Kerala High Court
Neethu Rajan, Proprietor, M/S St. ... vs State Of Kerala on 21 August, 2025
Author: A.Muhamed Mustaque
Bench: A.Muhamed Mustaque
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O.T.Rev.No.27 of 2025 2025:KER:63081
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE A.MUHAMED MUSTAQUE
&
THE HONOURABLE MR. JUSTICE HARISANKAR V. MENON
THURSDAY, THE 21ST DAY OF AUGUST 2025 / 30TH SRAVANA, 1947
OT.REV NO. 27 OF 2025
AGAINST THE JUDGMENT DATED 20.03.2025 IN TAVAT NO.273 OF 2024
OF KVAT APPELLATE TRIBUNAL
--------
REVISION PETITIONER/APPELLANT/ASSESSEE:
NEETHU RAJAN, PROPRIETOR,
M/S.ST.NICHOLAS CASHEW EXPORTS,
AGED 40 YEARS, PLAVILA RAJ HOUSE,
NALLILA P.O., KOLLAM DISTRICT, PIN - 691515.
BY ADVS.
SHRI.BOBBY JOHN
SRI.S.AJAYGHOSH KUMAR
SMT.SANGEETHA S.KAMATH
RESPONDENT/RESPONDENT/REVENUE:
STATE OF KERALA, REPRESENTED BY THE SECRETARY
TO THE GOVERNMENT, TAXES DEPARTMENT, SECRETARIATE,
THIRUVANANTHAPURAM, PIN - 682031.
THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR ADMISSION ON
18.08.2025, THE COURT ON 21.08.2025 DELIVERED THE FOLLOWING:
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ORDER
Harisankar V. Menon, J.
The assessee is the revision petitioner. The assessment
for the year 2014-15, as modified by the appellate authority,
is the subject matter of challenge in this Other Tax Revision
Petition.
2. The assessing authority initiated assessment
proceedings, noticing various discrepancies. One such
discrepancy was the alleged difference of Rs.1,56,95,772/- in
closing stock as per Form 54 (closing stock inventory) and
Form 13/13A (audited statements). While completing the
assessment, the afore difference is brought to tax with 20%
gross profit. Though an appeal was filed against the afore
addition, the appellate authority refused to interfere, even
though some directions with reference to the granting of input
credit were issued. A second appeal was filed before the
Appellate Tribunal as T.A.(VAT) No.273 of 2024. Before the
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Tribunal; the petitioner-assessee pointed out that there were
two proprietary businesses - one in the name of the revision
petitioner and other in the name of her brother Sri.Nithin
Rajan - and by an inadvertent mistake the stock of raw nuts
of the business of her brother was also included in the stock
that actually belonged to the revision petitioner. It was
pointed out that at the time of the audit of the books of
accounts, the mistake was realised, on account of which the
stock of her brother was removed, and the actual position is
reflected in the audited statements of the revision petitioner.
Therefore, it was prayed that the addition on account of the
afore reason may be deleted. The Tribunal, however, refused
to accept the afore explanation, though it issued certain
directions to the assessing authority on some aspects, which
were challenged in the appeal. It is seeking to challenge the
afore order, refusing to interfere with the addition on account
of the difference in stock in Form 54 and Forms 13 and 13A,
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that this Other Tax Revision Petition is filed.
3. Heard Sri.Bobby John, the learned counsel for the
revision petitioner, and Sri.V.K.Shamsudheen, the learned
Senior Government Pleader (Taxes).
4. There is no dispute as regards the difference in stock
of raw nuts in Form 54 (closing stock inventory) and Form
13/13A (audited statements). However, the petitioner-
assessee specifically pointed out before the Tribunal that her
brother was running another entity - St.Micheal Cashew
Exports - a registered dealer under the Kerala Value Added
Tax Act, 2003 (hereinafter referred to as the 'Act') and that
while preparing Form 54 as regards the revision petitioner, a
stock which actually belonged to her brother was included. It
was pointed out further that there were two businesses, as
well as godowns of the revision petitioner and her brother, in
the same place, which led to the confusion. However, the
revision petitioner contends that upon realising this error at
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the time of audit, the mistake was rectified by reducing the
said quantity of raw nuts which actually belonged to the
brother and adding the same in the stock of the brother's
business. These details are seen produced before the Tribunal.
We notice that the Tribunal has verified the documents
produced as above and has found that "produced documents
show that the contention raised now by the appellant is true".
However, even after finding so, the Tribunal proceeded to hold
that an assessee cannot normally keep its stock in the
business place/godown of another dealer and vice versa, and
hence the explanation/contention raised cannot be accepted.
5. At the same time, we notice that the explanation
offered by the revision petitioner-assessee is with reference
to Form 13/13A (audit statements) filed by the revision
petitioner and relied on while completing the assessment. The
explanation offered is essentially to the effect that the stock
belongs to the petitioner's brother, who is also an assessee
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under the provisions of the Act.
6. True, going by the provisions of the Act, a dealer
cannot maintain the stock in the premises of another
assessee. The provision of Section 44(8) empowers an
authority to impose a penalty not exceeding 50% of the value
of taxable goods, in such circumstances. Sub-section (10)
thereto also entitles the assessing authority to treat the stock
which is stored in the undeclared godown as outside the
regular books of accounts of the dealer. However, with respect
to the power under Section 44(8) and (10), a Division Bench
of this Court in Sajeev v. Intelligence Officer [2009(4)
KLT 601] held as under: -
"....... As already stated, even though penalty under S.44(8)
read with S.44(10) is mandatory, by virtue of the
abovereferred discretionary powers conferred on the officer,
a dealer is given opportunity to state emergency which led
to his keeping the goods in undeclared godown without prior
intimation and if he proves it and if such goods were found
accounted, then the same should certainly be taken into
account by the Inspecting Officer while levying penalty. In
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other words, by applying the fiction alone under S.44(10),
the officer cannot levy maximum penalty at half the value of
the goods under S.44(8), if the dealer proves the extreme
circumstances that led to his storage of goods in undeclared
godown and that the goods are accounted......."
Thus, this Court has categorically found that even if the
storage of goods was in an undeclared godown, the assessee
would be entitled to prove that the goods were accounted for.
7. In tune with the afore, the Act itself was amended by
the Finance Act, 2010, with effect from 01.04.2008, and the
provisions of Section 44(10) after amendment read as
under:-
"(10) If any officer, in the course of any inspection or search of
any business place, building or any other place finds that
goods are stored in undeclared godown such stock shall be
treated as stock outside the regular books of accounts of the
dealer unless proved otherwise."
(Underlined portion added by the Amendment)
Thus, even as regards the unregistered godown, the question
of treating the stock as outside the books of accounts arises
only when the dealer is not able to prove that the goods were
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accounted. Therefore, the Act permits the dealer to explain
the actual inclusion in the books of accounts even when the
same is stocked in an undeclared godown.
8. It is in the light of the afore that the explanation
offered by the revision petitioner is to be noticed. As already
noticed, the revision petitioner had contended that the
difference noticed by the assessing authority actually belongs
to her brother, another assessee under the Act. Therefore,
even on the face of the delay in pointing out the explanation,
the matter requires to be considered afresh since the
explanations are offered with reference to another registered
dealer.
9. Insofar as such an adjudication is not made, we are
of the opinion that the matter requires to be considered by
the assessing authority afresh, with specific reference to the
books of accounts and the assessment records of
M/s.St.Michel Cashew Exports, the proprietary business of the
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petitioner's brother.
Resultantly, we allow the Other Tax Revision Petition,
directing the assessing authority to consider the issue afresh
in the light of the discussions contained above.
Sd/-
A.MUHAMED MUSTAQUE
JUDGE
Sd/-
HARISANKAR V. MENON
JUDGE
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PETITIONER'S ANNEXURES:
ANNEXURE A TRUE COPY OF THE ASSESSMENT ORDER DATED
13.07.2020, PASSED BY THE DEPUTY COMMISSIONER
(A) -III, SPECIAL CIRCLE, SGST, KOLLAM.
ANNEXURE B TRUE COPY OF THE FIRST APPELLATE ORDER DATED
24.07.2024, IN KVATA (KLM) 91/2023, PASSED BY
THE JOINT COMMISSIONER (APPEALS), SGST
DEPARTMENT, KOLLAM.
ANNEXURE C TRUE COPY OF THE SECOND APPEAL DATED 04.08. 2024
FILED BY THE REVISION PETITIONER/ASSESSEE
BEFORE THE TRIBUNAL.
ANNEXURE D TRUE COPY THE ARGUMENT NOTE DATED 06.03.2025,
FILED BY THE COUNSEL FOR ASSESSEE BEFORE THE
TRIBUNAL.
ANNEXURE E TRUE COPY THE ORDER DATED 20.03.2025, PASSED BY
THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL,
ADDITIONAL BENCH, THIRUVANANTHAPURAM IN T.A.
(V.A.T.) NO. 273 OF 2024.
