IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM FRIDAY, THE 10TH JUNE 2011 / 20TH JYAISHTA 1933 WP(C).No. 14170 of 2011(U) -------------------------- PETITIONER: ------------------- K.S.MADHAVAN, PROPRIETOR, M/S.KSM SAW MILL & TIMBERS, COLLEGE ROAD, AYALUR P.O., NEMMARA, PALAKKAD DISTRICT. BY ADVS. SRI.HARISANKAR V. MENON SMT.MEERA V.MENON SRI.MAHESH V.MENON RESPONDENTS: --------------------- 1. INTELLIGENCE OFFICER, SQUAD NO.III, DEPARTMENT OF COMMERCIAL TAXES, PALAKKAD 678001. 2. STATE OF KERALA, REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM 695001. BY GOVERNMENT PLEADER SRI.V.K.SHAMSUDHEEN THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 10/06/2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: VK C.K.ABDUL REHIM, J. ------------------------------------------- W.P.(C).No.14170 of 2011 ------------------------------------------- Dated this the 10th day of June, 2011 J U D G M E N T ---------------------- Ext.P4 order through which penalty was imposed against the petitioner under Section 67 of the Kerala Value Added Tax Act, 2003 (KVAT Act) is challenged in this writ petition. Under normal circumstances this court may not be inclined to entertain challenge against an order imposing penalty in view of the effective statutory remedy by way of appeal available to the petitioner. But the petitioner raises a specific contention that the proceedings of penalty was finalised against him in a manner which is totally violative of mandatory procedures prescribed. The relevant provisions are also in total violation of principles of natural justice. 2. According to the petitioner, when a proposal with respect to penalty was received, he had filed detailed objections. Through objections, the petitioner had raised complaint regarding non-return of the seized documents which are mainly slips and notebooks relating to the business transactions. It was contended that, without getting copy of such records the petitioner is not in a position to give an effective reply against the allegations raised in the proposal notice. The relevant W.P.(C).14170/11 -2- portion in the objections raised pertaining to the return of the documents is as follows:- “Please note that all the slips and notebooks are in your possession. I am not in a position to give an effective reply/objection against your allegation in the absence of the copies of the said slips/note books. As such I applied for the copies of the recovered documents on 11.2.2011 and till date I have not received the copies. Therefore I request you to issue copies as early as possible since those materials constitute the fundamental foundation of your allegations.” 3. While considering the objections as stated above, the 1st respondent observed that the recovered documents are created and maintained by the dealer himself by not including such transactions in the regular Books of Accounts. According to the 1st respondent, the demand for supply of such records is with a view to include the suppressed figures in the Books of Accounts. Therefore it is observed that the objection regarding non-furnishing of details of the business slips are baseless and such an objection is raised only to escape from the actual liability. On the basis of such findings the authority had discarded the objections finding that ample opportunity had already been given to the dealer. 4. Heard; learned Government Pleader appearing on behalf of the respondents. Regarding return of the recovered slips, notebooks and other records the contentions raised are W.P.(C).14170/11 -3- more or less the same as observed in the impugned order, which is narrated above. 5. It is pertinent to note that a proceedings under Section 67 of the KVAT Act is penal in nature. Penalty could not be imposed on the assessee unless it is proved that there was willful suppression of the turnover. The allegation in this case is raised mainly based on the records recovered during the time of inspection, such as slips and notebooks. The contents of those records were taken as incriminating evidence to allege suppression and for imposition of penalty. Being a penal proceedings it is obligatory on the part of the authority concerned to afford every reasonable opportunity to the petitioner to prove his innocence or to deny the allegations. Since the incriminating materials on the basis of which the allegations are raised are in the custody of the authority concerned, there is substance in the contention of the petitioner that he could not effectively object such allegations. It is not justified on the part of the 1st respondent to deny such materials merely raising an allegation that it may facilitate the petitioner to prepare Books of Accounts on the basis of such materials. Even in such case it will be left open to the authority concerned to arrive at findings that the relevant transactions were not accounted during the regular course of business transactions. W.P.(C).14170/11 -4- However, imposition of penalty without acceding to the request for supply of such materials could not stand the test of sustainability, especially since the proceedings is penal in nature. Therefore I am of the view that Ext.P4 order is not sustainable in the eye of law. 6. In the result, the writ petition is allowed and Ext.P4 order is hereby quashed. The 1st respondent is directed either to return the recovered documents or to supply copy thereof to the petitioner, in order to facilitate the petitioner to file proper objections to the proposal notice. The proceedings shall be finalised afresh, after supplying such materials and after affording opportunity to the petitioner to file objections, and for producing Books of Accounts and other records. Needless to say that before passing orders the petitioner shall be afforded with effective opportunity. 7. Fresh orders in this regard shall be issued by the 1st respondent after complying with the above directions, as early as possible, at any rate, within a period of three months from the date of receipt of a copy of this judgment. C.K.ABDUL REHIM, JUDGE. okb