IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE K.M.JOSEPH THURSDAY, THE 10TH JANUARY 2008 / 20TH POUSHA 1929 SALES TAX APPEAL No. 4 of 2004 ------------------------------------------------------------ (ORDER NO.R1.57059/02/CT. DATED 7-10-2003 OF THE COMMISSIONER OF COMMERCIAL TAXES, THIRUVANANTHAPURAM, FOR THE ASSESSMENT YEAR 1999-2000) APPELLANT/ PETITIONER: -------------------------------------- SRI.RAJU CHERIAN, RAILWAY CONTRACTOR, KUNNKKATTIL HOUSE, MEEMPARA P.O., PUTHENCRUZ, ERNAKULAM. BY ADV. SMT.K.LATHA RESPONDENT/ RESPONDENT: ------------------------------------------ THE STATE OF KERALA. BY SENIOR GOVERNMENT PLEADER SRI.MUHAMMED RAFIQ. THIS SALES TAX APPEAL HAVING BEEN FINALLY HEARD ON 10/01/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: H.L.Dattu, C.J. & K.M.Joseph, J. ---------------------------------------------- S.T.Appeal No.4 of 2004 ---------------------------------------------- Dated, this the 10th day of January, 2008 JUDGMENT K.M.Joseph,J. The appellant calls in question the order passed by the Commissioner of Commercial Taxes under Section 37 of the Kerala General Sales Tax Act, 1963 (“Act” for short). By the impugned order, the Commissioner of Commercial Taxes has proceeded to interfere with the order passed by the Deputy Commissioner, Commercial Taxes. The Deputy Commissioner, in turn, had allowed the revision filed by the appellant against the order passed by the Intelligence Officer imposing penalty. (2) Penalty came to be levied from the appellant citing three reasons. They are: (a) There is delay in taking registration. (b) There is non-remittance of tax. (c) There is non-filing of monthly and annual returns. The Intelligence Officer, vide Annexure A2 order, took the view that this is a case where imposition of penalty under Section 45A(a)(b)(c) and (e) of the Act is warranted. This was done on the basis that the appellant is carrying on a works contract and received an amount of Rs. 17,53,725/- during the assessment year 1999-2000 from the Southern Railway, that he had failed to take out a registration as required under Section 13, that he had failed to file return - both monthly and annual - and that he had failed to remit tax due on the same. After considering the objections filed by the appellant, the Intelligence Officer found that it is a fit case for imposition of maximum penalty S.T.Appeal No.4/2004 - 2 - of double the tax due, which was fixed at Rs.98,208.60 and, thus, an amount of Rs.1,96,420/- was imposed as penalty by the Intelligence Officer. In the revision petition filed by the appellant, the Deputy Commissioner took the view that the offence committed by the appellant is only technical in nature and there is no nexus between the offence committed and the penalty imposed. He has found that the quantum of penalty was excessive and requires reconsideration and, thus, the order passed by the Intelligence Officer came to be set aside and the matter remitted back for fresh disposal. (3) Finding that there was prejudice caused, the Commissioner of Commercial Taxes proceeded to pass the impugned order after issuing necessary notice to the appellant, to which the appellant has also given his explanation. (4) The following questions of law were raised, apparently in view of Form 35 appended to the Rules, for our consideration and decision. They are as under: “(i). Whether the Order of the Deputy Commissioner applying his judicial mind for fresh disposal of the penalty order according to law on the basis of his finding that the offence committed by the petitioner was only technical in nature and that there is no nexus between the offence committed and the penalty imposed; is prejudicial to the revenue and whether the commissioner can be interfered in such judicial order U/s.37. (ii). Whether the suo moto procedure Under Section 37 of the Kerala General Sales Tax Act 1963 can be legally initiated to levy penalty Under Section 45A of the Kerala General Sales Tax Act 1963, in a case where it was proved that the appellant had already complied with the law even before issuing the order of penalty for tax evasion and where the compounding was opted Under Section 7 of the Kerala General Sales Tax Act (hence no need to produce any books of accounts on such contract work) and paid tax accordingly even before issuing such penalty order and where it was also proved that there is no evasion of tax by the appellant to levy any penalty as held by the Deputy Commissioner. (iii). Whether the Judicial view of the Deputy Commissioner that the offence committed by the appellant is only technical in nature by verifying the records and based on the facts and S.T.Appeal No.4/2004 - 3 - circumstances of the case can be re-opened under Section 37 of the KGST Act 1963 by the Commissioner unless and until such judicial findings of the Dy. Commissioner were found arbitrary or baseless. (iv). Whether the Penalty will be leviable in a case where it was proved that the appellant had taken registration and paid tax @ 2% of the contract receipt and paid surcharge accordingly by opting the assessment Under Section 7 (7A) of the KGST Act 1963, even before the issuance of such penalty procedures. (v). Whether the levy of penalty is justifiable under a suo moto proceeding under section 37 of the KGST Act 1963 where it was proved that there was no bonafide evasion of tax by the appellant. (vi). Whether the levy of penalty more than R.10,000/- is legally justifiable, as the provisions U/S 45A specifically provided that in such cases the maximum penalty is Rs.10,000/-”. (5) We have heard Smt.Latha, learned counsel appearing for the appellant and Sri.Muhammed Rafiq, learned Senior Government Pleader appearing for the respondent. (6) Smt.Latha, learned counsel appearing for the appellant, would submit that in the fact situation, the invoking of the power under Section 37 of the Act was unwarranted. According to her, the view taken by the Deputy Commissioner was also possible and, therefore, it was not open to the Commissioner to invoke the powers under Section 37 of the Act. She would contend that tax has been paid and in such a situation, imposition of penalty at Rs.1,96,420/- is unwarranted. (7) In Annexure A7, it was stated as follows: “I shall not consider the quantum of penalty. At the time when the penalties were imposed by the Intelligence Officer, the tax due had not been assessed. But the assessment has since been completed, and the tax due for 1998-99 was Rs.10,641, and that for 1999-2000 was Rs.40,766/-. As deliberate evasion of tax over a long period of time has been established beyond doubt, imposition of the maximum penalty is warranted in this case. The penalty is revised as double the amount of tax as assessed by the assessing authority”. S.T.Appeal No.4/2004 - 4 - Thus, it is clear that the actual penalty imposed is not Rs.1,96,420/-, but the amount would be double the tax assessed by the assessing authority as noted by the Commissioner in Annexure A7, at Rs.40,766/-. We also would think that there is no merit in the complaint raised by the appellant that this is not a fit case where the power under Section 37 of the Act could have been invoked by the Commissioner of Commercial Taxes. (8) Having regard to the facts and circumstances brought out and set out in the order of the Intelligence Officer and also that of the Commissioner of Commercial Taxes, we are of the clear view that this is a fit case where the appellant was liable to be visited with the penalty. In such circumstances, we find no merit in this appeal. The appeal fails and it is dismissed. H.L.Dattu Chief Justice K.M.Joseph vku/- Judge