IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM TUESDAY, THE 8TH MARCH 2011 / 17TH PHALGUNA 1932 WP(C).No. 3370 of 2011(U) ------------------------- PETITIONER(S): --------------- MATHEW SEBASTIAN, PROPRIETOR, M.S.TIMBERS, CAUSEWAY JUNCTION, MUNDAKKAYAM, KOTTAYAM DISTRICT. BY ADV. SRI.S.ANIL KUMAR (TRIVANDRUM) SRI.K.S.HARIHARAN NAIR SRI.K.UMAMAHESWAR RESPONDENT(S): --------------- 1. COMMERCIAL TAX OFFICER, PONKUNNAM P.O., KOTTAYAM DISTRICT-686 506. 2. THE COMMISSIONER, COMMERCIAL TAXES, VIKAS BHAVAN P.O., THIRUVANANTHAPURAM-695 033. SR. GOVT. PLEADER SRI.C.K.GOVINDAN THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 08/03/2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.K.ABDUL REHIM,J. ------------------------------- WP(C).NO. 3370 of 2011 --------------------------------- Dated this the 8th day of March, 2011 JUDGMENT The petitioner, a dealer in timber, registered under the Kerala Value Added Tax Act, 2003 (KVAT Act) on the rolls of the 1st respondent, is seeking direction to the 1st respondent to affix seal on sufficient number of Delivery Notes. As per Rule 22(3) of the Kerala Value Added Tax Rules 2005 (KVAT Rules) the dealer is required to submit photocopies of used Delivery Notes along with periodic returns and to submit originals of all used Delivery Notes along with the annual return. In the case of the petitioner the 1st respondent issued Ext.P1 notice requiring the petitioner to produce duplicate copies of all the Delivery Notes used by him after 1.4.2007. Such a notice was issued on the basis of an allegation that the petitioner was adopting a particular 'modus operandi' in preparing the delivery notes by filling up the transport copy of the Delivery Note alone and filling up the original subsequently with false entries. In reply the petitioner had produced duplicate copies of four Delivery Notes and replied WP(C).3370/2011 2 that duplicate copies of other Delivery Notes are not available. It was contended that there was no misuse and most of the Delivery Notes were used for consignment of the goods to the petitioner himself. However, finding that the petitioner had not complied with requirement of producing the duplicate copies of all Delivery Notes, request for sealing the required number of Delivery Notes was refused, through Ext.P5. Eventhough the petitioner submitted Ext.P6 representation before the 2nd respondent, no steps was taken to consider the same or to issue any directions to the 1st respondent. Hence this writ petition is filed on the premise that the non affixure of seal on required number of Delivery Notes is putting the petitioner to difficulty and the same is paralysing the business activities. 2. In a statement filed on behalf of the respondents it is mentioned that Ext.P2 notice was issued on the basis of a direction issued by the Deputy Commissioner (Intelligence), Thiruvananthapuram as per letter dated 31.8.2010, and the contents of the said letter which is extracted in the statement is reproduced hereunder. WP(C).3370/2011 3 “It is found that M/s. M.S.Timbers a dealer registered in the rolls of your office is continuously making use of statutory delivery note for bogus transportation of Timber. The Modus Operandi adopted by him is to use the transport copy of the delivery note filled up singly leaving the original of delivery note blank and subsequently filling up the original according to the necessity of the circumstances. I have examined the assessment records and found that this method of evasion practiced by the dealer is known to the assessing authority as well. The circumstances of the case give a very strong inference that the dealer is only a delivery note trader and not a real dealer in timber. Rule 58(17) makes it mandatory that every delivery note shall be prepared in triplicate as carbon copies and the duplicate (transporting copy) shall be retained by the purchasing dealer or the person to whom the goods are delivered for transporting. In the case of this dealer you have not insisted for observation of this rule in its strict sense. In the circumstance, if any more delivery note is issued to the dealer you should ensure WP(C).3370/2011 4 collection of transporting copy of delivery note (duplicate copy) relating to all used delivery notes and cross verify them as a precondition to issue fresh delivery note”. 3. It is evident that the denial of sealing of required number of Delivery Notes is on the basis of a direction issued by the superior authority of the first respondent. It is pertinent to note that Ext.P2 notice was issued only on 9.9.2010 whereas the requirement is to produce duplicate copies of all delivery notes issued from 1.4.2007 onwards. As per Rule 58(17) of the KVAT rules the dealer should furnish the original of the delivery note to the assessing authority along with annual return. It insist that the duplicate shall be retained by the purchasing dealer or the person to whom the goods are delivered for transporting. No provision is pointed out which will indicate insistence for keeping both the original as well as the duplicate copy by the consignor (dealer). As such the insistence for production of duplicate copies of all Delivery Notes issued from 1.4.2007 onwards, is a direction, which is prima facie incapable of compliance. If the petitioner had used the Delivery Notes in any malafide manner WP(C).3370/2011 5 for the purpose of effecting any clandestine transport or in any manner which lead to suppression of the actual turn over, the authorities of the Department are vested with sufficient powers to find out such clandestine transactions or suppressions. It is left open to the authorities to initiate necessary proceedings for imposition of tax liability and also to penalise the dealer for such actions. Ample provision is there to take steps even for cancellation of registration granted to the dealer, in such cases. As long as none of the authorities have initiated any such steps, there is no justification for denying issuance of Delivery Notes to the dealer, as long as he holds a valid registration. In the case at hand, it is evident that the 1st respondent has not initiated any proceedings on his own. But Ext.P2 is issued only on the basis of the directions issued by the higher authorities. Further, the 1st respondent has not considered the reply given by the petitioner through Ext.P3 series, informing about his inability to produce the duplicate copies of the used delivery notes. The 1st respondent has not taken any decision on the basis of such objections. It seems that the 1st respondent is taking a stand that unless the requirement mentioned in Ext.P2, which is insisted by the WP(C).3370/2011 6 superior authorities, is complied with, no further Delivery Notes will be issued to the petitioner. 4. I am of the view that an independent consideration of the matter untramelled by the directions issued by the Deputy Commissioner (Intelligence) is only justifiable, on the facts of the case. Needless to say that any decision taken by the assessing authority with respect to issuance of Delivery Notes will not in any way prejudice actions if any proposed against the petitioner alleging misuse of the Delivery Notes already issued. 5. Therefore the writ petition is disposed of directing the 1st respondent to consider and to take appropriate decision on the basis of Ext.P3 series explanations submitted by the petitioner, on the request made by him for issuance of Delivery Notes as per Ext.P4. A decision in this regard shall be taken after affording an opportunity of hearing to the petitioner, as early as possible, at any rate with a period of two weeks from the date of receipt of a copy of this judgment. C.K.ABDUL REHIM,JUDGE pmn/ WP(C).3370/2011 7