FA  623  of 2011   against C.C. 66/2010,  Dist. Forum, Nalgonda

Between:

The Oriental Insurance Company Ltd.

Branch Office : V.T. Road

Ramagiri, Nalgonda Town

Rep. by Authorised Signatory.                     ***                           Appellant/

          .                                                                                       O.P.                                                                                       And

M/s. Annapurna Sales Corporation

Plot No. 6-5-85/2, Beat Market

Nalgonda Town

Rep. by Gattani Srinivas

S/o. Misrilal.                                              ***                         Respondent/

                                                                                                Complainant       

Counsel for the Appellant:                          M/s.  Bhaskar Poluri

Counsel for the Respondents:                     M/s.  T. Sridhar Reddy

 CORAM:

HON’BLE SRI JUSTICE D.APPA RAO, PRESIDENT

                                   SMT. M. SHREESHA, MEMBER

&

                                   SRI S. BHUJANGA RAO, MEMBER

THURSDAY, THE THIRTIETH DAY OF AUGUST TWO THOUSAND TWELVE

ORAL ORDER:  (Per Hon’ble Sri Justice D.Appa Rao, President )

***

1)                 This is an appeal preferred  by  the   opposite party insurance company against the order of the Dist. Forum  directing it to pay  Rs.  6,71,591/- inclusive of VAT together with damages of Rs. 50,000/-   in all Rs. 7,21,591/- with interest @ 9% p.a., from the date of  complaint till the date of realization and costs of Rs. 3,000/-.

2)                 The case of the complainant in brief is that  it is a firm dealing in  wholesale distribution of ITC products including tobacco products.   It obtained  shopkeeper’s insurance  policy  from the appellant insurance company  for stock in trade for a sum of Rs.  37 lakhs  which includes  Rs.  4 lakhs towards money in transit, Rs.  74,000/- towards cash in safe and Rs. 37,000/- cash in counter covering the period from  10.3.2009 to 9.3.2010.   While so, on   28.8.2009   at about 9.30 p.m.  after closure of business   hours,  office-cum-godown was closed.  At that time there was cash of Rs. 40,654/-, stock of Rs. 35,81,538/- in the godown.   On the next day morning, when office was opened they found that the  lock was broken and that almirah  and cash counter were opened.  On verification they found that  17 cartons of  Gold Flake  King cigarettes  worth Rs. 6,71,591/- were missing besides  Rs. 40,000/- cash kept in the cash counter chest.    Immediately they reported the matter to II town police station, Nalgonda.  Basing on which a case in Crime No. 190/2009  was registered u/s 457, 380 IPC against unknown offenders.    Investigation was conducted and  final report  before the Magistrate  was submitted which referred it as ‘Undetected’.   The claims were submitted to the insurance company along with  requisite documents, however, to no avail.   Except  raising queries  they did not settle the claim.    On that legal notice was issued but no reply was received.    It was orally informed that  they settled the claim at Rs. 5,90,000/- however, nothing was paid.    In fact due to loss  they could not conduct the business properly, and therefore filed the complaint claiming Rs. 6,71,591/-  towards value of the stock lost, Rs. 37,000/- towards loss of cash besides damages of Rs. 1 lakhs towards mental agony  together with interest  @ 24% p.a., and costs. 

3)                 The appellant insurance company resisted the case. While admitting issuance of policy it denied  having any information  about  various stocks and cash kept in the godown and cash chest respectively.    Immediately on receipt of report   and claim they appointed the surveyor and loss assessor  Sri  M.V. Radha Krishnan.  He submitted his report  assessing the net loss at Rs. 5,96,971/- excluding VAT and as such  an amount  Rs. 5,90,000/- was settled and sent a discharge voucher which the complainant did not accept.   There was no deficiency in service on its part.   The complainant has already availed VAT  on credit purchases, and therefore the surveyor assessed the loss  on cost price without VAT.   Claim of Rs. 40,654/- towards cash loss  was not payable as the keys were kept in the table drawer  without keeping them in a safe place violation of condition No. 2 of the policy.    Therefore it prayed for dismissal of the complaint with costs. 

4)                The complainant   in proof of   its case filed  the affidavit evidence of  its partner and got Ex. A1  to A13  marked while the insurance company  filed the affidavit evidence of its Divisional Manager and got Ex. B1 surveyor’s report marked. 

5)                The Dist. Forum after considering the evidence placed on record   opined that the complainant was entitled to  a sum of Rs. 6,71,591/- inclusive of VAT together with damages of Rs. 50,000/- towards delay in settling the claim  in all Rs. 7,21,591/- with interest @ 9% p.a., from the date of  complaint till the date of realization and costs of Rs. 3,000/-.

6)                Aggrieved by the said order, the   insurance company preferred the appeal contending that the Dist. Forum did not appreciate either facts or law in correct perspective. It ought to seen that on the basis of surveyor’s report  it was  agreed  to  pay Rs. 5,90,000/-.   The complainant is not entitled to the amount towards VAT.  As per Section 13 of  A.P. VAT Act  the dealer can seek credit of tax  in future  transactions.   There was no negligence  or deficiency in service on its part, and therefore prayed  that the order to that extent be modified. 

7)                The point that arises for consideration are:

                             i.    whether the award towards damages is  not maintainable? 

                           ii.    To what relief?

8)                It is an undisputed fact that the complainant has taken  shopkeeper’s  insurance policy covering the stock in trade  for a sum of Rs. 37 lakhs which includes Rs.  4 lakhs towards money in transit, Rs.  74,000/- towards cash in safe and Rs. 37,000/- cash in counter covering the period from  10.3.2009 to 9.3.2010 vide policy Ex. A1.    It is also not in dispute that on the intervening night of 28/29.8.2009  there was a theft in the godown-cum-shop.  17 cartons of  Gold Flake  King cigarettes  worth Rs. 6,71,591/- were missing besides  Rs. 40,000/- cash kept in the cash counter chest.   The police investigated into the matter after registering a case in Crime No. 190/2009   u/s 457, 380 IPC vide  FIR  Ex. A2.   Finally after investigation it requested the learned Magistrate  to close the case as ‘Undetected’.    On receipt of  claim, the insurance company  appointed surveyor-cum-loss assessor  who after investigation filed his report Ex. B1.    He found that  there was a theft wherein  172 MS of  Gold Flake Kings  cigarettes  were committed theft worth Rs. 6,71,592/-.  However, in regard to loss of cash  in chest he observed that keys were not  kept in  a safe place.  Therefore he disallowed   cash loss of Rs. 40,654/-    However, he excluded VAT by stating that  “the insured had  claimed   VAT benefits for purchases made  in August, 2009 including items  lost in burglary.  Hence, loss assessed is cost price excluding  VAT.”  The Dist. Forum opined that repudiation of amount in regard to loss of cash to an extent of Rs. 37,000/- was justified  as the complainant  had not kept the keys in a secured place.   The complainant did not prefer any appeal questioning this aspect of the matter.   The Dist. Forum awarded Rs. 50,000/-  by way of damages towards deficiency in service for the delay in settling the claim. 

9)                 In this  appeal  the insurance company  questioned inclusion of VAT and awarding  Rs. 50,000/- towards damages.   For the loss caused on 28.8.2009  the insurance company agreed to settle the claim  on 19.10.2010  nearly after 14 months agreeing to pay  the amount by deducting VAT which the complainant did not agree. 

10)              As per Section 13 of the A.P. VAT Act an input tax credit shall be allowed to the VAT dealer for the tax charged in respect of all purchases of taxable goods, made by that dealer during the tax period, if such goods are for use in the business of the VAT dealer.  No input tax credit shall be allowed in respect of the tax paid on the purchase of goods specified in Schedule VI.  He was entitled to claim  for the sales tax paid under Andhra Pradesh General Sales Tax Act, 1957 on the stocks held in the State subject to certain conditions.    He was entitled to  claim input tax credit on the date the goods are received by him, provided he is in possession of a tax invoice; and he is entitled to claim input tax credit or sales tax credit on the date of registration, provided he is in  possession of documentary evidence therefor.    As per Clause-5 of Section 13 of A.P. VAT  Act  no input tax credit shall be allowed viz.,

            (a) works contracts where the VAT dealer pays tax.

            (b) transfer of a business as a whole;

            (c) sale of exempted goods except when such goods are sold in the course of export or exported outside the territory of India;

            (d) exempt sale;

                      (e) transfer of exempted goods on consignment basis or to branches of

        the VAT dealer outside the State otherwise than by way of sale;

Undoubtedly, VAT is payable only in respect of consideration received  on transfer of property in goods  viz., sale  as defined under the VAT Act.   The settlement of  insurance claim by the insurance company cannot be said to be transfer of ownership and as such  no VAT  is payable.  Evidently  no input tax credit is available  on goods which are not  sold because  of any loss.  If the complainant had already  availed, the same  should be reversed.    It was not in this case.   Therefore  exclusion of VAT  cannot be upheld.  The Dist. Forum is right  in observing that the insurance company had to pay the amount which includes VAT.

11)               Coming to compensation of Rs. 50,000/- awarded by the Dist. Forum due to delay in settling the claim.  The insurance company  though  it had the benefit or advantage  of the report of the surveyor  where he confirmed the loss of stock, and the insurance company having settled the claim, ought to have sent the undisputed amount by way of cheque.    It cannot keep the amount denying the benefit to the complainant for using it in his business.    It was a loss for the complainant for a period of 14 months.   The complainant is a  partnership concern doing business in sale of cigarettes.  Therefore the insurance company had the advantage of this amount all-through, obviously utilizing  in its business.   The complainant  has to be necessarily compensated for this loss.   Therefore, we do not see any mis-appreciation of fact or law by the Dist. Forum in this regard.    We do not see any merits in the appeal.

12)               In the result the appeal is dismissed with costs computed at Rs. 5,000/-.  Time for compliance four weeks. 

1)      _______________________________

PRESIDENT                 

2)      ________________________________

 MEMBER           

3)      ________________________________

 MEMBER           

                                                                                      30/08/2012

*pnr

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