Commissioner Of Com.Taxes, Tvm vs M/S. Ktc Automobiles

The undisputed facts disclose that the respondent is in the business of purchase and sale of Hyundai cars manufactured by Hyundai Motors Limited, Chennai. As a dealer of said cars, both at Kozhikode (Calicut), Kerala where their head office is located and also at Mahe within the Union Territory of Pondicherry where they have a branch office, they are registered dealer and an assessee under the KGST Act, the Pondicherry Sales Tax Act as well as the Central Sales Tax Act. The dispute relates to assessment year 1999-2000. Its genesis is ingrained in the inspection of head office of the respondent on 1.6.2000 by the Intelligence Officer, IB, Kozhikode. After obtaining office copies of the sale invoices of M/s K.T.C. Automobiles, Mahe (branch office) for the relevant period as well as some additional period and also cash receipt books, cash book etc. maintained in the head office, he issued a show cause notice dated 10.8.2000 proposing to levy Rs.1 crore by way of penalty under Section 45A by the KGST Act on the alleged premise that the respondent had wrongly shown 263 number of cars as sold from its Mahe Branch, wrongly arranged for registration under the Motor Vehicles Act at Mahe and wrongly collected and remitted tax for those transactions under the provisions of Pondicherry Sales Tax Act. According to the Intelligence Officer, the sales were concluded at Kozhikode and hence the vehicles should have been registered within the State of Kerala. Therefore, by showing the sales at Mahe the respondent had failed to maintain true and complete accounts as an assessee under the KGST Act and had evaded payment of tax to the tune of Rs.86 lakhs and odd during the relevant period. The respondent submitted a detailed reply and denied the allegations and raised various objections to the proposed levy of penalty. The Intelligence Officer by his order dated 30.3.2001 stuck to his views in the show cause notice but instead of Rs.1 crore, he imposed a penalty of Rs.86 lakhs only.

The respondent appealed against that order. Their appeal was allowed by the Deputy Commissioner by a detailed order dated 8.1.2002 which has been noted and examined with meticulous care by the High Court in paragraphs 9 to 11 of the impugned judgment and later approved. Against the appellate order in favour of assessee, the Commissioner of Commercial Taxes initiated a suo- motu proceeding in exercise of power under Section 37 of the KGST Act and passed a final order on 12.8.2002 setting aside the appellate order and restoring the original order of penalty passed by the Intelligence officer. Against this suo-motu order the respondent preferred Miscellaneous First Appeal before the High Court of Kerala which was numbered as MFA No. 1000 of 2002 and ultimately allowed by the impugned order dated 20.3.2006. Mr. K. Radhakrishnan, learned senior advocate for the appellant made detailed oral submissions on facts as well as law. The same has been supplemented by way of written submissions also. The submission on behalf of appellant is that the order imposing penalty is based upon proper appreciation of all the facts and circumstances noted by the Intelligence Officer in the show cause notice as well as in his final order. According to submissions, there was no other conclusion possible except to hold that the respondent dealer had created colorable device to evade sales tax in Kerala by adopting questionable means such as providing incorrect addresses of buyers for the purpose of facilitating registration of the motor vehicles at Mahe. According to Mr. Radhkrishnan, the sales transactions stood concluded in Kozhikode, Kerala and hence the respondent should not have given any facilities to residents of Kerala in getting motor vehicles registered at Mahe. By adoption of such means, the respondent had derived advantage of paying sales tax in Pondicherry where the rate was lower and evaded payment of lawful tax under the KGST Act in Kerala. To elaborate and support the aforesaid factual stance, the learned senior counsel has highlighted some facts which have been duly noticed by the authorities under the KGST Act as well as the High Court. He highlighted that in the “customer booking registration and necessary fitting instructions” issued from main office at Kozhikode the respondent gave an unwarranted option to the customers of registering the vehicle at Mahe. It was contended on behalf of appellant that such option was not for lawful purposes of promoting sales at Mahe but an offer to facilitate registration of cars at Mahe against the provisions of Motor Vehicles Act and the Rules which require registration at the place of residence or place of business of the owner of the vehicle. Some allegations were highlighted to contend that in some purchase orders the buyers had given Kerala addresses but the respondent as a dealer raised sale invoices showing Mahe addresses which were fictitious. This was alleged to be a deliberate act on the part of dealer to escape tax liability in Kerala. It was also highlighted that same cash receipt book in the head office at Kozhikode was at times used for issuance of cash receipts for transactions where the sale and registration was shown at Mahe. Letters of few buyers allegedly supported the allegation that sometimes even the delivery of the vehicle was given at Kozhikode although it was registered at Mahe.

January 29, 2016.