IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM MONDAY, THE 27TH SEPTEMBER 2010 / 5TH ASWINA 1932 WP(C).No. 29213 of 2010(B) -------------------------- PETITIONER(S): --------------- QUILON TRADING COMPANY: VII/234B: NEDUMBASSERRY: P.O.MEKKAD: THURUTHISSERY ERNAKULAM DIST: REP: BY M.P.DIVAKARAN: PARTNER. BY ADV. SRI.P.RAGHUNATH SRI.PREMJIT NAGENDRAN RESPONDENT(S): --------------- 1. INTELLIGENCE OFFICER (IB): SALE TAX COMPLEX, M.G.ROAD, ERNAKULAM ; 682015. 2. DEPUTY COMMISSIONER (APPEALS): SALES TAX COMPLEX, M.G.ROAD, ERNAKULAM ; 682015. BY GOVT. PLEADER SRI.C.K.GOVINDAN THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 27/09/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.K.ABDUL REHIM, J --------------------------- W.P(C) No.29213 of 2010-B ---------------------------- Dated this the 27th day of September, 2010. J U D G M E N T Ext.P10 interlocutory order issued by the first appellate authority (2nd respondent) is under challenge in this writ petition. The appeal arises from Exts.P3 and P4 orders imposing penalty under Section 67(1) of the Kerala Value Added Tax. The dispute pertains to rate of tax applicable to the products “Ujala Supreme” and “Ujala Stiff & Shine”. The petitioner levied tax at the rate of 4% for the above products, being the rate applied by the manufacturer. The allegation was that the rate applied is incorrect and the tax ought to have been levied at the rate of 12.5%. It is pointed out that the Sales Tax Appellate Tribunal in the decisions in T.A (VAT) No.273 and 314 of 2008, which are appeals filed by the manufacturer, held that the correct rate of tax is 4%. The revision filed by the revenue against that is pending disposal before this Court. But on the basis of an application filed by another dealer before the Commissioner of Commercial Taxes under Section 94 of the KVAT Act, it was clarified that the correct rate applicable is W.P(C) No.29213 of 2010-B 2 12.5%. Challenge against the said order before this Court in O.T.A No.9/2007, was unsuccessful. A Special Leave Petition is pending before the Hon'ble Supreme Court against decision of this Court. Being the position as above, contention of the petitioner is that liability on the point remains unsettled and in the such case imposition of penalty has been deprecated by the Hon'ble Supreme Court in the decision reported in E.I.D.Parray (I) Ltd. V. Assistant Commissioner of Commercial Taxes and another (2000) 117 STC 457 and also in the decision of the High Court of Madras in State of Tamil Nadu V. Indian Cements Ltd. (2009) 26 VST 362 (Mad). 2. On the basis of the above contentions it is argued that imposition of penalty was totally unwarranted and the first appellate authority ought to have considered the same. The condition imposed for payment of 1/3rd of the penalty is highly unreasonable and arbitrary, is the contention. It is also pointed out that, this Court in cases of assessments relating to the same products completed against the manufacturer and other dealers, had issued directions to the appellate authorities to dispose of such appeals and recovery steps were directed to be kept in abeyance on condition of payment of 1/3rd of the tax in dispute. W.P(C) No.29213 of 2010-B 3 3. Learned counsel for the petitioner points out that even when the amounts payable as tax is in dispute and when the rate of tax applicable is in controversy, due to disputed interpretations of the various entries, there is no justification for imposing penalty. It is further contended that the question of liability on the point remains unsettled and therefore no 'mens rea' can be attributed against the assessee in paying tax at a lesser rate. 4. Having considered various facts as mentioned above, I am of the considered opinion that a lenient view can be taken in the matter, since the issue is pending decision before various Courts. In such circumstances, I am of the opinion that appellate authority can be directed to dispose of the appeal on an early basis and till then the recovery can be kept in abeyance. 5. In the result, the writ petition is disposed of directing the second respondent to consider and pass orders on Exts.P5 and P6 appeals after affording an opportunity of hearing to the petitioner, as early as possible, at any rate within a period of two months from the date of receipt of a copy of this judgment. 6. Ext.P10 order is modified to the extent of the condition imposed therein, and it is made clear that if the petitioner furnishes W.P(C) No.29213 of 2010-B 4 security for the amount of penalty in dispute within a period of two weeks from today, the recovery of the amounts in dispute shall be kept in abeyance till the disposal of the appeal by the second respondent as directed above. Sd/- C.K.ABDUL REHIM JUDGE //True Copy// P.A to Judge ab