Polakulath Tourist Home vs. Assistant Commissioner Of State Tax

The petitioner is a registered dealer on the rolls of the 1st respondent under the KGST Act, who is running a bar hotel. The petitioner, instead of paying turnover tax on the sales turnover under Section 5(2) of the KGST Act, opted to settle liability at the compounded rate as provided under Section 7 of the KGST Act, which is 140% of the purchase turnover of liquor. For the assessment year, 2015-16, the petitioner opted to remit tax on 140% of the purchase price of the liquor made during the year. Though the 1st respondent accepted the option for compounding and accepted the return ..3.. and payment of tax, best judgment assessment proceedings under Section 17(3) of the KGST Act was initiated by issuing Ext.P1 notice dated 18.01.2019. In the said notice, it was stated that the closing stock of the Indian Made Foreign liquor (IMFL) for the previous year, 2014-15, would be taken into consideration in fixing the purchase value for 2015-16 for the purpose of computing the tax liability. As per Ext.P3, the petitioner objected to Ext.P1 notice, stating that as per Ext.P2 judgment, this Court has held that the purchase price referred to in Section 7 of the KGST Act is the purchase price of the entire liquor sold during the relevant year, which includes the value of the opening stock of the liquor with the purchases made in the year after excluding the value of closing stock. However, the 1st respondent, without taking into consideration the objections raised in ..4.. Ext.P3, finalized the assessment as per Ext.P4. Thereafter, the petitioner filed Ext.P5

The 1st respondent has filed a counter affidavit, contending that since the petitioner was a non compounded dealer for the previous assessment year, 2014-15, the closing stock of the previous year, 2014-15, has to be ..5.. considered in fixing purchase value of IMFL sold for the relevant assessment year, 2015-16. 4. Heard both sides.

The petitioner submits that the 1st respondent has finalized the proceedings as per Ext.P4 by including the closing stock for the previous year, 2014-15, which is against the settled position of law as declared by this Court in M/s Sannidhan Bar & Restaurant v. State of Kerala [2010 (2) KLT 887], which is produced as Ext.P2 judgment.

In M/s Sannidhan Bar & Restaurant's case (supra), this Court has categorically held as follows; “Therefore, purchase price referred to in the section above extracted is the purchase price of the entire liquor sold during the relevant year, that is 2005-06 which includes the value of the opening stock of liquor with the purchases made in the year after excluding the value of closing stock. In any case, the purchase price referred to in Section 7 is the purchase price of the entire liquor sold during the relevant year, which includes opening stock as well.”

In Ext.P4 assessment order, the 1st respondent has finalized the proceedings by including the closing stock for the year 2014-15. Though Ext.P5 rectification petition was filed by the petitioner before the 1st respondent for recomputing the turnover and tax liability after allowing deductions towards closing stock value, it was rejected as per Ext.P7 order. Ext.P4 order is per se illegal on the basis of the settled position in M/s Sannidhan Bar & Restaurant's case (supra). Hence, Exts.P4 and P7 orders are liable to be set aside and remanded back to the assessing authority for de novo consideration.

In the result, this writ petition is disposed of, as follows; (a) Exts.P4 & P7 orders are set aside. (b) The 1st respondent assessing authority is directed to reconsider the matter in ..7.. accordance