IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE V.GIRI THURSDAY, THE 24TH JULY 2008 / 2ND SRAVANA 1930 WP(C).No. 22298 of 2008(D) -------------------------- PETITIONER: ------------ BATA INDIA LTD., COURT CROSS ROAD, KOZHIKODE - 673 032, REPRESENTED BY ITS DEPOT MANAGER, C.P.PANKAJAKSHAN. BY ADV. SRI.E.K.NANDAKUMAR SRI.A.K.JAYASANKAR NAMBIAR SRI.K.JOHN MATHAI SRI.P.BENNY THOMAS SRI.ANIL D. NAIR RESPONDENTS: ------------- 1. THE STATE OF KERALA, REPRESENTED BY THE SECRETARY TO GOVERNMENT, TAXES DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM - 695 001. 2. DEPUTY COMMISSIONER (APPEALS) DEPARTMENT OF COMMERCIAL TAXES, KOZHIKODE - 673 006. 3. INTELLIGENCE OFFICER, SQUAD NO.III, DEPARTMENT OF COMMERCIAL TAXES, KOZHIKODE - 673 006. BY GOVERNMENT PLEADER SRI. GOVINDAN THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ALONG WITH WPC.NO.22297/2008 ON 24/07/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: V. GIRI, J. ------------------------------- WP(C).NO. 22297 & 22298 of 2008 --------------------------------- Dated this the 24th day of July, 2008. JUDGMENT The parties are common in these two writ petitions. The contentions and issues are also common. Therefore, they have been heard together and are being disposed of by this common judgment. I will refer to the contentions in WPC.No.22297/2008. 2. The petitioner is a dealer in footwears registered under the Kerala Value Added Tax Act, 2003. It has 32 retail and wholesale outlets in various parts of the District. Moulded Plastic Footwears manufactured by the assessee is classified under entry 87 of third schedule to the KVAT Act and therefore exigible to tax at the rate of 4%, it is contended. For the assessment year 2005-2006, return had been filed by the assessee in terms of section 20 of the Act. There has been no proceedings by the assessing authority proposing to reject the return on calling upon the assessee to file a fresh return as the case may be. In the meanwhile, the assessee was served with a notice Ext.P1 on 12.2.2007 requiring to show cause why penalty to the tune of WPC.22297 & 2298 of 2008 2 Rs.1,66,02,230/- should not be demanded. The assessee submitted a reply. Apparently, it was pointed out that moulded plastic footwear is an item distinctly classified under entry 87 of the third schedule to the KVAT. Therefore this makes the rate of tax applicable to goods at 4%. The assessing authority has not raised any dispute as to the classification of the items sold by the petitioner. There has been no allegation of untrue or incorrect return submitted by the assessee. In the circumstances, proceedings for levy of penalty, it was contended, was misconceived. By Ext.P1 order the objections were overruled and an order of penalty was imposed. Ext.P2 appeal has been preferred before the appellate authority. Ext.P3 application for stay was also filed. Substantial contentions have been taken up in Ext.P2. The assessee has mounted a serious challenge against the proposal for levy of penalty. 3. The appellate authority passed Ext.P5 order. After finding that there is a prima facie case, first an order has been passed requiring the assessee to remit 50% of the demand due on or before 31.7.2008 with a further requirement of security for the balance amount. This is under challenge in this writ petition. WPC.22297 & 2298 of 2008 3 4. I heard learned counsel for the petitioner Sri.A.K.Jayasankar and learned Special Government Pleader Sri. Govindan. It is true that orders in the nature of Ext.P5 could be interfered with only on extremely limited grounds. The discretion is exercised by a quasi judicial authority and unless discretion is exercised by the quasi judicial authority in a perverse manner, this court would not normally interfere with the order as such. Nevertheless the power being exercised by the quasi judicial authority has an impact on the assessee. It is settled law that once a prima facie case is found by the authority concerned, then normally an order is passed in favour of the assessee. No doubt conditions could be imposed. But what is required is not a mechanical application of mind. In the instant case, I am satisfied on a perusal of Ext.P2 that there are substantial contentions raised by the assessee which warrants serious consideration by the appellate authority. Ext.P5 does not reflect an application of mind to the material factors. In other words, the order seems to be a product of mechanical exercise of power and not that of a quasi judicial authority. In the result, Ext.P5 is set aside. The second respondent shall pass fresh orders on the WPC.22297 & 2298 of 2008 4 application for stay Ext.P3 after hearing the petitioner and after adverting to the contentions of the assessee. Such oder shall be passed within two months from today. The interim order already passed by this court in Ext.P4 judgment will continue to be operative till fresh orders are passed. 5. The discussion in relation to WPC.22298/2008 is applicable to the present case also. In the result, Ext.P5 order is quashed and the second respondent shall pass fresh orders on Ext.P3 application within two months from today. This shall be after hearing the assessee. Order passed by this court in Ext.P4 judgment shall continue to be operative till fresh orders are passed. The writ petitions are disposed of as above. V. GIRI, JUDGE. Pmn/ WPC.22297 & 2298 of 2008 5