IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE K.VINOD CHANDRAN SATURDAY, THE 19TH NOVEMBER 2011 / 28TH KARTHIKA 1933 WP(C).No. 39543 of 2003(G) -------------------------- PETITIONER: --------------- P.K. MOHANDAS M/S SMARTLINK INC. NEREVEETIL BUILDINGS VAZHAKKALA, KOCHI-684 021 BY ADV. SRI.N.D.PREMACHANDRAN SRI.V.B.HARI NARAYANAN RESPONDENTS: --------------- 1. THE COMMISSIONER OF COMMERCIAL TAXES, THIRUVANANTHAPURAM 2. THE DEPUTY COMMISSIONER OF COMMERCIAL TAXES, ERNAKULAM 3. THE INTELLIGENCE OFFICER(IB) COMMERCIAL TAXES, OFFICE OF THE DEPUTY COMMISSIONER(INTELLIGENCE) DEPARTMENT OF COMMERCIAL TAXES, PALARIVATTOM, KOCHI - 682 025 4. THE DEPUTY TAHSILDAR(RR) KANAYANNUR TALUK ERNAKULAM, KOCHI- 682 011 R BY GOVERNMENT PLEADER SRI BOBBY JOHN PUTHENPURAKKAL THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 19/11/2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).No. 39543 of 2003(G) APPENDIX PETITIONER'S EXHIBITS: EXT.P1 : COPY OF THE NOTICE ISSUED BY THE 3RD RESPONDENT EXT.P2 : COPY OF THE EXPLANATION SUBMITTED BY THE PETITIONER DTD. 29.10.2002 EXT.P3 : COPY OF THE ORDER PASSED BY THE 3RD RESPONDENT U/S 9 OF THE CST ACT READ WITH SECTION 45A OF THE KGST ACT DTD.13.12.2002 EXT.P4 : COPY OF THE ORDER PASSED BY THE 2ND RESPONDENT DT. 26.7.2003 EXT.P5 : COPY OF THE ORDER PASSED BY THE 1ST RESPONDENT DTD.6.11.2003 EXT.P6 : COPY OF THE COMPLAINT FILED BY THE PETITIONER BEFORE THE JUDICIAL FIRST CLASS MAGISTRATE DT.18.11.2002 EXT.P7 : COPY OF THE REVENUE RECOVERY NOTICE ISSUED BY THE 4TH RESPONDENT TO THE PETITIONER DT.3.3.2003 RESPONDENTS' ANNEXURES: NIL //TRUE COPY// P.A. TO JUDGE jma K. VINOD CHANDRAN, J ---------------------------------------------------- W.P.(C) No. 39543 of 2003 ---------------------------------------------------- Dated this the 19th day of November, 2011 J U D G M E N T The petitioner is engaged in the business of import and sale of Toiletry, cosmetics, etc., and is a registered dealer in the files of the Sales Tax Officer, 2nd Circle, Kalamassery. On the basis of the details of the daily report of import from the Customs Office, Kochi, the investigation branch of the Commercial Taxes Department called for the books of accounts of the petitioner for the year 2001-02. On verification of the books of accounts, it was suspected that the dealer had claimed irregular exemption under Section 8(1)(b) of the CST Act. The irregular claim was noticed with respect to 10 invoices allegedly effecting interstate sale to one M/s. Sree Mukambika Trades and Agencies, Mangalore. The turnover with respect to these 10 invoices came to an amount of ` 29,04,463/-. The petitioner had claimed interstate sales and paid tax as provided under Section 8(1)(b). The Inspection Wing on suspecting the genuineness of the transaction issued summons in Form 51 under Section 53 of WP(C) No.39543/2003 : 2 : the KGST Act to the consignee in Karnataka. However, the registered article was returned with the endorsement “no such firm at the given address”. Hence, a notice was issued to the petitioner on 14.1.2002 directing production of documents to prove the genuineness of the claim made under section 8 of the CST Act. The petitioner filed a reply that merely on the reason of the consignee not being located, the transaction cannot be suspected as local sales. However, the assessee produced no documents and yet another notice was issued on 13.4.2002 proposing initiation of prosecution to which the assessee replied by seeking further time to produce the 'C' form declaration. Yet again, the assessee failed to produce 'C' form declaration and kept on seeking more time. On 15.7.2002, the assessee produced the photocopy of the 'C' form and subsequently the original on 18.9.2002. The copy of the 'C' form and details regarding the transaction were then forwarded by the department to the Deputy Commissioner of Commercial Taxes (Assessment)3, Mangalore. The said officer replied to the department stating that the consignee is not a registered dealer and that the office has not issued any 'C' forms to the said party WP(C) No.39543/2003 : 3 : and also that the 'C' form furnished by the petitioner appears to be bogus. The petitioner obviously did not have any explanation to offer regarding the bogus 'C' form produced by him; even after they were put to notice of the non existence of the consignee. It is pertinent to note that the 'C' form produced by them itself was dated 9.7.2002, as is noticed in Exts.P3, P4 and P5. The petitioner would contend that they received the said 'C' form from the consignee by post; after the department had informed them by notice that the genuineness of the consignee is suspected. Hence, notice was issued under Section 9 of the CST Act read with section 45A of the KGST Act proposing penalty for the alleged violation of conditions stipulated in Section 8(1)(b) and 8(2)(b) of the CST Act and violation of Section 17 and 27 of the KGST Act. The assessee further filed objections to the notice which reiterated their earlier contention, but offering no explanation or evidence as to the existence of the consignee, nor any explanation for the bogus 'C' form produced by him. Having considered the matter in detail the Intelligence Officer(IB), Commercial Tax, Ernakulam imposed the maximum penalty under Section 9 of the CST Act read with Section 45A of WP(C) No.39543/2003 : 4 : the KGST Act, viz., twice the amount of tax sought to be evaded. 2. The petitioner then approached the Deputy Commissioner of Taxes, Commercial Taxes, Ernakulam who confirmed the orders of the Intelligence Officer. The second revision filed before the Commissioner of Commercial Taxes by the petitioner also failed and Ext.P5 order was passed dismissing the same. The petitioner in the instant writ petition challenges Exts.P3, P4 and P5 orders and Ext.P7 notice of demand. The petitioner would, even in the instant writ petition, contend that the 'C' form produced by them has not been established to be bogus and that the production of 'C' forms would amply demonstrate that the petitioner had been cooperating with the department in the penalty proceedings. The petitioner would further contend that the bonafides of the petitioner is evident by the action of entering the transactions in their accounts and sending goods on the strength of departmental delivery notes. Inter alia, the petitioner would contend that no contumacious act has been established to warrant imposition of penalty under Section 45A of the KGST Act. 3. Transactions which were suspected by the Intelligence WP(C) No.39543/2003 : 5 : Wing of the Commercial Tax Department, Kerala were between 9.8.2001 to 12.9.2001 and were allegedly send to the same consignee in Karnataka. The departmental authorities on trying to summon the said consignee was informed by postal authorities that no such firm existed at the given address. The non-existence of the consignee was immediately conveyed by the department to the petitioner and he was directed to produce documents and materials to establish the genuineness of the consignee, as also the alleged interstate sale. Despite repeated notice, the petitioner failed to produce the books of accounts and eventually did so, only under threat of initiation of prosecution proceedings. 'C' form declaration; when produced was immediately transmitted to the Commercial Tax Authorities in the State of Karnataka. The concerned Officer of the Karnataka Commercial Taxes Department confirmed the non-existence of the firm and also confirmed that no 'C' forms were issued to such a firm. Above all, the 'C' form produced by the assessee was verified by the Commercial Taxes Department, Karnataka and found to be bogus. Confronted with the above facts the assessee has no further explanation to offer, but for reiterating WP(C) No.39543/2003 : 6 : his earlier contention that the assessee is not liable and cannot be mulcted with penalty for the contumacious act of the purchaser. In fact, Ext.P3 clearly records the admission of the assessee that the the Assistant Commissioner of Commercial Taxes, Check Post Mangalore in his letter dated 26.12.2001 informed the assessee that no such consignee existed in Mangalore in that address and that the registration number shown in the invoice is bogus. Even after the said fact was brought to the notice of the assessee, the petitioner had the temerity to produce the 'C' form declaration executed later to the date of such information being furnished. The petitioner would then reassert that it was through post that he received such a declaration. The fact of production of this bogus 'C' forms even after the non-existence of the consignee was informed to the petitioner by the Commercial Tax Department, Kerala and Karnataka also was noticed by the Intelligence Officer who passed Ext.P3 order. This was taken note of not as the subsequent event but as a factor which established the malafides of the petitioner in the earlier transactions in which he wrongly claimed reduced rate of tax. The other materials and WP(C) No.39543/2003 : 7 : documents produced by the assessee were also examined by the Intelligence Officer and it was recorded that the same would not in any manner evidence the existence of the consignee in Karnataka or the genuineness of the interstate transaction. On the above findings the Intelligence Officer imposed maximum penalty under Section 45A at the rate of double the tax sought to be evaded. The revisional authorities also by Exts.P4 and P5 considered the contentions of the petitioner thread-bare and came to the conclusion that the petitioner has purposefully attempted to evade tax by styling local sales as interstate sales paying lesser amount of tax as provided under the CST Act. The assessee though has produced a complaint filed under Section190 of the Code of Criminal Procedure filed before the Judicial Magistrate I Class, Aluva conveniently does not say anything about what happened subsequently on the complaint. 4. The copy of the judgment in W.P(C)39779/2003 dated 3.7.2009 was also brought to my notice, in which the imposition of penalty on similar set of facts was challenged and negated by a learned Single Judge of this Court. On going through the said judgment, I find that the consignee in the instant case and the WP(C) No.39543/2003 : 8 : one referred to in the above mentioned writ petition have the same address but minor change in the name. The petitioners are also said to be sister concerns. The learned Single Judge had elaborately considered the arguments of the petitioner in the said case and had refused to interfere with the findings and reasons of the departmental authority. It is also seen recorded that the petitioner in the said case conceded that the criminal proceedings initiated before the Judicial First Class Magistrate Court, Aluva, similar to the complaints produced herein, was forwarded for investigation under Section 153 of the CRPC and was referred by the police and the petitioner took no further steps by way of filing a protest complaint. The interstate transactions which were the subject matter of the said case are similar to that in the present writ petition. 5. Evidently, the suspected transaction allegedly made by the petitioner to the consignee M/s. Sree Mukambika Trades and Agencies were styled as interstate sales for evading local sales tax due and avail the reduced rate of tax as provided under the CST Act. The facts and records would show that the goods as contended by the petitioner has not moved to outside the State WP(C) No.39543/2003 : 9 : and the only assumption that can be made in the said circumstances, especially in the context of the 'C' form produced by the petitioner having been found bogus is that local sales were effected. The attempt to evade tax is very clear and has been established by the Intelligence Officer which has been confirmed by two revisional authorities. In the circumstances, I am of the view that Ext.P3 order as confirmed by Exts.P4 and P5 is not liable to be interfered with in the extra-ordinary jurisdiction and by the conduct of the petitioner imposition of penalty at the maximum rate, as has been concurrently held by the three authorities under the KGST Act, is perfectly justified. The writ petition therefore fails and is accordingly dismissed. K. VINOD CHANDRAN (Judge) jma