IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT:- THE HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE A.K.BASHEER FRIDAY, THE 18TH JULY 2008 / 27TH ASHADHA 1930 W.A.No.1485 of 2008 ------------------------------------ AGAINST THE JUDGEMENT IN W.P.(C).19700/2008 DATED 01/07/2008 .................... APPELLANT: PETITIONER: ------------------------------------- M/S. MARUTHAM STEEL INDUSTRIES (P) LTD., VII/885, NIDA, KANJIKODE, PALAKKAD - 678621. REPRESENTED BY ITS DIRECTOR M.KANDASAMY. BY ADV. SRI.RAJU JOSEPH RESPONDENTS: RESPONDENTS:- ------------------------------------------------- 1. INTELLIGENCE OFFICER, SQUAD NO.1, SPECIAL TEAM, COMMERCIAL TAXES, ERNAKULAM-682024. 2. DEPUTY COMMISSIONER (APPEALS), COMMERCIAL TAXES, ERNAKULAM-682015. 3. THE INSPECTING ASSISTANTCOMMISSIONER (RECOVERY), COMMERCIAL TAXES, PALAKKAD. BY SENIOR GOVERNMENT PLEADER SRI.MUHAMMED RAFIQ. THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 18/07/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ` H.L.Dattu, C.J. & A.K.Basheer, J. --------------------------------------------- W.A.No.1485 of 2008 --------------------------------------------- Dated, this the 18th day of July, 2008 JUDGMENT H.L.Dattu,C.J. This Writ Appeal is directed against the orders passed by the learned Single Judge in W.P.(C).No.19709 of 2008 dated 1st July, 2008. By the impugned order, the learned Single Judge, taking a very sympathetic view of the matter, has modified the orders passed by the first appellate authority by directing the petitioner to pay a sum of Rs.20 lakhs and furnish security before the assessing authority. 2. The learned Single Judge, while modifying the orders passed by the first appellate authority, has stated as under: “Having regard to all the circumstances involved in the case, in particular the contention of the petitioner that it is totally unsafe to rely on the figure of 800 units for producing one metric tonne and in view of the fact that it is a penalty, I feel that Ext.P6 should be modified and it is ordered that it suffices that the petitioner pays a sum of Rs.20 lakhs and furnishes security before the assessing authority for the balance amount. This direction need be complied with within a period of three weeks from today. I leave open all the contentions of both the parties”. 3. In order to appreciate the contentions canvassed by the W.A.No.1485 of 2008 - 2 - learned counsel for the appellant, it would be useful to extract, in extenso, the orders passed by the first appellate authority. It reads as under: “The appellant, M/s.Marutham Steel Industries (P) Ltd., Kanjikode, Palakkad, filed application for the stay of collection of penalty for the year 2007-07 under the KVAT Act 2003. The Intelligence Officer, Squad No.I, Ernakulam (Special Team), imposed penalty upon the appellant under section 67(1)(b) of the KVAT Act 2003. Aggrieved of the above order of penalty, the appellant filed an appeal in this office, which is pending disposal. In the mean time the appellant filed the above interlocutory application for the stay of collection of the penalty. Sri.K.Bhaskaran, Sales Tax Practitioner appeared and heard. He contended that no stock variation were detected by the inspection by the special team. In the case of alleged transport of goods through the check post no investigation has been conducted before fastening liability on the appellant. The appellant has regular transactions with M/s.Palakkad Steels. All the cheques received were properly accounted. As these transactions were through cheque proves that there is no intention to evade any transaction. The parameters if any prescribed by KSIDC is not applicable here. The KSIDC personnel itself denied that they have prescribed any parameters for the production of steel. They are only financing agencies. The Inspecting Officer has no material at hand to go for an estimation on the basis of current consumption. Sri.Jaison Paul, Intelligence Officer, Squad W.A.No.1485 of 2008 - 3 - No.I, Ernakulam, one of the member of the special team appeared for the State strongly opposed stay petition. He contended that KSIDC is a Government Organisation evaluating the viability of the project reports and financing the industrial units. The parameters prescribed by them are applicable in the case of production. In Melton India Vs. Commissioner of Trade Tax, U.O. (2007) 5 VST 613, the Hon'ble Apex Court upheld the estimate of production based on energy consumption. Perused the connected records on the basis of the hearing. After considering the issue under dispute, I feel that there is prima facie a case for granting conditional stay is established. In the circumstances the following orders are passed. xx xx xx”. 4. The learned counsel appearing for the appellant would submit, that, in view of the decision of the Division Bench of this Court in the case of Alok Spices v. Dy. Commissioner [1988 (2) KLT 182], there must be an application of mind by the appellate authority while considering the application for the grant of an interim order. In the said decision, the Court, while considering the discretionary order passed by the first appellate authority, has observed that the discretion that requires to be exercised by the first appellate authority should not be capricious or arbitrary or unreasonable. The Court has further observed, that, in the impugned order, which was the subject matter of the petition before this W.A.No.1485 of 2008 - 4 - Court, there was nothing to show that the first appellate authority had borne in mind the principles laid down by the decisions of this Court in passing the stay order. Further, the Court has observed that the authority has failed to exercise the discretion vested in him in a proper or legal manner and, therefore, it amounts to the exercise of “no discretion” whatsoever. 5. Keeping in view the principles laid down by the Division Bench of this Court, we have carefully perused the orders passed by the first appellate authority. The first appellate authority, while considering the application filed for interim stay, firstly, has referred to the facts of the case and, thereafter, applying the principles laid down by the apex Court in the case of Melton India Vs. Commissioner of Trade Tax, U.O. [(2007) 5 VST 613], has come to the conclusion that the assessee is not entitled for an unconditional interim order of stay. In the aforesaid decision, the apex Court has stated that consumption of electricity for the production can also be one of the basis or criteria for computing the tax liability under the Act. 6. Having gone through the orders passed by the first appellate authority, we cannot call the said order as an order passed without proper application of mind. Here is an order passed by the first appellate authority, wherein he has taken into consideration the facts W.A.No.1485 of 2008 - 5 - pleaded in the appeal and the parameters that have to be applied while considering an application for grant of an interim order of stay. In that view of the matter, it is difficult for us to annul the said order. Keeping that aspect of the matter in view, we are of the opinion, that, the learned Single Judge, while disposing of the writ petition, has rightly, taking a very sympathetic view of the matter, modified the orders passed by the first appellate authority. We do not find any good reason to interfere with the said orders passed by the learned Single Judge. Therefore, the Writ Appeal requires to be rejected and it is rejected. Ordered accordingly. H.L.Dattu Chief Justice A.K.Basheer Judge vku/-