IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM FRIDAY, THE 10TH DECEMBER 2010 / 19TH AGRAHAYANA 1932 WP(C).No. 36224 of 2010(C) -------------------------- PETITIONER(S): --------------- TRAVANCORE TRADING CORPORATION, NEDUMBASSERRY BY HIMA DHARMAN, MANAGER. BY ADVS. SRI.P.RAGHUNATH SRI.PREMJIT NAGENDRAN RESPONDENT(S): --------------- 1. INTELLIGENCE OFFICER (IB), ERNAKULAM-682 024. 2. COMMERCIAL TAX OFFICER, CIRCLE I, ALUVA-683 101. 3. DEPUTY COMMISSIONER (APPEALS), ERNAKULAM-682 015. 4. INSPECTING ASST.COMMISSIONER, MATTANCHERRY-682 002. BY ADV.SRI.C.K.GOVINDAN, GOVERNMENT PLEADER. THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 10/12/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ami/ C.K. ABDUL REHIM, J ------------------------------- WP(C) NO. 36224 OF 2010 ------------------------------------- Dated this the 10th day of December, 2010 JUDGMENT The petitioner is challenging Ext.P9 common interim order passed by the 3rd respondent disposing of stay petitions filed along with Exts.P4 and P6 appeals. The appeals in question were filed against orders imposing penalty under Section 67(1) of the Kerala Value Added Tax Act (KVAT Act) (Exts. P1 and P3). The appellate authority found that the petitioner could able to establish a prima facie case and accordingly granted interim stay subject to condition of the petitioner remitting 1/3rd of the amount in dispute. 2. It is noticed that the dispute pertains to the rate of tax applicable to the products, 'Ujala Supreme' and 'Ujala Stiff & Shine', which is dealt with by the petitioner. According to the petitioner, tax at the rate of 4% was collected and paid with respect to the product. But the department had initiated action on the basis that the 2 WP(C) No. 36224/2010 correct rate of tax applicable is 12.5%. The Kerala Value Added Tax Appellate Tribunal in the decision in T.A (VAT) Nos. 273 and 314 of 2008, which are appeals filed by the manufacturer, held that the rate of tax applicable is 4%. A revision filed by the revenue against the said decision is pending disposal before this Court. At the same time, on the basis of the application made by another dealer, the Commissioner of Commercial Taxes had clarified that the rate of tax applicable is 12.5%. Eventhough the said order was challenged before this Court in O.T.A. No. 9/2007, this Court was not inclined to interfere. It is evident that a Special Leave Petition filed against the order in O.T.A No. 9/2007 is pending disposal before the Hon'ble Supreme Court. 3. It is contended that the question regarding liability of the petitioner remains unsettled and as such imposition of penalty under such circumstances was deprecated by the Hon'ble Supreme Court in the decision reported in E.I.D 3 WP(C) No. 36224/2010 Parry (I) Ltd. v. Asst. Commissioner of Commercial Taxes and another [(2000) 117 STC 457] and also in a decision of the Madras High Court in State of Tamil Nadu v. Indian Cements Ltd. [(2009) 26 VST 362 (Mad)]. Therefore the order of penalty is totally unsustainable and hence the impugned interim order is liable to be interfered, is the contention. 4. I take note of the fact that the liability for payment of tax remains unsettled, awaiting final decision from this Court as well as from Hon'ble Supreme Court. Under such circumstances, insistence for payment of 1/3 of the amount of penalty, till disposal of the appeal, seems to be improper and unjust. Hence, I am of the view that, interest of justice will be served if a direction is issued to the appellate authority to pass orders on the appeal itself, on an early basis, and till then restrain the recovery steps. 5. In the result, the Writ Petition is allowed and Ext.P9 order is hereby quashed. The 3rd respondent is directed to 4 WP(C) No. 36224/2010 consider and pass orders on Exts.P4 and P6 appeals after affording a reasonable opportunity of hearing to the petitioner, as early as possible at any rate, within a period of three months from the date of receipt of a copy of this judgment. 6. Till such time orders are passed on the appeals as directed above, recovery of amounts covered under Exts.P1 and P3 orders imposing penalty shall be kept in abeyance, provided the petitioner furnish security bond with respect to the amount in dispute within two weeks from the date of receipt of a copy of this judgment. 7. The petitioner will produce a copy of this judgment before the 3rd respondent. C.K. ABDUL REHIM JUDGE dnc