IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR FRIDAY, THE 22ND AUGUST 2008 / 31ST SRAVANA 1930 OP.No. 11259 of 1997(M) ----------------------- PETITIONER: ------------ G.K.VASUDEVA RAO, PROPRIETOR, M/S.PRECISE ENGEERING EQUIPMENTS, THYCAUD, TRIVANDRUM. BY ADV. SRI.N.DHARMADAN (SR.) SRI.M.BALAGOVINDAN SMT.D.P.RENU RESPONDENTS: ------------- 1. STATE OF KERALA, REP. BY ITS CHIEF SECRETARY, TRIVANDRUM. 2. COMMISSIOENR, BOARD OF REVENUE(TAXES), TRIVANDRUM. 3. INTELLIGENCE OFFICER, SQUAD NO.I, AGRICULTURAL INCOME TAX & SALES TAX, TRIVANDRUM. 4. TAHSILDAR(R.R.), TRIVANDRUM. BY G.P. SRI.TEKCHAND THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 22/08/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ORDER ON CMP NO.19936/1997 IN O.P. NO.11259/1997 DISMISSED: 22.8.2008 SD/-(C.N.RAMACHANDRAN NAIR, JUDGE.) APPENDIX PETITIONER'S EXHIBITS: P1: TRUE COPY OF RECEIPT DT.21.10.92 BY PETITIONER TO INTELLIGENCE OFFICER, SQUAD NO.III. P2: TRUE COPY OF REPLY DT.30.10.95 BY PETITIONER TO R3. P3: TRUE COPY OF ORDER DT.16.11.95 ISSUED BY R1. P4: TRUE COPY OF STATEMENT FOR THE YEAR 90-91. P4(a): .DO. 91-92. P4(b): .DO. 92-93. P5: TRUE COPY OF PURCHASE ABSTRACT 90-91 BY PETITIONER. P5(a): .DO. 91-92 .DO. P5(b): .DO. 92-93 .DO. P6: TRUE COPY OF ORDER R.P. NOS.100/95, 101/95 & 102/95 DT.15.1.96 BY DY. COMMISSIONER AIT & ST, TRIVANDRUM. P7: TRUE COPY OF JUDGMENT IN O.P. NO.880/97 DT.17.1.97 OF THIS COURT. P8: TRUE COPY OF ORDER DT.28.4.97 BY R1. P9: TRUE COPY OF ASSESSMENT ORDER(90-91) DT.17.1.2000 ISSUED BY SALES TAX OFFICER. P9(a): .DO. (91-92) DT.24.12.99 .DO. P9(b): .DO. (92-93) .DO. P10: TRUE COPY OF LETTER DT.-2.2000. P10(a): TRUE COPY OF APPLICATION FOR PAYMENT OF ARREARS WITH REDUCED INTEREST. P11: TRUE RELEVANT PORTION OF ORDER NOS.STA 706, 707, 708 AND 709/98 DT.15.11.1999. P12: TRUE COPY OF AFFIDAVIT AND NOTICE FILED BY LEARNED COUNSEL SRI.S.RAJEEV DT.29.11.2006. TRUE COPY PA TO JUDGE C.N.RAMACHANDRAN NAIR, J. .................................................................... O.P. No.11259 of 1997 .................................................................... Dated this the 22nd day of August, 2008. JUDGMENT The order challenged in the O.P. is a second revisional order issued by the Board of Revenue (Commissioner of Commercial Taxes) confirming penalty levied on the petitioner for the assessment years 1990-91, 1991-92 and 1992-93. I have heard Senior counsel Sri.N.Dharmadan appearing for the petitioner and Government Pleader for the respondents. 2. The petitioner was a registered dealer engaged in the business in engineering goods. An inspection was carried out in the business premises of the petitioner on 28.12.1992. When purchase and sale bills and accounts were verified, it was found that petitioner was engaged in massive suppression in as much as he was not returning the actual turnover disclosed in bills and accounts and even collected tax was not remitted along with monthly returns. Even though petitioner filed revised returns and paid further amount of tax in addition to tax paid based on original returns, the Intelligence Officer levied penalty under Section 45A of the KGST Act at double the amount of tax evaded for all the three years. The revision petitions filed by the petitioner in two stages were dismissed and this O.P. is 2 filed challenging the second revisional order of the Board of Revenue confirming penalty. 3. The contention raised by the petitioner is that since revised returns are filed and tax remitted, levy of penalty is not justified. Besides this, counsel for the petitioner contended that based on revised return no balance tax was due and so much so, there was no evasion of tax and therefore, maximum penalty should be limited to Rs.5,000/- under Section 45A of the KGST Act. Government Pleader on the other hand contended that suppression found is from petitioner's own records and this is a case of conscious evasion of tax because petitioner failed to disclose the actual turnover and did not even remit the collected tax. Besides the details furnished in the impugned orders, I have gone through the statements and documents produced by the petitioner. It is proved beyond doubt that petitioner did not return the turnover covered by his own bills and there is massive suppression of turnover. In fact, the suppressed turnover is multiples of the turnover returned by the petitioner in the returns filed. Besides this, admittedly petitioner has collected tax and the remittance accounts for maximum 10 to 15% of the collected tax. Suppression is also conceded by the petitioner because after date of search, revised returns were filed. Even here, the documents produced by the petitioner do not disclose 3 that soon after search he filed revised returns or remitted the tax. Even though Senior counsel appearing for the petitioner contended that entire collected tax was remitted along with revised returns, I am unable to relate the tax payment for each year with reference to date of payment based on revised returns filed. The Bank statement produced do not show the year to which the tax payment is related. 4. The contention of the petitioner that there is no evasion of tax and so much so, penalty cannot be levied in excess of Rs.5,000/- cannot be accepted because it is a settled position that filing of revised return or payment of tax after detection of suppression in search proceedings cannot save the assessee from liability. However, payment of tax voluntarily with interest for belated payment is certainly a mitigating fact for reducing penalty. There is no mention in any of the orders about the interest if any paid by the petitioner under Section 23(3) or Section 23(3A) of the KGST Act. In this case since penalty is based on evasion of tax which is nothing but collected tax retained by the petitioner without remittance to the department, petitioner is liable to pay interest for belated payment of the tax along with revised returns. If petitioner has paid differential tax along with interest after search, but before levy of penalty, I feel penalty should be limited to equal amount of tax and not at double the amount of tax. In the 4 circumstances, O.P. is disposed of directing the petitioner to furnish yearwise details of remittance of tax with interest along with revised returns before the Intelligence Officer and on verification if he finds that petitioner has remitted differential tax with interest along with revised returns before levy of penalty, there will be direction to him to reduce penalty to equal amount of tax evaded by the petitioner. However, if petitioner has not paid tax with interest along with revised returns before levy of penalty, then the penalty order confirmed by the Commissioner's order will stand sustained. C.N.RAMACHANDRAN NAIR Judge pms