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2015 (11) TMI 159 - HC - VAT and Sales TaxDemand of VAT and levy of Penalty u/s 67 of KVAT - E-commerce transactions - virtual shop - facility for providing online sale or purchase of goods - breach of the provisions of Sections 20 and 40 of the KVAT Act - Registeration not obtained under KVAT - Non filing of returns and non maintenance of true and correct accounts - The petitioner contends that it has absolutely no role to play in the transaction of sale and purchase and hence it could not have been proceeded against under the penal provisions of the KVAT Act. Held that:- Rather than stating the reasons that prompted the revenue authorities to suspect an evasion of tax, and calling for the explanation of the assessee to those reasons, the notice proceeds to draw definite conclusions as regards the commission of an offence by the assessee. There is no indication in the notice as to why the revenue authorities considered the petitioner a dealer, or why the transactions in question had to be treated as local sales as against inter-state sales. The notice adopts the figure furnished by the petitioner, representing the total turnover in respect of sale transactions completed through its online portal to customers in Kerala during the relevant period, as the total sales turnover of the petitioner for the purposes of quantifying the tax liability and penalty against the petitioner. The impugned orders only find that there were transactions of sale that resulted in goods being delivered to customers in Kerala, but do not go further and find that it was the petitioner who effected those sales. Further, there is no consideration of the specific contention of the petitioner that the sales in question were effected by sellers who were registered on its online portal, and that all the said sales were inter-state sales on which the respective sellers had paid applicable tax under the CST Act. A specific finding on the above issues, in my view, was necessary to clothe the authority concerned with the jurisdiction to proceed against the petitioner under the penal provisions of the KVAT Act, and the absence of a finding on these issues, denudes the authority concerned of such a jurisdiction. The most perplexing aspect of the instant case, however, is that WS Retail, the seller responsible for effecting majority of the sales to customers in Kerala, through the online portal of the petitioner, is registered as a dealer under the KVAT Act and, in the returns submitted by the said dealer for the relevant period, they had conceded NIL taxable turnover under the KVAT Act, on the contention that their entire sales turnover pertained to inter-state sales effected by them. Under the said circumstances and, in the absence of any material to suggest that the returns filed by the said seller were rejected by the revenue authorities, one fails to understand how the revenue authorities could proceed to levy tax, or impose penalty, on the petitioner in respect of the same turnover. The findings in the impugned orders reflect a patent non-application of mind by the authority concerned and also smack of arbitrariness. - Demand and penalty set aside.
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