IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR THURSDAY, THE 10TH JANUARY 2008 / 20TH POUSHA 1929 MFA.No. 520 of 2003(A) ---------------------- ( ORDER IN STRP69/01/CT -ORDER NO.R2-3384/02/CT DATED 2.12.2002) APPELLANT: ----------- M/S. ATLAS JEWELLERY, MAIN ROAD, PERAMBRA. BY ADV. DR.K.B.MUHAMED KUTTY (SR.) SRI.K.M.FIROZ RESPONDENTS: ------------- THE COMMISSIONER OF COMMERCIAL TAXES, THIRUVANANTHAPURAM. BY GOVERNMENT PLEADER SRI. K.P. PRADEEP THIS MISC. FIRST APPEAL HAVING BEEN FINALLY HEARD ON 10/01/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: 2 ORDER ON CMP 2395 OF 2003 IN M.F.A.NO. 520 OF 2003 DISMISSED 10.1.2008 SD/-C.N.RAMACHANDRAN NAIR, JUDGE. SD/-T.R. RAMACHANDRAN NAIR, JUDGE. TRUE COPY P.S. TO JUDGE. C .N. RAMACHANDRAN NAIR & T.R. RAMACHANDRAN NAIR, JJ. -------------------------------------------- M. F. A. No. 520 OF 2003 -------------------------------------------- Dated this the 10th day of January, 2008 JUDGMENT C.N. Ramachandran Nair,J. This Appeal is filed under Section 40 of the KGST Act against order of the Commissioner of Commercial Taxes issued under Section 37 of the Act whereunder he suo motu cancelled the first revisional order of the Deputy commissioner remanding the penalty case. The business premises of the appellant, a jeweller, was searched on 12.7.2000. In the course of search, stock variation was noticed and slips and a note-book were recovered. The Intelligence Officer found that the appellant was engaged in unaccounted purchase and sale of gold jewellery. Even though appellant was given an opportunity to establish the nature of transactions entered into in regard to recovery of slips and a note-book, appellant mainly contended that much of the transactions represented purchase and sale of silver and the entries related to personal business of the managing partner. The Intelligence 2 Officer overruled the objections and levied penalty at almost double the amount of tax sought to be evaded. On revision, the Deputy Commissioner accepted the appellant's claim that appellant was not given an opportunity to cross-examine the persons referred to in the recovered note book and therefore he set aside the penalty order and remanded the matter back to the assessing officer for reconsideration of penalty after giving an opportunity to the appellant to cross-examine the persons referred to by the appellant. The commissioner in exercise of powers under Section 37 cancelled the order of the Deputy Commissioner and restored the penalty against which this appeal is filed. 2. We have heard senior counsel appearing for the appellant and Government Pleader appearing for the respondents. Counsel for the appellant contended that the order of the Commissioner is not justified because first revisional order setting aside the penalty and remanding the matter for reconsideration for the purpose of giving adequate opportunity to the appellant is not an order prejudicial to the revenue. In other words, according to him, so long as penalty is not cancelled by 3 the Deputy Commissioner, and it was open to the Officer to restore the penalty in remand proceedings, such order cannot be styled as an order prejudicial to the interest of the revenue. Government Pleader submitted that first revisional order setting aside penalty order by itself is an order prejudicial to the interest of the revenue because, but for the order, penalty would have been recovered. Moreover he contended that the Deputy Commissioner is not justified in setting aside the penalty order on the grounds stated therein because appellant did not ask for cross-examination of any party in adjudication proceedings. We are inclined to uphold the order of the Commissioner because the specific case of the appellant in the adjudication proceedings was that the transactions entered in the recovered note book represented matters pertaining personal business of the managing partner. When appellant pleads a specific case, it is for the appellant to prove the case with evidence. Moreover appellant had not asked for any cross-examination of any person in adjudication proceedings as is clear from the copy of the reply filed in this case. Besides this, it was open to the appellant to have produced any evidence in the course of adjudication either in the 4 form of affidavit or even the persons referred to in the notebook could have been produced and examined. Therefore we do not find any justification for the Deputy Commissioner to set aside the penalty order for the purpose of cross-examination and therefore the order of the Commissioner in principle is upheld. 3. However, we find force in the contention raised by senior counsel appearing for the appellant on the quantum of penalty. Since the Deputy Commissioner remanded the case, he did not have occasion to consider as to whether the quantum of penalty is in proportion to the gravity of offence noticed. It is seen that penalty is very close to double the amount of tax sought to be evaded. There is nothing to indicate that appellant was engaged in suppression of purchase and sale and was levied penalty on earlier occasions. Moreover, penalty itself is based on estimation. In fact, in suo motu revision under Section 37 Commissioner also does not consider the dispute on quantum of penalty. In the normal course we should have remanded the case for reconsideration on this issue. However, having regard to the fact that the matter is of the year 2000-01 and the appeal was pending in this 5 Court for the last four years, we reduce the penalty from Rs. 3 lakhs to Rs. 2 lakhs. Appeal is allowed to the above extent. (C.N.RAMACHANDRAN NAIR) Judge. (T.R.RAMACHANDRAN NAIR) Judge. kk 6