IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMACHANDRA MENON MONDAY, THE 30TH AUGUST 2010 / 8TH BHADRA 1932 WP(C).No. 32989 of 2006(B) ---------------------------------------- PETITIONER(S): ------------------------ A.SHAJAHAN, MOOLATHARAYIL HOUSE, SOORANADU P.O., KOLLAM DISTRICT. BY ADVS. SRI.V.P.SUKUMAR, SRI.KURYAN THOMAS. RESPONDENT(S): ---------------------------- 1. THE INTELLIGENCE OFFICER (IB), COMMERCIAL TAXES, KOTTAYAM. 2. THE DEPUTY COMMISSIONER, COMMERCIAL TAXES, KOTTAYAM. 3. THE COMMISSIONER OF COMMERCIAL TAXES, THIRUVANANTHAPURAM. 4. A.SHARAFUDIN, PROPRIETOR, MOOLATHARAYIL AGENCIES, SOORANADU, KOLLAM DISTRICT. 5. M/S.KRISHNA VINYLS LTD., BETAGAON, MAHAGAON ROAD, NEAR GOUSHALA, BOISAR (EAST), THANE, MAHARASHTRA. 6. THE TAHSILDAR, TALUK OFFICE, KUNNATHUR, SASTHAMKOTTA, KOLLAM DISTRICT. R1 TO R3, R6 BY GOVERNMENT PLEADER SRI. K.P.PRADDEP THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 30/08/2010,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: Kss WPC.NO.32989/2006 B APPENDIX PETITIONER'S EXHIBITS: P1: COPY OF THE PENALTY NOTICE DTD. 16/04/2002 ISSUED TO THE 4TH RESPONDENT BY THE 1ST RESPONDENT. P2: COPY OF THE REPLY SUBMITTED BY THE 4TH RESPONDENT TO EXT.P1 NOTICE. P3: COPY OF THE NOTICE DTD. 15/05/2002 ISSUED TO THE 4TH RESPONDENT BY THE 1ST RESPONDENT. P4: COPY OF THE NOTICE DTD. 28/09/2002 ISSUED BY THE 1ST RESPONDENT JOINTLY TO THE PETITIONER AND THE 4TH RESPONDENT. P5: COPY OF THE REPLY DTD. 18/11/2002 SUBMITTED BY THE PETITIONER BEFORE THE 1ST RESPONDENT. P6: COPY OF THE PENALTY ORDER DTD. 26/12/2002 PASSED BY THE 1ST RESPONDENT. P7: COPY OF THE COMMON ORDER DTD. 8/05/2003 PASSED BY THE 2ND RESPONDENT IN THE REVISIONS FILED BY THE PETITIONER AND THE 4TH RESPONDENT. P8: COPY OF THE NOTICE DTD.20/12/2003 ISSUED TO THE PETITIONER AND THE 4TH RESPONDENT BY THE 3RD RESPONDENT. P9: COPY OF THE REPLY DTD. 31/01/2004 SUBMITTED BY THE PETITIONER BEFORE THE 3RD RESPONDENT. P10: COPY OF THE REPLY DTD. 30/01/2004 SUBMITTED BY THE 4TH RESPONDENT TO EXT.P8 NOTICE ISSUED BY THE 3RD RESPONDENT. P11: COPY OF THE ORDER DTD. 19/11/2005 PASSED BY THE 3RD RESPONDENT. P12: COPY OF THE NOTICE DTD. 9/11/2006 ISSUED TO THE PETITIONER BY THE 6TH RESPONDENT. RESPONDENT'S EXHIBITS: N I L /TRUE COPY/ P.A.TO JUDGE Kss P.R.RAMACHANDRA MENON, J. ``````````````````````````````````````````````````````` W.P.(C) No. 32989 of 2006 B ``````````````````````````````````````````````````````` Dated this the 30th day of August, 2010 J U D G M E N T The petitioner is challenging Ext.P11 order passed by the third respondent Commissioner, whereby Ext.P7 order of remand made by the second respondent to reconsider the matter with regard to the fixation of liability imposing the penalty has been set aside and the original order passed by the first respondent has been affirmed. 2. When the matter came before this Court on 12-12- 2006, the matter was admitted and the coercive proceedings were intercepted on condition that the petitioner satisfied a sum of Rs.5 lakhs within one month, which stands still to be complied with. However, notwithstanding the non-satisfaction of the condition to avail the benefit of interim stay, the merits require to be considered, as projected in the writ petition. 3. The learned counsel for the petitioner submits that the petitioner is a dealer in 'vinyl flooring', which is a business similarly pursued by his brother as well (who is the fourth respondent) and both of them were doing the business making use of the supplies effected by the fifth respondent company, who is the manufacturer WPC.32989/06 : 2 : and supplier of the different commodities to the petitioner as well as the fourth respondent. 4. The issue involved pertains to the assessment years 1999-2000, 2000-01 and 2001-02. The case of the petitioner is that, in the course of the transactions, in respect of the assessment year 1999-2000, the petitioner had provided some financial assistance to his brother i.e., the fourth respondent, in the course of which the petitioner procured a Demand Draft in the name of the fifth respondent, which in fact was not reflected in the books of accounts of the petitioner. The first respondent conducted an inspection in the premises of the fifth respondent company, pursuant to which, some incriminating circumstances were unearthed, which, according to the Department, revealed the transactions with the petitioner and also the fourth respondent. This led to issuance of Ext.P1 notice to the petitioner, proposing to impose penalty, which was replied vide Ext.P2. The first respondent also issued Ext.P3 notice to the fourth respondent and this was subsequently followed by Ext.P4 notice issued to the petitioner as well as to the fourth respondent. Eventhough the petitioner preferred Ext.P5 reply, the same was not properly WPC.32989/06 : 3 : considered by the first respondent, who issued Ext.P6 order imposing penalty upon the petitioner. 5. Being aggrieved of the penalty imposed by the first respondent, the petitioner preferred a revision petition before the second respondent, as provided under relevant provisions of law. After considering the facts and figures, the second respondent passed Ext.P7 order, whereby it was held that the imposition of penalty was not correct or proper and it required to be reconsidered. Accordingly, the impugned order was set aside and the matter was remanded to the first respondent. 6. Taking note of the turn of events, the third respondent 'suo motu' proposed to revise Ext.P7 order passed by the second respondent and issued Ext.P8 notice to the petitioner as well as to the fourth respondent, which was replied by them as evidenced by Exts.P9 and P10 respectively. But, without properly appreciating the case, Ext.P11 order was passed by the third respondent setting aside Ext.P7 and confirming Ext.P6 order imposing penalty. This was followed by Ext.P12 notice under the Revenue Recovery Act which, in turn, is under challenge in this writ petition. As mentioned already, eventhough the coercive proceedings were WPC.32989/06 : 4 : intercepted by this Court, the petitioner did not choose to comply with the condition and in the said circumstances, further proceedings were taken and it is conceded by both sides that the property concerned, forming subject matter of Ext.P12, was sold in public auction and the sale has been confirmed. The writ petition has not been amended in this regard, nor the bidder has been brought to the party array. 7. With regard to the challenge raised by the petitioner, the petitioner as to the scope of interference by the third respondent, the learned Government Pleader appearing for the respondents submits that the idea and understanding of the petitioner is wrong/misconceived and Ext.P6 order imposing penalty is a well considered one and it was without considering the specific facts and circumstances that the second respondent passed Ext.P7 order setting aside the same and remanding the matter, which in turn was taken note of by the third respondent who passed Ext.P11 reversing the position based on the statutory prescriptions and also based on the materials on record, which hence is not assailable under any circumstances. The learned Government Pleader also submits that, the Demand Draft drawn WPC.32989/06 : 5 : by the petitioner in the name of the fifth respondent company and the non-accounting of the transaction in this regard is rather conceded. Various incriminating circumstances in respect of the transactions have been narrated in detail by the first respondent in Ext.P6, wherein it has been observed as follows:- “ The Investigation Branch conducted further detailed enquiry in the matter and visited Central Bank of India, Sooranadu and collected photocopies of DD purchase applications and also collected photocopy of CC Account (No.C4) operated from 90-00 onwards in the name of ASM Agencies, Sooranadu, a sister concern of Moolatharayil Agencies. The photocopies of DD purchase applications revealed that the DDs to M/s.Krishna Vinyls Ltd. were purchased by A.Sharafudeen, Moolatharayil Agencies, Sri.Shajahan, ASM Agencies and similar other names. The C.C. Account extract also disclosed that the amount of DD purchased in various names were transacted through that account. On enquiries conducted it was ascertained that Sri.Shajahan is brother of Sri.A.Sharafudeen and is the Proprietor of ASM Agencies, Chakkuvally. Both the dealers Moolatharayil Agencies and ASM Agencies hold registration on the rolls of WPC.32989/06 : 6 : Sales Tax Office, Karunagappally. It is evidenced that the subject purchases were the purchases actually made by Sri.A.Sharafudeen and Sri.A.Shajahan were jointly doing the business in Vinyl Flooring and the subject purchases were effected by them for sale within this state.” 8. It is further observed in Ext.P6 as follows:- “ The recovered records disclosed that the demand drafts taken by Sri.Shajahan and by the other persons are seen forwarded to the Mumbai Company with covering letter of Moolatharayil Agencies. It has come to notice to the undersigned that M/s.Shajahan and Sharafudeen are brothers and were jointly engaged in doing the business in purchasing Vinyl Flooring from the Mumbai Company in bogus names for sale in Kerala and have evaded huge quantum tax legitimately due to the State Exchequer. As per summon dt. 12.8.02 Sri.Shajahan was directed to produce his books of accounts for 00-01 to till date for verification on 4.9.02. But he failed to respond to this notice. Another notice dt. 5.9.02 was returned by postal authorities with endorsement “unclaimed”. WPC.32989/06 : 7 : 9. Coming to the correctness and sustainability of Ext.P11 order, the revisional authority, after narrating the sequence of events, has observed in the following terms:- “ I have considered the contentions of the dealers and examined the records of the case. Both M/s.Shajahan and Sharafudeen were dealers in flooring materials during the relevant period and both had taken registration under the KGST Act. As regards Sri.Shajahan, he was running a business in the name of ASN Agencies. Details of his transactions gathered by the Intelligence Officer from Central Bank of India, Sooranad showed that only a small part of the actual sales turnover was reflected in the returns filed before the assessing authority. This would be clear from the following details. Year Deposits Withdrawals Turnover conceded 1999-00 4.5 Lakhs 8.00 Lakhs Nil 2000-01 31 Lakhs 31.50 Lakhs 3.40 Lakhs 2001-02 25 Lakhs 24.00 Lakhs 10.40 Lakhs During 1999-00 Sri.Shajahan had purchased demand drafts as given below in favour of M/s.Krishna Vinyls:- WPC.32989/06 : 8 : DD No.17/1376 dt.29.1.2000 for Rs.48,000 “ 17/1377 dt.29.1.2000 for Rs.48,000 “ 17/1124 dt.15.12.1999 for Rs.40,000 “ 17/1125 dt.15.12.1999 for Rs.30,000 “ 17/1325 dt.24.1.2000 for Rs.48,000 “ 17/1279 dt.12.1.2000 for Rs.48,000 “ 17/1280 dt.12.1.2000 for Rs.2,735 In all these cases the purchaser is shown as ASN Agencies. But these purchases have not been included in the purchase lists, which conceded only local purchases of Rs.95,827.96. Though the dealers contend that Sri.Shajahan and advanced certain amounts to his brother to purchase demand drafts there is no material to support the claim. Also, no reasons have been furnished for the withdrawal of substantial amounts from the bank account on various days without these transactions being reflected in purchases or sales. There is also substantial variation between the purchase and sales turnover, as detailed below:- Year 2000-01 2001-02 Purchase – Local Rs.7,29,891 Rs.2,36,562 Purchase-Interstate Rs.4,56,380 Rs.34,41,583 Total Rs.11,86,271 Rs.36,78,145 ========= ========== Sales returned Rs.3,39,946 Rs.10,39,273 “ WPC.32989/06 : 9 : 10. It is also specifically observed in paragraph 6 of the last page of Ext.P11 that, though the accounts of M/s.Shajahan (petitioner herein) were called for by Intelligence Officer, he did not produce the same and the petitioner had even refused to accept the notice calling for the accounts. It was in the said circumstances, that the finding was arrived at by the third respondent, based on the facts stated in Ext.P11. This Court finds that Ext.P11 is very much a 'speaking order' and it does not call for any interference. The petitioner has failed to make out a sustainable case and none of the grounds raised in support of the reliefs prayed for in the writ petition does serve its purpose. Accordingly, interference is declined and the writ petition is dismissed. Sd/- (P.R.RAMACHANDRA MENON, JUDGE) aks // True Copy // P.A. To Judge