IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN WEDNESDAY, THE 30TH DAY OF NOVEMBER 2011/9TH AGRAHAYANA 1933 STA.No. 1 of 2011 ( ) ===================== (AGAINST ORDER NO.R3/17581/08/CT DATED 21/01/2011 PASSED BY THE COMMISSIONER OF COMMERCIAL TAXES, KERALA.) APPELLANT(S) ============ M/S.K.R.TOURIST HOME, REPRESENTED BY ITS MANAGING PARTNER D.RAJKUMAR BY ADV.SRI.A.SUDHI VASUDEVAN SMT.K.PUSHPAVATHI RESPONDENT(S) ============= 1. COMMISSIONER OF COMMERCIAL TAXES, THIRUVANANTHAPURAM, PIN - 695 001. 2. INTELLIGENCE OFFICER, SQUAD NO.II, COMMERCIAL TAXES, ATTINGAL, PIN - 695 101. 3. COMMERCIAL TAX OFFICER, ATTINGAL, PIN - 695 101. 4. DEPUTY COMMISSIONER (LAW), COMMERCIAL TAXES, ERNAKULAM, PIN - 682 032. BY ADV.MR.SEBASTIAN CHAMPAPPILLY, SPL. GOVERNMENT PLEADER THIS SALES TAX APPEAL HAVING COME UP FOR ADMISSION ON 30-11-2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: STA NO.1/2011 APPENDIX APPELLANT'S EXHIBITS ANNEXURE-A1 : COPY OF ORDER DATED 26/9/2007 PASSED BY THE INTELLIGENCE OFFICER, SQUAD NO.II, COMMERCIAL TAXES, ATTINGAL UNDER SECTION 46(1) OF THE KGST ACT. ANNEXURE-A2 : COPY OF ORDER NO.R.P76/07 DATED 15/04/2008 PASSED BY THE DEPUTY COMMISSIONER COMMERCIAL TAXES, THIRUVANANTHAPURAM MODIFYING THE ORDER OF THE INTELLIGENCE OFFICER. ANNEXURE-A3 : COPY OF ORDER DATED 22/03/2008 PASSED BY THE DEPUTY COMMISSIONER (APPEALS), THIRUVANANTHAPURAM. //TRUE COPY// PA TO JUDGE. jg C.N.RAMACHANDRAN NAIR & K.VINOD CHANDRAN, JJ. .................................................................... S.T. Appeal No.1 of 2011 .................................................................... Dated this the 30th day of November, 2011. JUDGMENT Ramachandran Nair, J. Heard counsel for the appellant and Special Government Pleader for respondents. 2. Order under challenge is penalty levied under Section 45Aof the KGST Act for attempted evasion of turnover tax in respect of sale of liquor. Even though substantial relief was granted in first revision by the Deputy Commissioner, the Commissioner of Commercial Taxes in suo moto revision proceedings initiated under Section 37 of the KGST Act vacated the order of the first revisional authority and restored the penalty order. It is against this order appellant has filed statutory appeal before this court under Section 40 of the KGST Act. 3. After hearing both sides and after going through the orders impugned, what we notice is that the average gross profit returned by the appellant was 39%, whereas during inspection the Inspecting Officer on verifying bills found that the gross profit charged in respect STA 1/2011 2 of three items is an average of 59%. The difference in gross profit is treated as evaded turnover based on which maximum penalty is levied. Before the lower authorities and before us appellant's contention is that penalty cannot be levied based on estimation of gross profit for the whole year based on certain bills recovered on one day. Counsel submitted that invariably lot of group customers purchase bottles wherein appellant cannot charge same gross profit. Special Government Pleader opposed the submissions by contending that 59% gross profit is the actual rate of gross profit found on inspection and it is realistic because without so much of the rate of profit, business in the Bar Hotel itself will not be viable. Counsel for the appellant specifically referred to the compounding scheme introduced under Section 7 of the KGST Act which provides for payment of turnover tax in Municipal areas at 140% of the purchase turnover. 4. Having regard to the facts and circumstances and since the gross profit returned by the appellant is very close to the statutory rate prescribed for payment at compounded rate, we accept in principle the penalty levied, but reduce the amount to Rupees One lakh. However, STA 1/2011 3 we make it clear that the reduction granted in penalty should not be treated as a reflection of the actual turnover for the purpose of assessment. The reduction granted is on a further condition that appellant will pay the reduced penalty with interest within one month from date of receipt of copy of this judgment, failing which the relief granted by us will stand modified by increasing the penalty to Rs.1.5 lakhs which could be recovered by the department. C.N.RAMACHANDRAN NAIR Judge K.VINOD CHANDRAN Judge pms