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 14TH DAY OF DECEMBER 2011/23RD AGRAHAYANA 1933 STA.No. 4 of 2011 ------------------ ORDER.22662/2008 of COMMR. OF COMMERCIAL TAXES, TRIVANDRUM APPELLANT(S): ------------ G.RAJENDRA BABU,PROPRIETOR, M/S BABUJI RESTAURANT & BAR, MAIDANAM, VARKALA,THIRUVANANTHAPURAM. BY ADVS.SRI.JAWAHAR JOSE SMT.CISSY MATHEWS RESPONDENT(S): -------------- 1 THE STATE OF KERALA REPRESENTED BY SECRETARY, COMMERCIAL TAX DEPARTMENT GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM PIN 695001. BY GOVERNMENT PLEADER SRI. BOBBY JOHN. THIS SALES TAX APPEAL HAVING COME UP FOR ADMISSION ON 14-12-2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: LSN STA.No. 4 of 2011 ANNEXURE PETITIONER'S ANNEXURE: A1: COPY OF THE PENALTY ORDER DATED 11-01-2008 PASSED BY THE INTELLIGENCE OFFICER. A2: COPY OF THE ORDER DATED 29-04-2008 PASSED BY THE DEPUTY COMMISSIONER OF COMMERCIAL TAXES. A3: COPY OF THE SUO-MOTU ORDER DATED 17-06-2011 PASSED BY THE COMMISSIONER OF COMMERCIAL TAXES. RESPONDENT'S ANNEXURE: NIL //TRUE COPY// P.A. TO JUDGE. LSN C.N. RAMACHANDRAN NAIR & K. VINOD CHANDRAN,JJ ============================== S.T.A. NO. 4 OF 2011 ============================ Dated this the 14th day of December 2011 JUDGMENT C.N.Ramachandran Nair, J. The appeal is filed against the order issued by the Commissioner under Section 37 of the Kerala General Sales Tax Act cancelling the first revisional order of the Deputy Commissioner and restoring the penalty levied on the appellant, who is running a Bar Hotel at Varkala. 2. We have heard the counsel for the appellant and Senior Government Pleader for respondent and have also gone through the orders of the three authorities produced along with the appeal. The appellant’s place of business was inspected on 2/3/2006 when irregularities in the form of excess and shortage in various items of liquor were noticed by the Inspecting Officer. It was also noticed that though the appellant was maintaining excise registers, books of STA 4/2011 2 accounts and other records pertaining to purchase and sales were not maintained. The Intelligence Officer verified the bill seized in respect of retail sale of an item of liquor and found that gross profit charged is 66.94% whereas the average gross profit returned by the assessee was only around 45%. Difference in percentage of gross profit is taken as suppressed turnover which was arrived at around Rs.23 lakhs and based on it escaped turnover tax was estimated at 10% of the estimated suppressed turnover. Penalty was levied under Section 45A of the K.G.S.T.Act at double the amount of turnover tax sought to be evaded. 3. In the first revision, the revisional authority followed the Tribunal’s order in another case and allowed the revision by canceling the penalty. However, the Commissioner of Commercial Taxes noticed that the basis on which the Deputy Commissioner interfered with the penalty order is wrong inasmuch as even in the case decided by the Tribunal, gross profit conceded by the dealer was not accepted and the Tribunal refixed the percentage STA 4/2011 3 of gross profit at a higher amount. Since the basis on which penalty was cancelled in first revision was not sustainable, the Commissioner restored the penalty. It is against this order, the appellant has filed this appeal. 4. After hearing both sides and after going through the orders what we notice is that the percentage of gross profit returned is not certainly the gross profit seen in the particular sale . However, the case of the appellant is that there is no standard pattern of gross profit charged on every item of liquor. According to him, the percentage of gross profit depends on demand for the item, which may not be the same for all varieties of liquor sold. 5. Even though we find force in this contention that uniform rates of profit need not be charged on every item of liquor, the appellant has no explanation as to why the entire bills were not made available to the Inspecting Officer at the time of inspection which was at the fag end of the year. In other words, admittedly the appellant did not produce copies of invoices for the local sales of liquor made in the STA 4/2011 4 Bar Hotel. In the absence of sale bills and other records, the only option is to estimate turnover to find out the probable suppression. Since the percentage of gross profit returned is much below the gross profit charged, the Department is entitled to estimate suppression and levy penalty on such basis. However, having regard to the fact that the appellant has returned an average gross profit of 45.13%, which is above the gross profit provided under the compounding scheme under Section 7, we feel the penalty levied at double the amount of tax is on the higher side. The commissioner, after reversing the first revisional order, has not considered the correctness or otherwise of the original penalty order. However, since the matter relates to 2006, we do not want to remand the matter again to the Commissioner. Considering the facts and circumstances stated above, we allow the appeal in part by modifying the Commissioner’s order and the penalty order issued by the Intelligence officer by reducing the penalty to Rs.2 lakhs. However, the reduction is granted on further condition that STA 4/2011 5 the appellant will make payment before 31st January 2012, failing which the penalty will stand increased to Rs.2.5 lakhs which is recoverable from the appellant. C.N.RAMACHANDRAN NAIR JUDGE K. VINOD CHANDRAN JUDGE ks.