AVR Overseas Pvt. Ltd. vs State of Karnataka

N. Kumar, J.—This revision petition is filed against the order passed by the Karnataka Appellate Tribunal affirming the orders passed by the lower appellate authorities. The petitioner is a dealer registered under the provisions of the Karnataka Sales Tax Act, 1957 (for short, hereinafter referred to as, "the KST Act"). He is trading in resale of kerosene and other oils. He is also registered under the provisions of the Central Sales Tax Act, 1956 (for short, hereinafter referred to as, "the CST Act"). The petitioner has been trading in kerosene within the State as well as outside the State of Karnataka. He has been riling returns regularly and remitting taxes due upon the returns. The petitioner has effected inter-State sales of kerosene against form C declarations issued by the registered dealers situated outside the State under rule 12(1) of CST Rules. In the course of his business, the petitioner is required to transport kerosene to the place of the purchasers. Since kerosene is flammable liquid/oil, the same requires to be transported in the specified tankers. On November 4, 2003, the petitioner raised sale invoices bearing Nos. 626, 627 and 628 in favour of M/s. Jai Bherunath Traders, C/o. K.F. Jain, Shop No. 5, Khanwell Road, Rakholi Village Silvasa (hereinafter referred to as the purchaser) and the kerosene was consigned along with the respective delivery notes bearing Nos. 6261404, 8261405 and 8261406 dated November 4, 2003. The case of the petitioner is that he had complied with section 28A(2) read with rule 23B of the KST Rules. The kerosene was transported in the tankers bearing No. MH 04 P 6395, MH 04 F 4698 and MH 04 BG 8296 on the same day. The drivers of the respective vehicles had tendered the aforesaid documents at the Mukka check-post on arrival. The Commercial Tax Officer in-charge of the check-post Mukka, issued an endorsement on the basis of suspicion that the consignee/purchaser is not in existence. The endorsements even dated November 5, 2003 issued u/s 28A(3B) of the KST Act were served on the drivers and the vehicles were parked until the investigation completed. The check-post officer levied penalty u/s 28A(4) of the KST Act amounting to Rs. 1,84,340 Rs. 1,53,600 and Rs. 1,07,520, respectively, for the goods vehicles. The Commercial Tax officer had acted upon the intelligence report while imposing the said penalty. The report which he had furnished is that the consignee/purchaser is not in existence at the declared address, he has failed to report the turnover and to pay the taxes to their Sales Tax Department. The said opinion was confirmed on the basis of a letter given by the Assistant Commissioner of Commercial Taxes (Intelligence) who stated that the purchaser is not a functioning unit and the business premises of the dealer was found closed. Therefore, he proceeded to pass the orders even dated November 20, 2003. In the said orders, he recorded a finding that the purchaser is not in existence in his declared address and that he is not engaged in business officially at present. No material is placed to prove their existence. The purchaser has not reported any business and therefore, a finding was recorded that the purchaser was not a genuine dealer. The transaction in question is not a genuine transaction but a bogus transaction, therefore he levied penalty.

Aggrieved by the said orders of the Commercial Tax Officer imposing penalty of Rs. 1,53,600, Rs. 1,84,340 and Rs. 1,07,520 the petitioner/asses-see preferred appeals before the Joint Commissioner of Commercial Taxes (Appeals), Mangalore. The Appellate Authority went into the matter in detail and on re-examination of the entire material on record and on verification of the documents held that the check-post authority noticed that the purchaser was not in existence and the address given in the documents were found to be bogus based on the report of the Assistant Commissioner Commercial Taxes (Intelligence) I, (for short, "ACCT (Int)-1") based on the investigation conducted by him. The said report discloses that the sale transactions of superior kerosene oil (for short, "S.K.O.") made by the assessee to the extent of Rs. 4,67,34,353 paid from June 1, 2003 to September 30, 2003 were found not carried out as per the records verified at respective sales tax authorities. In the said premises, no name board, no storing facility and no person carrying any transactions were found. On the basis of the said material, he recorded a finding that the dealer is not in existence, no actual business was carried out, and the consignment mentioned by the selling dealers was found to be bogus. He also recorded at page No. 35 that the ACCT of Sales Tax of Dadra and Nagar-Haveli Unit in their letter No. 5-11-2003 has reported that the location of the purchaser has been inspected and found closed. To rebut this material on record, the assessee/petitioner produced the copy of the registration certificate. It was also contended on behalf of the appellant that the investigation conducted by the intelligence wing was not in relation to particular dealer on specific point. Repelling the said contention, it was held that on verification of the records and spot inspection of the business premises, it is noticed that the purchaser has obtained registration certificate but he has not filed any returns and failed to pay any taxes from the date of obtaining the registration certificate till the date of their visit. Further it discloses that he personally visited the premises at the address given of the purchaser and found nobody is carrying out S.K.O. dealings and not even a name board is in existence. It is on the said material that the appellate authority recorded a categorical finding that the purchaser is not actually carrying out any S.K.O. transaction at the given address. The appellant also produced a copy of the endorsement issued by the ACCT (Sales Tax), Silvasa, wherein the sales tax authority certified that the purchaser is registered with the Department as a trader for kerosene and all types of oil. The appellate authority held that this was not the answer for the observation made by the investigating officer stating that "found nobody is carrying out S.K.O. dealings and not even a name board is in existence". On the basis of the aforesaid material, he recorded a categorical finding of fact that the purchaser has obtained registration but they have not carried on the business in the address given. The finding recorded by the check-post officer is based on legal evidence and no case for interference is made out.

Aggrieved by the said order, the assessee/petitioner preferred appeals before the Karnataka Appellate Tribunal. The Appellate Tribunal on reconsideration of the entire material on record and also taking into consideration the various judgments relied on held that the material on record clearly establishes that before the check-post officer, the driver of the truck admitted the offence. The material shows that the purchaser is not carrying on any business, they have not paid any tax. To rebut the same, the appellant has not produced any evidence though certificate of registration is produced, no material is produced to show that the purchaser is carrying on the business in S.K.O. All these documents are created for the purpose of deceiving the authorities and to evade payment of sales tax and therefore, the Tribunal dismissed the said appeals. Aggrieved by the said common order, the present revision petitions are filed.

The learned counsel appearing for the petitioner assailing the impugned order contended that the assessee has produced the registration certificate to show the existence of the purchaser. The assessee has also produced the returns filed by the purchaser to the concerned sales tax authorities for the year 2003-04. The purchaser was given the benefit of deduction in payment of Central sales tax as C forms were produced, issued by the competent authority. In fact, in the assessment proceedings, when all these documents were produced before the assessing authority, the assessing authority refused to act on the said documents and refused to grant the benefit. Aggrieved by the said order, when the assessee preferred an appeal before the Joint Commissioner of Commercial Taxes, the Joint Commissioner looked into those documents and found that the purchaser is registered with the said authorities, the authorities have issued a C form and in view of the C form being issued, the petitioner/assessee is entitled to the benefit and granted the benefit and the said order has attained finality. In the light of this material, the findings recorded by the three authorities in this case is unsustainable and therefore, she submits, a case for interference with the said order is made out.

Per contra, learned counsel appearing for the Revenue submitted that the assessee was unable to rebut the presumption arising u/s 28(4) of the Karnataka Sales Tax Act, 1957. Further, when the check-post officer recorded a factual finding that the purchaser is not in existence, is not carrying on any business and also the finding that the goods having crossed the frontiers of Karnataka, has no document showing the seal at the entry of the check-post is produced even to this date, to rebut these documents, no material is placed. When three fact-finding authorities on careful examination of the material on record have recorded a finding of fact that when the purchaser is not a genuine dealer and the transactions in question are not genuine transactions, the said finding of fact cannot be interfered with in these proceedings.

In the light of the aforesaid contentions, the point that arise for consideration is, whether a case is made out for interfering with the concurrent finding of fact recorded by the three fact-finding authorities?

The facts are not in dispute. The petitioner is a registered dealer both under the provisions of the Karnataka Sales Tax Act, 1957 and the Central Sales Tax Act, 1956. The petitioner under the invoices bearing Nos. 626, 627 and 628 raised in the name of M/s. Jai Bherunath Traders, the purchaser said to have sold superior kerosene oil worth Rs. 3,14,080, Rs. 3,76,896 and Rs. 2,19,856, respectively. Delivery challans are also raised. They are produced before the check-post officer on November 5, 2003 when the vehicle was intercepted. When the check-post officer wanted the assessee to show the records pertaining to the purchaser on November 6, 2003, a letter was addressed to him including a copy of the certificate of registration dated February 28, 2002 duly notarized on June 20, 2003. The said document is not in dispute. The question for consideration is whether the said purchaser who got him duly registered was carrying on the business of trading in kerosene which was purchased from the assessee. Subsequently to prove the said fact, the petitioner produced the returns filed in form No. 1 before the Central Sales Tax (Dadra and Nagar-Haveli) Officer under the Central Sales Tax Rules. The said returns disclosed, it is for a period from July 1, 2003 to September 30, 2003. The first returns show the name of the purchaser and address of the dealer at No. 4, Rakholi Village, Silvasa and status of the dealer as "individual". The total amount shown is Rs. 6,10,15,350. No tax is paid by the purchaser to the authorities. Form No. C, a copy of the which is also produced along with an annexure issued in favour of the assessee herein on behalf of the purchaser. The said annexure shows the transactions the petitioner had with the purchaser starting from June 23, 2003 up to November 4, 2003 and the total amount involved is Rs. 6,03,39,078. A bare perusal of the signature of the proprietor on the form shows two different signatures. The assessee has not produced to this date any document to show that the said goods crossed the frontiers of Karnataka and entered the adjoining State. Similarly, no material is produced to show that the purchaser dealt with the kerosene purchased by the purchaser in any manner. No material is produced to show the amount received by the assessee from the purchaser towards the sales made, no bank statements are produced. On the contrary, when original form-"C" was produced, it was not accepted by the authorities as it did not infuse confidence in them. The said form C is dated July 7, 2003 and in the said form Rs. 6,03,39,078 has mentioned as the total amount of purchases made as per the enclosed statement. In the records, we do not find the enclosed statement. Subsequently, it is the case of the assessee that he obtained another copy of the said declaration. This copy does not mention the date of issue. However, along with C form, we find an annexure showing the transaction between the parties from March 26, 2003 to November 4, 2003 and the amount covered is Rs. 6,03,39,078. When the C form was obtained on July 7, 2003 and the amount mentioned therein is Rs. 6,03,39,078 which is the total amount of transaction as at the end of November 4, 2003. Therefore, the authorities were fully justified in not acting on the said C form. Unfortunately, though the assessing authority refused to act on these documents, the appellate authority in the assessment proceedings proceeded on the assumption that the C form issued is a genuine document and extended the benefit to the assessee. Now, that order is sought to be pressed into service to show that the concurrent findings recorded by these three authorities on proper appreciation of the material on record is erroneous. When the check-post officer refused to act on these documents and made known to the assessee that it is not a genuine transaction and the purchaser is not a genuine person to dispel that case, material to be produced should be anterior to the said date. Except the registration certificate, nothing else is produced which is anterior to that date. Now, reliance is placed on the document which has come into existence subsequently as pointed out earlier. None of those documents infuses confidence to believe that the purchaser is a genuine person and the documents produced by him are genuine. When three fact-finding authorities have looked into the available evidence on record, applied their mind and recorded a finding of fact which we find to be correct after re-appreciating the entire evidence on record, no case for interference with the said order is made out.

We are satisfied from the material on record that the order passed by the appellate authority in the assessment proceedings in Appeal No. CST AP 10/05-06 passed on November 28, 2005 requires re-consideration and therefore it is a fit case for the Additional Commissioner or Commissioner of Sales Tax to exercise their power u/s 22A of the Central Sales Tax Act to revise the said order. Ordered accordingly.