by the order passed by the Karnataka Appellate Tribunal, Bengaluru, dated 28.7.2014 in STA Nos. 1160-1171/2011 (M/s. Shanthakoti Enterprises vs State of Karnataka), whereby the learned Tribunal upheld the estimate of suppressed turnover by the authorities below adopting the basis of information supplied by the Mining Department under Rules 42 and 43 of the Karnataka Minor Mineral Concession Rules, 1994 (hereinafter for short referred to as ‘the Rules”), upon a survey of the business place of the petitioner on 20.10.2005, where it was found that the assessee was not filing his monthly returns regularly and again during inspection on 25.4.2007 it was observed that there were differences in the measurements of the sales invoices and that given in the Permits issued by the Department of Mines and Geology. Thus, the suppressed turnover to the tune of Rs.28,64,220/- was estimated by Date of Order 06-07-2018 STRP.Nos.192 /2015 & 331-341/2017 M/s. Shanthakoti Enterprises Vs. State of Karnataka & others. 4/11 in the re-assessment order the assessing authority (Annexure-C) dated 26.2.2010 for the period from April 2005 to March 2006.

2. The reasons assigned by the learned Tribunal in the impugned order (Annexure-A) dated 28.7.2014 are quoted below for ready reference : - “7.Point No.1:- On perusal of the records of lower authorities we notice that the CTO (MS) Chamarajanagara had visited the business premises of the appellant on 20.10.2005 and noticed that the appellant is not filing monthly returns regularly. Later CTO (Intelligence

1) Mysore during inspection on 25.04.2007 has observed the difference in measurements shown in sales invoices and that given in the permits issued by Department of Mines & Geology. The suppressed sales was worked out at Rs. 1,07,31,317-00. The appellant failed to produce the books of accounts in response to the notice of the Intelligence authority. As per Rule 42 & 43 of KMMC Rules 1994 the required permit Date of Order 06-07-2018 STRP.Nos.192 /2015 & 331-341/2017 M/s. Shanthakoti Enterprises Vs. State of Karnataka & others. 5/11 would have detailed measurements of the rough granite blocks permitted to be removed from the quarry. The difference between actual measurement of the physical goods and that shown in permit should not exceed by 0.05 CMT. If the difference exceeds 0.15 CMT penalty at five times the Royalty amount is attracted. These provisions are reiterated in the Circular dated 24.07.1997 of the Director of Mines & Geology. The CTO while entertaining the rectification application, in the proposition notice has furnished month wise details of measurements in permit, measurements in corresponding sales invoices, difference in cu. Mts. And value thereof. Standard deduction in cubic meters is also allowed. Hence, we find that the estimation of suppressed turnover is fair and justifiable. Hence, we answer Point No.1 in the affirmative.” 3. Learned counsel for the petitioner-assessee, Mr. Thirumalesh submitted that the first Appellate Authority has referred to a communication dated 8.10.2009 and extracted the Table of removal of granite Date of Order 06-07-2018 STRP.Nos.192 /2015 & 331-341/2017 M/s. Shanthakoti Enterprises Vs. State of Karnataka & others. 6/11 in the case of assessee and on the basis of the said communication issued by the Mysore Minerals Limited (Government of Karnataka Undertaking) dated 8.10.2009 though the learned Joint Commissioner (Appeals) found that the difference between the quantity mentioned in the permits and sales invoices was more than 15% but he has dismissed the contention of the assessee that more deduction toward wastage in the production process should be allowed, and affirmed the assessment order passed by the assessing authority giving deduction of only 15% while estimating the suppressed turnover in the hands of the assessee.

4. Learned Tribunal has upheld the order passed by the two authorities below.

5. The argument raised by the learned counsel for the petitioner-assessee before us are two folds (i) That Rules 42 and 43 of the Rules are not relevant for the purpose of assessment under the provisions of the Date of Order 06-07-2018 STRP.Nos.192 /2015 & 331-341/2017 M/s. Shanthakoti Enterprises Vs. State of Karnataka & others. 7/11 Karnataka Value Added Tax Act, 2003 (for short hereinafter referred to as “the KVAT Act”). (ii) That the deduction of only 15% while estimating the suppressed turnover is not justified because even if such an evidence was to be relied upon by the assessing authority, the difference as estimated by the Mining Department or the Government of Karnataka Undertaking, M/s Mysore Minerals Limited, was more than 15% as would be evident from the Table or Chart so quoted in the order of the Joint Commissioner (Appeals).

6. We may observe here that none of the arguments raised by the learned counsel for the petitioner-assessee is tenable and acceptable. Firstly, the estimate of suppressed turnover by the authorities under the KVAT Act are findings of fact in the realm of best judgment assessment by the authorities and unless there is a perversity in the same, no question of law arises requiring consideration by this Court under Section 65 of the KVAT Act. Date of Order 06-07-2018 STRP.Nos.192 /2015 & 331-341/2017 M/s. Shanthakoti Enterprises Vs. State of Karnataka & others. 8/11 7. Secondly, the contention raised by the learned counsel that the information or the documents maintained under Rules 42 and 43 of the Rules could not have been relied upon by the assessing authority under the provisions of the KVAT Act is misconceived. As a matter of fact, the actual removal of goods, minerals (granite in present case), the information and documents maintained by the Mining Department is indeed the best evidence which could be relied upon by the assessing authorities under the provisions of the KVAT Act. While estimating the suppressed turnover, once during the course of survey at the business place of the petitioner-assessee, the officers of the Commercial Tax Department found that the measurements and quantum of granite sold by the petitioner-assessee during the said period did not tally with the information available with the Mining Department, such authority could always resort to the best judgment assessment for estimating the suppressed turnover in the hands of the petitioner-assessee and imposing additional Date of Order 06-07-2018 STRP.Nos.192 /2015 & 331-341/2017 M/s. Shanthakoti Enterprises Vs. State of Karnataka & others. 9/11 tax thereon. Therefore, the information yielded from the documents maintained and compiled under Rules 42 and 43 of the Rules by the Mining Department cannot be said to be an irrelevant evidence for the authorities under the provisions of the KVAT Act.

8. As far as assessment of suppressed turnover is concerned, we have already indicated above that it is a matter of fact finding and best judgment assessment by the authorities under the Act. The assessee cannot claim as a right that deduction from gross turnover to the extent of more than 15% ought to have been given in the hands of the assessee based upon a communication by the Mysore Minerals Limited dated 8.10.2009 as extracted by the Joint Commissioner (Appeals) in Annexure-D dated 10.3.2011. Even though the said letter is extracted in the said order of the first Appellate Authority, the said authority has upheld the estimate of the suppressed turnover by the assessing authority giving deduction only to the extent of 15%. A perusal of the said Table by us Date of Order 06-07-2018 STRP.Nos.192 /2015 & 331-341/2017 M/s. Shanthakoti Enterprises Vs. State of Karnataka & others. 10/11 also indicates that the percentage of difference between Permit quantity and Sales Invoices ranges between 13.93% to 33% or so. It may be more than 15% on an average but that does not establish any standard of deduction from gross turnover to be estimated on the basis of such records maintained by the Mining Department to any exact extent. The deduction given by the assessing authority and as upheld by the two Appellate Authorities to the extent of 15% on the basis of which the suppressed turnover in the present case has been finally estimated to the extent of Rs.28,64,220/- appears to be reasonable and justified and therefore we cannot hold that such orders are perverse requiring our interference under Section 65 of the KVAT Act.

9. We do not find any force in the Revision Petitions. No question of law arises from such finding of Tribunal. The Revision Petitions are liable to be dismissed and accordingly they are dismissed. No costs. Date of Order 06-07-2018 STRP.Nos.192 /2015 & 331-341/2017 M/s. Shanthakoti Enterprises Vs. State of Karnataka & others. 11/11 Copy of the order may be sent to the Respondent Department. ckl List No.1, Sl. No.2 Sd/- JUDGE Sd/- JUDGE