Lakshman And Co. vs. The Asst. Commissioner (Assessment)

Facts

The petitioner, Lakshman and Co., a partnership firm dealing in cashew nut processing, challenged an assessment order issued by the Assistant Commissioner (Assessment), SGST Special Circle, Kollam. The petitioner had filed returns for the year 2013-14 under the erstwhile KVAT Act, 2003, which were accepted. Subsequently, a circular was issued by the Commissioner of Commercial Taxes prescribing floor rates for raw cashew nuts and kernels imported into the State for advance tax purposes. The petitioner argued that these floor rates, fixed under Section 47(16A) of the KVAT Act, were only for advance tax collection and not for determining turnover. The first respondent issued a pre-assessment notice proposing to estimate the petitioner's turnover by adding Rs. 5,68,94,020/- to the reported sales. Despite the petitioner's reply and submission of import statements, an assessment order was passed demanding Rs. 35,66,993/- with interest, totaling Rs. 60,99,558/-.

Held

The Court held that the petitioner could not circumvent the statutory appeal provision under Section 55 of the KVAT Act by directly challenging the assessment order under Article 226 of the Constitution. The Court found no force or merit in the petitioner's arguments. It reiterated that advance tax is a provisional deposit and does not preclude a party from paying tax based on the actual sale price. The Court stated that an assessment order can only be challenged under Article 226 if it is without jurisdiction, irrational, or arbitrary. Regarding the merits of the matter, the Court opined that the applicability or non-applicability of the circular and other points were within the domain of the appellate authority. Therefore, the Court found no illegality or perversity in the assessment order and dismissed the writ petition without expressing an opinion on the merits, to preserve the petitioner's right to appeal.

Key Issues

1. Whether the floor rates fixed by the circular under Section 47(16A) of the KVAT Act, 2003, for the purpose of collecting advance tax at the point of entry, can be the basis for fixing the actual turnover and tax liability under the KVAT Act, 2003? Petitioner's arguments: The petitioner contended that the floor rates prescribed in the circular were solely for the collection of advance tax at the point of entry into Kerala and should not be used as the basis for determining the actual turnover under the KVAT Act. They relied on previous judgments of the High Court, including KMP Timbers & Saw Mills vs. Commercial Tax Inspector, Cashew Manufacturers and Exports Association vs. State of Kerala, and U.K Monu Timbers vs. State of Kerala, which they argued established this principle. The petitioner also asserted that their purchases were supported by valid invoices and bills of entry, which were not disbelieved by customs authorities. Revenue's arguments: The judgment does not explicitly record arguments made by the revenue or State. However, the Court's reasoning implies that the revenue likely contended that the assessment order was valid and that the petitioner should pursue the statutory appeal remedy.