1999 (3) TMI 621 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Applicability of Section 5(7) of the Kerala General Sales Tax Act to the purchasing dealer.
2. Compliance with conditions for concessional tax rate under Section 5(7).
3. Legality and quantum of penalty imposed under Section 45A(1)(g) of the KGST Act.

Issue-wise Detailed Analysis:

1. Applicability of Section 5(7) of the KGST Act to the Purchasing Dealer:
The petitioner argued that Section 5(7) of the KGST Act is not applicable to the purchasing dealer as the liability to pay tax is on the selling dealer. Consequently, they contended that penalty under Section 45A(1)(g) could not be imposed on them. The court rejected this argument, stating that the penalty can be imposed on any person under Section 45A, not just the selling dealer. The court referenced the case of Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Bharat Refineries Limited, emphasizing that the purchasing dealer's declaration, which resulted in lesser tax collection, can attract penalty.

2. Compliance with Conditions for Concessional Tax Rate under Section 5(7):
The petitioner claimed compliance with the conditions for the concessional tax rate, arguing that the finished products were manufactured within the State and were for sale, without a requirement to sell only within Kerala. However, the court highlighted that the first proviso to Section 5(7) mandates that the finished products must be liable to tax under the KGST Act or the Central Sales Tax Act. Since a significant portion of the finished goods was transferred outside Kerala without paying tax, the court found that the petitioner violated the declaration, thus not entitled to the concessional rate.

3. Legality and Quantum of Penalty Imposed under Section 45A(1)(g):
The petitioner contended that the imposition of penalty was illegal as there was no deliberate intention to evade tax, and any violation was technical. They also argued that the penalty should not be at the maximum rate. The court referred to the Supreme Court decision in Hindustan Steel Ltd. v. State of Orissa, which states that penalties should not be imposed for technical defaults without deliberate intention. However, the court found that the petitioner's declaration was false, leading to revenue loss, and there was no bona fide mistake. The court noted that the Board of Revenue had considered the petitioner's arguments and the gravity of the offense, and found no grounds to interfere with the imposition of the maximum penalty.

Conclusion:
The court dismissed the original petition, upholding the imposition of penalty under Section 45A(1)(g) for the false declaration and violation of the conditions under Section 5(7) of the KGST Act. The court found no lack of jurisdiction or perversity in the findings and confirmed that the orders were passed with proper application of mind.