M/S. Alif Steel Agencies vs. State Of Kerala

Held

The Court held that the Appellate Tribunal was legally wrong in drawing a presumption under Section 114 of the Evidence Act against the petitioner for not producing the duplicate copy of the delivery note. Such a presumption could only be drawn if the law required the petitioner to retain the duplicate copy, which it did not. The duplicate copy is typically handed over to the transporter, and it cannot be presumed that the transporter would have handed it over to the petitioner. The Court found no material with the Department to indicate that the transportation was effected solely for delivering goods to the petitioner. The petitioner cannot be expected to prove a negative. The Court also noted that the petitioner's purchases were supported by purchase bills, and this fact could not be disregarded based on an unwarranted presumption. The Court found no admission in the petitioner's letter dated 31.07.2008 that they had purchased larger quantities; instead, it was interpreted as a denial of estimated additions and a plea for input tax credit if the estimated sales were taxed in the hands of the supplier. The Court set aside the assessment orders insofar as they made additions to the returned turnover based on delivery notes, as there was nothing to indicate that the excess goods transported were delivered to the petitioner or that the supplier maintained two sets of invoices for the same purchaser. The questions of law were answered in favour of the assessee.

Facts

The petitioner, M/s. Alif Steel Agencies, a dealer in iron and steel, is challenging the final assessment order for the year 2007-08. The Assessing Officer made an estimated addition of Rs. 7,28,77,258/- to the declared turnover of Rs. 38,56,41,465/-, alleging suppression of purchase based on discrepancies between delivery notes issued by the supplier, M/s. Beepath Castings Pvt. Ltd., to the transporter and the sale invoices issued by the supplier to the petitioner. The petitioner argued they are not responsible for such variations and their declared turnover is based on recorded purchases supported by bills. The Appellate Authority reduced the estimated gross profit from 5% to 3% and found the petitioner eligible for a special rebate. The Tribunal dismissed the petitioner's appeal due to delay, but this court set aside that order and directed the Tribunal to consider the appeal on merits. The Tribunal subsequently dismissed the appeal, relying on Section 114 of the Evidence Act.

Key Issues

1. Whether the Appellate Tribunal was legally justified in drawing an adverse inference under Section 114 of the Evidence Act against the petitioner for not producing the duplicate copy of the delivery note issued by M/s Beepath Castings Pvt. Ltd. relating to purchases made by the petitioner? 2. Whether the Assessing Officer, Appellate Authority, and the Tribunal were correct in making estimated additions to the declared turnover of the petitioner solely because a higher amount than that disclosed in the invoices was reflected in the delivery notes issued by the selling dealer to the transporter? Petitioner's Arguments: The petitioner contended that there is no legal requirement for them to retain copies of delivery notes. They argued that the duplicate copy of the delivery note is to be retained by the purchasing dealer or the transporter, and the law does not mandate its retention by the purchasing dealer. They also argued that the burden of proof for purchase suppression lies with the Department and was wrongly shifted to them. They relied on the fact that their purchases were supported by corresponding purchase bills. Revenue's Arguments: The Revenue argued that a blank pen was used to fill out delivery notes, leaving the original blank and the copy with the transporter showing excess goods. The original was later filled with a lesser quantity and surrendered to the Assessing Authority. They also argued that the supplier admitted to delivering larger consignments to the petitioner. The Revenue relied on the presumption under Section 114 of the Evidence Act.