IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMAN & THE HONOURABLE MR. JUSTICE P.S.GOPINATHAN FRIDAY, THE 6TH MARCH 2009 / 15TH PHALGUNA 1930 WA.No. 274 of 2009() -------------------- AGAINST THE JUDGEMENT IN WPC.16620/2003 Dated 22/07/2008 .................... APPELLANT(S): -------------- POLAKULATH TOURIST HOME NARAYANAMANGALAM, KODUNGALLUR THRISSUR DIST. REPRESENTED BY ITS PROPRIETOR, P.K.NARAYANAN. BY ADV. SMT.S.K.DEVI SRI.M.RAJ MOHAN RESPONDENT(S): --------------- 1. INTELLIGENCE OFFICER , SQUAD III COMMERCIAL TAXES, THRISSUR. 2. THE DEPUTY COMMISSIONER, COMMERCIAL TAXES, THRISSUR. 3. THE COMMISSIONER, OFFICE OF THE COMMISSIONER OF COMMERCIAL TAXES THIRUVANANTHAPURAM. BY GOVERNMENT PLEADER SRI.MOHAMMED RAFIQ THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 06/03/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: P.R.RAMAN & P.S.GOPINATHAN, JJ. ------------------------------- W.A.No.274 of 2009 ------------------------------- Dated this the 6th March, 2009 J U D G M E N T Raman, J. The appellant's business premises, a bar hotel, was inspected by the Sales Tax Intelligence Squad in January, 2001, and found that there was a variation in stock, both excess and shortage, and levied penalty at twice the amount of tax attributable to the unaccounted transactions as estimated by him. The Deputy Commissioner by Ext.P2 order in revision also agreed that there were excess stock and unaccounted sales. The contention of the petitioner-appellant was that the stock ascertained at the time of inspection was not correct. According to him, had the Intelligence Squad allowed the employees to cross verify the stock in the stock inspection report with that of the stock register, the alleged variation of stock could not have been there. This contention was not accepted by the Deputy Commissioner, since the entire stock was verified and recorded in W.P.(C) No.274 of 2009 2 the stock inspection report in the presence of the employees, and that was also signed by the representative of the petitioner. Similarly, the contention that the employees of the petitioner was not allowed to cross check the quantity was also rejected. The contention that the excess stock was not due to unaccounted purchases, and, therefore, the rate of tax at the rate of 90% adopted to calculate the penalty was not correct, is also rejected. Merely because the Intelligence Officer has not verified the label and ascertained whether the stock was from any source other than the Kerala State Beverages Corporation,by itself is no reason to accept that there was no unaccounted purchases. The action of the assessing authority in adopting the rate of tax was also found to be correct. But according to the Deputy Commissioner, the unaccounted sales of liquor and shortage in the stock cannot be stated to be due to unaccounted purchases, and that at best, can only be the evasion of turnover tax. W.P.(C) No.274 of 2009 3 2. The Intelligence Officer has calculated tax at the rate of 85% and 55% respectively on IMFL and beer, in addition to turnover tax at the rate of 5%. The total deficit as found by the Deputy Commissioner was only Rs.70,372.79. Considering the quantum of penalty and taking a lenient view in the matter, especially, considering the nature of the business and that there is likelyhood of some small variations possible to occur in the retail sale of liquor, the Deputy Commissioner reduced the tax to Rs.1,08,000/=, in the place of Rs.2,78,532/=. 3. Against the said order, the assessee filed a second revision to the extent that the Deputy Commissioner did not grant the full relief. The Commissioner, on the other hand, suo motu sought to revise the order of the Deputy Commissioner and by Ext.P3 order, he restored the penalty imposed by the first authority. Therefore, the assessee filed a writ petition before this Court and the learned Single Judge, after considering the matter, held that all the authorities have concurrently found that W.P.(C) No.274 of 2009 4 the accounts were not maintained properly. Even according to the petitioner, the accounts could not be maintained properly because of the large business on account of temple festival going on in the area. Therefore, the fact that the accounts were not maintained property was beyond dispute. Excess stock could represent purchases from other sources. True, that this suspicion could have been totally lifted out, had the inspecting team at the time of inspection found from the label that the bottles were purchased from else where and not from the Beverages Corporation. Therefore, there is an omission on the part of the Intelligence Squad in this regard. However, the fact remains that the accounts were not maintained properly and Section 45 A of the Kerala General Sales Tax Act is attracted. Hence, only on the question of quantum of penalty, some consideration could be shown in favour of the appellant. The learned Single Judge has reduced the penalty at 1 ½ times of the tax amount, as against the two times levied. W.P.(C) No.274 of 2009 5 4. Considering the totality of the facts and circumstances, we reduce the penalty to Rs.1,50,000/=, and sustain the turnover tax as such. The judgment of the learned Single Judge is modified to the limited extent, as above. The writ appeal is partly allowed. P.R.RAMAN, JUDGE P.S.GOPINATHAN, JUDGE. nj.