IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE S.SIRI JAGAN TUESDAY, THE 5TH FEBRUARY 2008 / 16TH MAGHA 1929 OP.No. 6281 of 2002(W) ---------------------- PETITIONER: ------------ M/S. CHANTHIAM HARDWARES, SULTHAN BATTERY, REPRESENTED BY ITS PARTNER, MR.GEORGE VARGHESE. BY ADV. SRI.E.K.NANDAKUMAR SRI.A.K.JAYASANKAR NAMBIAR SRI.ANIL D. NAIR SMT.PRIYA MAHESH SMT.PRIYA MANJOORAN RESPONDENTS: ------------- 1. ASSISTANT COMMISSIONER (ASSMT)-II, SPECIAL CIRCLE, KOZHIKODE. 2. OFFICE OF THE INTELLIGENCE OFFICER, AGRICULTURAL INCOME TAX AND SALES TAX, WAYANAD, KALPETTA. 3. DEPUTY COMMISSIONER OF COMMERCIAL TAXES, WAYANAD, KALPETTA. 4. COMMISSIONER OF COMMERCIAL TAXES, THIRUVANANTHAPURAM. 5. STATE OF KERALA, REPRESENTED BY THE SECRETARY (TAXATION) THIRUVANANTHAPURAM. BY SPECIAL GOVERNMENT PLEADER (TAX), SRI.TEK CHAND THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 05/02/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: OP NO.6281/2002/W ORDER ON CMP NO.11081/2002 IN OP NO.6281/2002 DISMISSED 5.2.2008 SD/- S.SIRI JAGAN, JUDGE APPENDIX PETITIONER'S EXHIBITS: EXT. P1: COPY OF THE ASSESSMENT ORDER ISSUED BY THE 1ST RESPONDENT FOR 1995-96 DATED 27-2-1997 TO THE PETITIONER. EXT. P2: COPY OF THE NOTICE ISSUED BY THE 2ND RESPONDENT DATED 6-3- 98 TO THE PETITIONER. EXT. P3: COPY OF THE LETTER SENT BY THE PETITIONER TO THE 2ND RESPONDENT DATED 8TH AUG. 1998. EXT. P4: COPY OF THE LETTER SENT BY THE PETITIONER TO THE 2ND RESPONDENT DATED 19-10-1998. EXT. P5: COPY OF THE NOTICE ISSUED BY THE 2ND RESPONDENT DATED 6.3.2000 TO THE PETITIONER. EXT. P6: COPY OF THE LETTER ISSUED BY THE PETITIONER TO THE 2ND RESPONDENT DATED 27-3-2000. EXT. P7: COPY OF THE CROSS EXAMINATION BETWEEN THE PETITINER AND VIJAYALAKSHMI PRINTING PRESS DATED 17-4-2000. EXT. P8: COPY OF THE LETTER SENT BY THE PETITIONER TO THE 2ND RESPONDENT DATED 6-11-2000. EXT. P9: COPY OF THE ORDER ISSUED BY THE 2ND RESPONDENT TO THE PETITIONER DATED 7.6.2001. EXT. P10: COPY OF THE ORDER OF THE 3RD RESPONDENT TO THE PETITIONER DATED 2-1-2002. EXT. P11: COPY OF THE ORDER CMP NO.3848/01 IN MFA NO.411/2001 DATED 8TH MAY 2001. EXT. P12: COPY OF THE ORDER CMP 3833/01 IN MFA NO.409/2001 DATED 8TH MAY, 2001. /TRUE COPY/ P.A.TO JUDGE JP S.SIRI JAGAN, J. ======================= O.P. No.6281 of 2002 (W) ======================= Dated this the 5th day of February, 2008 JUDGMENT The petitioner is an assessee under the KGST Act. Assessment of the petitioner under the KGST Act for the year 1995-96 were completed by Ext.P1 assessment order accepting his books of accounts. Thereafter, Ext.P2 notice was issued by the 2nd respondent under Section 45A of the KGST Act directing the petitioner to show cause why penalty proceedings should not be initiated against him in respect of sales of tore steel in bulk quantity as per sale bill nos. detailed therein, which have not found a place in his books of accounts. To this, the petitioner filed Ext.P3 reply stating that the bills referred to in Ext.P2 are not issued by the petitioner and the petitioner had not made any sales of steel as per the bills referred to in Ext.P2. By Ext.P3, they also made a request for an opportunity to verify the bills referred to in Ext.P2. They have also suggested that there is likelihood that the disputed bills might have been fabricated by O.P. No.6281/2002/W -2- the contractor. They again requested for an opportunity to verify the documents referred to in Ext.P2. By Ext.P4, they again reiterated their request for copies of the bills pointing out a Supreme Court decision which upholds the right of an assessee for perusal of evidentiary material relied on against him and for cross examination of witness, seeking also a right to cross examine the witness through whom the bills are sought to be proved. Thereafter another notice under Section 45A, Ext.P5, was issued to the petitioner in which in addition to the bills in respect of alleged sale of steel, another 125 bills allegedly for unaccounted sale of cement were also mentioned, in respect of which also the petitioner was directed to show cause why penalty proceedings should not be initiated against the petitioner. In Ext.P5, it was stated that on enquiry it was revealed that the sale bills of M/s. Haritha Marketing were obtained by the petitioner from M/s.Vijayalakshmi Printing Press at Sulthan Bathery which is near to petitioner's shop which was used for effecting the sale referred to in the show cause notice. Therein there was another O.P. No.6281/2002/W -3- statement that the Finance Investigation Wing of the Secretariat, Thiruvananthapuram conducted an enquiry in this matter and it was found that the petitioner had used those bills for sale of cement to the Executive Engineer Karapuzha River Project Division. By Ext.P6, again the petitioner denied knowledge of those bills. In that the petitioner requested for certified copies of the enquiry report of the Finance Investigation Wing. Further the petitioner specifically requested for certified copies of the bills alleged to have been used for sale of cement and steel. The copies of the bills were never given to the petitioner. But the petitioner was afforded an opportunity to cross examine the owner of the printing press from which the sale bills of M/s. Haritha Marketing was allegedly obtained by the petitioner. Ext.P7 is the copy of the deposition. In that, the petitioner specifically asked the owner as to whether he has seen those bills relied on against the petitioner, subsequently. He denied having seen and he also admitted that without seeing those bills he cannot say as to whether the same was printed in his press. O.P. No.6281/2002/W -4- He also stated that did not request for seeing the said bills before giving his statement to the 2nd respondent. Thereafter, the 2nd respondent passed Ext.P9 order confirming the proposal for penalty and imposing penalty of Rs.11,50,000/- on the petitioner for alleged attempt to evasion of tax. Petitioner's revision before the 3rd respondent was also rejected by Ext.P10 order. The petitioner is challenging Exts. P9 and P10 orders in this original petition. 2. The contention of the petitioner is that proceedings for imposition of penalty under Section 45 A are quasi criminal in nature and the same could not have been finalised without supplying to the petitioner or atleast permitting the petitioner to peruse, the materials which was held against the petitioner. According to him, in spite of specific requests made in that regard, the bills based on which the penalty proceedings have been confirmed have never been either supplied to the petitioner nor was the petitioner permitted to peruse the same. According to the petitioner, he was not also given a copy of the enquiry O.P. No.6281/2002/W -5- report of the Finance Inspection Wing despite request. The petitioner further points out that even 2nd respondent had not personally seen those bills at any time. He points out that in Ext.P9 order what has been stated is that predecessor-in-office of the 2nd respondent had verified those bills. According to him, there is no materials to show that the predecessor in office had actually verified the bills. For all these reasons, the petitioner submits that Exts.P9 and P10 orders are vitiated and are liable to be set aside. 3. The learned Government Pleader submits that in so far as the impugned order specifically states that the predecessor in interest of the 2nd respondent had actually verified the bills, that has to be accepted on face value. He would submit that since the bills in question were in the possession of other Governmental agencies, the 2nd respondent was incapacitated from getting the bills which cannot be a bar for completing the penalty proceedings. It is also submitted that the details of the bills have been furnished to the petitioner, which would be O.P. No.6281/2002/W -6- sufficient compliance with principles of natural justice. He, therefore, supports the impugned orders. 4. I have considered the rival contentions in detail. At the outset, I must state that even this Court has been denied an opportunity to peruse those bills based on which only the impugned orders have been passed. It is not known even now as to where those bills are actually. Although in the impugned orders it is stated that the predecessor-in-office of the 2nd respondent had verified the bills from the Deputy Superintendent of Police, Vigilance and Anti Corruption Bureau, Meenangadi, I am at a lost to understand why these two Government Departments cannot co-operate with each other for enabling the 2nd respondent to get copies of those bills. Both are Government departments and both are duty bound to safeguard the interest of the Government. That being so, the fact that those bills are in the hands of some other Government department is not an excuse for not bringing atleast photocopies of those bills on record in the penalty proceedings, especially O.P. No.6281/2002/W -7- when the penalty proceedings are based solely on those bills which admittedly has not taken place. 5. It is settled law that proceedings under Section 45A of the Kerala General Sales Tax Act are quasi-criminal in nature. Principles of natural justice should therefore be read into that Section. An assessee cannot be saddled with the liability to pay penalty without giving him a reasonable opportunity to controvert the materials held against him in that penalty proceedings. Here the only evidence against the petitioner are the bills for sale of steel and cement allegedly issued by the petitioner. Copies of those bills have not been given to the petitioner, and the same are not even on record in the penalty proceedings for perusal. As such the proceedings are vitiated not only for non-compliance with principles of natural justice but also for being arbitrary. Without the actual evidence on the basis of which a person is sought to be penalised, on record, no person can be found liable for penalty under Section 45 A. In the above circumstances, the very basis of Exts. P9 and P10 orders is faulty. As such they are O.P. No.6281/2002/W -8- unsustainable. Accordingly, I quash Exts. P9 and P10 orders. If the 2nd respondent still desires to continue the penalty proceedings, he may do so, but only after furnishing copies of the bills and the enquiry report referred to in the impugned orders to the petitioner and affording the petitioner an opportunity to cross examine the recipient of those bills, if requested for by the petitioner, and after hearing the petitioner, thereafter. The original petition is allowed as above. S.SIRI JAGAN, JUDGE jp