IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE S.SIRI JAGAN TUESDAY, THE 20TH JANUARY 2009 / 30TH POUSHA 1930 OP.No. 11233 of 2002(K) -------------------------------- PETITIONER(S): ----------------------- BLUE MOUNTAIN BISCUIT COMPANY, AMBALAVAYAL, REP. BY ITS MANAGING PARTNER, K.M.ASHRAFALI. BY ADV. SRI.N.MURALEEDHARAN NAIR SRI.V.K.SHAMUSUDHEEN RESPONDENT(S): ------------------------ 1. SALES TAX OFFICER, VYTHIRI AT KALPETTA. 2. DY.COMMISSIONER, COMMERCIAL TAXES, KALPETTA, WAYANAD DIST. 3. COMMISSIONER OF COMMERCIAL TAXES, TRIVANDRUM. 4. TAHSILDAR (R.R), AMBALAVAYAL. GOVERNMENT PLEADER (TAX) SRI. K.P. PRADEEP (NO MEMO) THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 20/01/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: OP.No. 11233 of 2002(K) APPENDIX PETITIONER'S EXHIBITS: EXT.P1 - TRUE COPY OF LETTER ISSUED BY DISTRICT INDUSTRIES CENTRE, WAYANAD DT. 3.8.2000 TO DY. COMMISSIONER, COMMERCIAL TAXES, KALPETTA. EXT.P2 - TRUE COPY OF COMMUNICATION RECEIVED FROM GOVERNMENT DATED 4.12.2000. EXT.P3 - TRUE COPY OF PENALTY ORDER PASSED BY 1ST RESPONDENT DATED 18.9.2000. EXT.P4 - TRUE COPY OF ORDER OF DY.COMMISSIONER, COMMERCIAL TAXES, WAYANAD, KALPETTA, DT. 2.11.2001. EXT.P5 - TRUE COPY OF LETTER ISSUED BY GENERAL MANAGER, DISTRICT INDUSTRIES CENTRE, WAYANAD DT. 14.12.2001. EXT.P6 - TRUE COPY OF REVN. PETITION FILED BY PETITIONER TO 2ND RESPONDENT DATED 7.12.2001. EXT.P7 - -DO- -DO- EXT.P8 - -DO- -DO- EXT.P9 - -DO- -DO- EXT.P10 - TRUE COPY OF THE ARGUMENT NOTE SUBMITTED BY THE PETITIONER BEFORE THE 3RD RESPONDENT DT. 7.2.2002. EXT.P11 - TRUE COPY OF THE ORDER OF THE 3RD RESPONDENT DATED 19.4.2002. EXT.P12 - TRUE COPY OF DEMAND NOTICE ISSUED BY 4TH RESPONDENT U/S. 7 OF THE R.R. ACT. EXT.P12(a) - TRUE COPY OF DEMAND NOTICE ISSUED UNDER THE R.R.ACT BY THE 4TH RESPONDENT. // TRUE COPY// PA TO JUDGE rhs S.SIRI JAGAN, J - - - - - - - - - - - - - - - - - - - - - - - O.P. No. 11233 of 2002 - - - - - - - - - - - - - - - - - - - - - - - Dated this the 20th day of January, 2009 J U D G M E N T The petitioner was a registered dealer under the Kerala General Sales Tax Act. The petitioner was engaged in the business of manufacturing biscuits as a SSI unit. The petitioner is challenging orders of the original, revisional and second revisional authorities under the Kerala General Sales Tax Act, by which petitioner was imposed with penalty of double the amount of tax on the turnover in question, under Section 45A of the Kerala General Sales Tax Act, for filing false returns, which liability was upheld by the revisional authorities, although the first revisional authority had reduced the amount of penalty as equal to the tax attempted to be evaded. Exts.P3, P4 and P11 are under challenge before me. The allegations against the petitioner was that in the returns filed by the petitioner for the years 1995-1996, 1997-1998 and 1999- 2000, the petitioner claimed exemption of turn over from tax, although he was not under law eligible for such exemption. As a result, the tax due on the turnover for which exemption was claimed was treated as tax attempted to be evaded and twice the amount of that tax was imposed as penalty on the petitioner amounting to Rs.20,71,680/- by O.P. No. 11233 of 2002 - 2 - Ext.P3 order. The same was reduced to Rs.10,35,840/- by Ext.P4 order which was confirmed by Ext.P11 order. Petitioner's contention is that he was not attempted to evade tax in so far as Ext.P1 application filed by the petitioner was pending before the District industries Centre for exemption and only when that was rejected the petitioner would cease to be entitled to exemption. This is opposed by the learned Government Pleader, who pointed out that the exemption is granted as per SRO No. 1729/1993 which was subsequently amended by SRO Nos. 404/1994 and 550/2000, whereby the Government have ordered that Industrial unit manufacturing biscuits would not be eligible for tax exemption from 1.4.1994 and that existing units as on 1.4.1994 only would continue to be eligible for exemption if they undertake expansion or diversification. It is pointed out that the petitioner's unit was started only on 3.4.1995 and therefore no exemption was available to the petitioner. Therefore filing of Ext.P1 application even if true, has no consequence in so far as under the Kerala General Sales Tax and there was no exemption available to the petitioner, in respect of the claim made by them in their returns. That being so the petitioner made the claim for exemption in the returns knowing well that under law they are not eligible for such exemption, which makes them liable to penalty is the contention of the O.P. No. 11233 of 2002 - 3 - learned Government Pleader. 2. The petitioner raises another contention that even assuming that the petitioner is liable for penalty, the tax computed on the turnover in question is wrong, in so far as tax has been calculated at the rate of 10% whereas, as a SSI unit the petitioner is liable to pay tax only at the rate of 4%. 3. I have considered the rival contention in detail. 4. The petitioner claims ignorance about the Government orders at the time of filing returns, which cannot now be countenanced, since as a dealer the petitioner expected to be aware of all exemption notifications on the basis of which he claims exemption. It is not now disputed before me that by virtue of the subsequent Government orders issued, the exemption has been limited to only up to 1.4.1994 and factories which started subsequent to that date would not be eligible for extension. Admittedly, the petitioner's unit started only on 3.4.1995. Therefore as per law, the petitioner is not eligible for exemption. That being so, in the returns filed by the petitioner no exemption could have been validly claimed. When the petitioner claimed such exemption the returns became false returns for which the petitioner is liable for penalty. Hence, I do not find any merit in the challenge against the O.P. No. 11233 of 2002 - 4 - order imposing penalty in so far as the liability for penalty is concerned. However, the petitioner's dispute regarding the rate of tax appears to be worthy of consideration. In the above circumstances, the respondents are directed to recalculate the amounts of penalty imposable on the petitioner, based on the rate of tax applicable to a SSI unit at the relevant time if the petitioner is entitled to such concessional rate under law. I make it clear that only the amounts as per revised orders of penalty shall be realised from the petitioner and therefore, I am not quashing the impugned orders. But revised orders shall be issued on the above basis, as expeditiously as possible, at any rate, within two months from the date of receipt of a copy of this judgment. 5. However, I make it clear that since the 1st revisional authority had reduced the penalty as equal to the tax attempted to be evaded, the calculation of penalty afresh shall also be at that rate. The original petition is disposed of as above. S.SIRI JAGAN, JUDGE rhs