M/S.Priority Gold PVT.LTD. vs. The Asst.Commissioner Of State Tax - Kerala High Court, 21 June 2019

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI FRIDAY, THE 21ST DAY OF JUNE 2019 / 31ST JYAISHTA, 1941 WP(C).No.16884 of 2019 PETITIONER/S: M/S.PRIORITY GOLD PVT.LTD., 19/1214,GROUND FLOOR,ST.LOUIS COMMERCIAL COMPLEX,CHURCH CIRCLE,ERINJERI ANGADI,THRISSUR- 680001,REPRESENTED BY ITS MANAGING DIRECTOR,JAISON SIMON PANAKKAL. BY ADVS. SRI.HARISANKAR V. MENON SMT.MEERA V.MENON RESPONDENT/S: 1 THE ASST.COMMISSIONER OF STATE TAX, STATE GST DEPARTMENT,SPECIAL CIRCLE, THRISSUR-680001. 2 COMMISSIONER OF COMMERCIAL TAXES, TAX TOWERS,KILLIPPALAM,KARAMANA, THIRUVANANTHAPURAM-695002. GP. DR. THUSHARA JAMES THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 21.06.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

WP(C).No.16884 of 2019 2 JUDGMENT Heard Sri.Harishankar V.Menon, the learned counsel for the petitioner and Dr.Thushara James, the learned Government Pleader appearing for the respondents.

Petitioner challenges Exts.P6 and P6(a) as completely illegal, beyond the juri iction suffer from perversity and thereby warrant the quashment of Exts.P6 and P6(a). The petitioner through Ext.P1 filed self assessment declaration. To appreciate the principal ground on which the legal objections are now raised, for convenience the following statement from Ext.P1 is excerpted hereunder:- C.TURNOVER DETAILS (VAT GOODS) Part C-Turnover on purchase of goods. Nature of Transaction Commodity Schedule Rate of Tax Purchase Value Tax paid on purchase Total Input Tax eligible for set off u/s 11 Local Purchase eligible for ITC BULLION II 1 517176293 5171760.96 522348053.96 5171760.95 Sub Total 517176293 5171760.96 522348053.96 5171760.95 TOTAL 517176293 5171760.96 522348053.96 5171760.95

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Through Ext.P2 petitioner applied for refund of tax said to have been paid in excess. Thereafter 1st respondent issued Ext.P4 notice and paragraph 1 Clause (a) deals with the main complaint of the petitioner and which reads thus:- "(a) As per annual return assessee has carried out interstate stock transfer out for an amount of Rs.61,96,67,865 of Bullion and jewellery of all kinds. Proviso 3rd to Section 11(3) of KVAT Act 2005 where any goods purchased in the State are subsequently sent to outside the State or used in the manufacture of goods and the same are sent out side the State otherwise than by way of sale in the course of inter- state trade or export or where the sale in the course of inter-state trade is exempted from tax, input tax credit under this Section shall be limited to the amount of input tax paid (in excess of 5%) on the purchase turnover of such goods sent outside the state. Hence and amount to Rs.2,69,27,728.00(Rs.51,82,76,254x 5%= Rs. 2,59,13,812.00 and 10,13,91,611 x 1% = 10,13,916) will be disallowed would be reversed."

The petitioner vide Ext.P5 denied the input tax credit claimed by the petitioner as Rs. 2, 69, 27, 728/- and confined the case to the details of input tax credit already excerpted above. The reply of the petitioner is excerpted for continuity and also for immediate reference. "

You have proposed to disallow input tax credit to the tune of

WP(C).No.16884 of 2019 4 Rs.2,69,27,728 under third proviso to section 11(3) of the KVAT Act, 2003, being the input credit on goods stock transferred out of Kerala. It is submitted with due respect that the total input credit availed by us for the above year is only Rs.51,71,761 as can be seen from the annual return as well as the audit statement in form 13 A filed. Therefore the proposal to disallow input tax credit of Rs.2,69,27,728 is not an order."

Ext.P6 is the order made by the 1st respondent and while concluding the issue of the credit to which the petitioner is entitled to, the 1st respondent recorded the following findings:- "(a) As per annual return assessee has carried out interstate stock transfer out for an amount of Rs.61,96,67,865 of Bullion and jewelery of all kinds. Proviso 3rd to Section 11(3) of KVAT Act 2005 where any goods purchased in the State are subsequently sent to outside the State or used in the manufacture of goods and the same are sent out side the State otherwise than by way of sale in the course of inter-state trade or export or where the sale in the course of inter-state trade is exempted from tax, input tax credit under this Section shall be limited to the amount of input tax paid (in excess of 5%) on the purchase turnover of such goods sent outside the state. Hence an amount of IPT in respect of interstate stock transfer out the said transaction amounting to Rs.2,69,27,728.00 will be disallowed and would be reversed. In the reply the assessee revealed that the total input tax credit availed for the local purchase for the year only is Rs.51,71,761.00 But in the notice we deals the input tax credit in respect of the interstate stock transfer out proved to reference. During the relevant assessment year assessee carried out the following transactions as per the annual return(Form No.10) filed on 24.12.2015. "

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Through Ext.P6(a) the request made in Ext.P2 and for refund is also rejected. Hence the writ petition.

Adv.Harishankar V.Menon contends that the petitioner is compelled to invoke the juri iction of this Court under Article 226 for the orders in Exts.P6 and P6(a) suffer from rank perversity and the perversity and the perversity of reasoning is manifold from the sum and total of input credit tax claimed by the petitioner is shown as Rs.2,69,00,000/-. 1st respondent, if would like to reassess the input credit tax component the 1st respondent can deal with Rs. 51,71,000 but not determine the input tax credit claimed by the petitioner as Rs.2,69,00,000. He does not dispute that against the orders in Exts.P6 and P6(a) the remedy of appeal is available but perversity persuaded and embolden the petitioner to straight away and invoke the juri iction of this Court.

The writ prayers are stoutly opposed by the learned Government Pleader. She takes a cue from the very contentions urged by the learned counsel for the petitioner and submits that

WP(C).No.16884 of 2019 6 this Court even for the limited purpose of appreciating the alleged ground of perversity looks into all the details the same amounts to looking into the legality of Exts.P6 and P6(a) in the manner in which the Appellate Authority would have done, judicial review on those lines is impermissible. She further contends that the ground now raised falls within the scope of appeal and the appellate authority could decide these questions.

Therefore the petitioner ought to be directed to work out the remedies against Exts.P6 and P6(a) before the appellate authority. This Court after taking note of bare details exhibited in Exts.P1, P4, P5 and P6 was also of the view that without further examination the ground of perversity raised in the writ petition could be considered merits decided. But as rightly pointed out by the learned Government Pleader the exercise were for the limited purpose of finding out the ground of perversity, this Court may encroach into the function of an appellate authority where the facts threadbare are considered, thereafter principle of law decided. The case on hand certainly

WP(C).No.16884 of 2019 7 has an arguable point by filing the appeal. The circumstances are singular and the off shoot of notice, explanation offered under Section 25 could easily be appreciated by appellate authority. Therefore to protect the interest of petitioner and also enable the petitioner to file appeal within the period of limitation and obtain orders as are deemed fit from the appellate authority, as an exceptional case, the writ petition is disposed of by this order:- (a) the petitioner is given liberty to file appeal within the period of limitation prescribed by the statute and also file an application seeking stay of the order in Ext.P6. For effective consideration of the stay petition that is allowed to be filed along with appeal the parties are directed to maintain status quo as on date vis-a-vis Ext.P6 for a period of two months. The appellate authority disposes of stay petition before the expiry of two months period granted by this Court. S.V.BHATTI JUDGE Ac

WP(C).No.16884 of 2019 8 APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1 COPY OF RETURN FILED BY THE PETITIONER FOR THE YEAR 2014-05 DATED 24-12-2015 EXHIBIT P2 COPY OF APPLICATION SUBMITTED BY THE PETITIONER BEFORE THE 1ST RESPONDENT DATED 24-12-2015 EXHIBIT P3 COPY OF JUDGMENT IN W.P.(C) NO.33014/2018 OF THIS HON'BLE COURT DATED 10-10-2018 EXHIBIT P4 COPY OF NOTICE ISSUED BY THE 1ST RESPONDENT DATED 23-11-2018 EXHIBIT P4(A) COPY OF NOTICE ISSUED BY THE PETITIONER BEFORE THE 1ST RESPONDENT DATED 26-11-2018. EXHIBIT P5 COPY OF REPLY FILED BY THE PETITIONER BEFORE THE 1ST RESPONDENT DATED 21-12-2018 EXHIBIT P6 COPY OF THE ORDER ISSUED BY THE 1ST RESPONDENT DATED 29-05-2019 EXHIBIT P6(A) COPY OF THE ORDER ISSUED BY THE 1ST RESPONDENT DATED 29-05-2019 RESPONDENT'S/S EXHIBITS NIL //// PA TO JUDGE