9911796707
TMI Blog2012 (6) TMI 795X X X X Extracts X X X X X X X X Extracts X X X X ..... herein for each variety of timber. The assessee having paid the same, brought it to the business premises/yards from where subsequent sales were effected within the State of Kerala, attracting tax under the Kerala Value Added Tax Act, 2003 (hereinafter referred to as "the KVAT Act"). 3. The controversy in the instance case arose from an inspection conducted by the Intelligence Wing of the Commercial Taxes Department in the business premises of the assessee. The books of accounts having been verified, the Department alleged that the sale of timber being at rates lesser than that prescribed in the aforesaid circular; leads to undervaluation and consequent evasion of tax, warranting an imposition of penalty under Section 67 of the KVAT Act. That the advance tax was paid as per the circular and sales were effected at rates below the floor rate prescribed under the circular are admitted. 4. We have heard learned counsel Sri.Harisankar V.Menon for the revision petitioner and Sri.Bobby John, learned Senior Government Pleader for the State. 5. The counsel for the revision petitioner would urge before us that going by binding precedents, the circular aforementioned has been issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conferring the power for imposition of penalty in cases where tax is actually evaded or sought to be evaded, more specifically Section 67 of the KVAT Act, clothe the authority with the power to make an estimation of the turnover for the purposes of determining the penalty? (ii) Would the prescription of rates for the purpose of collecting advance tax in the case of evasion prone commodities; bind and restrict the dealers from claiming sale of such commodities at a lesser rate resulting in tax liability only for such lesser amounts? 8. The question first to be considered is with respect to the estimation of the turnover made by the Intelligence Officer based on the rates prescribed in the circular. The circular if held by us to be indicative or determinative of the actual price for which the goods are sold, the question posed is as to whether in penalty proceedings estimation can be adopted. The provision authorizing imposition of penalties, coming up for consideration in the instant case, is Section 67 of the KVAT Act. Clauses (a) to (l) of Section 67 enumerates the various offences that attract imposition of penalty. If any authority empowered under the Act is satisfied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, in the decision reported in Paisons Vs. The Intelligence Officer & Others [(1992) 1 KTR 143 (Ker)], while upholding the constitutionality of Section 45A in the Kerala General Sales Tax Act, 1963; similar to Section 67 of KVAT Act, held: "The discretion vested in the officer under section 45A of the Act is not an unexaminable or unfettered discretion. Decisions are legion to hold that when the exercise of discretionary power is vested in a statutory authority on his being "satisfied" of certain facts, there should be material on record to substantiate the same. It is true that the language used in section 45A(1) is "subjective". Though literally, the language is so, the practical approach of the courts has been to insist on objective evaluation". 10. In penalty proceedings the offences indicated under Section 67 should be evidenced by the materials recovered on inspection or otherwise and the enquiry is pointedly against any actual suppression or omission in the course of the business transactions, which would lead to the definite conclusion of evasion or attempt to evade. On detection of such offences; in the event of the tax evaded or sought to be evaded being determinable, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dual officer which definitely is subject to the principles of reasonableness, proportionality and of course natural justice. Such estimation on best judgment would definitely have to be done with due notice and after affording a personal hearing. Such estimation should be reasonable and should have a nexus with the gravity and frequency of the commission of offences as also the quantum of loss suffered by the State. This exercise, in our opinion, cannot be undertaken by the officer empowered with the power to impose penalty under Section 67 of the Act. Section 67 contemplates imposition of penalty on proof of commission of offences as a measure of deterrence; best judgment assessments are made to compensate the loss caused to the State. The first question hence is answered against the Revenue and in favour of the assessee. 13. The next question is regarding the scope of Circular No.28/2008, dated 19.06.2008. The powers to issue orders, directions and instructions for the proper administration of the Act is contained in Section 3(2)(c) of the KVAT Act. Section 3(2) confers on the Commissioner the power of superintendence over all officers and persons employed in the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to evade payment of the tax due under the Act. Sub-section (16A) of Section 47 has been introduced as an overriding provision with a non-obstante clause empowering the Commissioner to direct the payment of tax, with respect to any commodity which is deemed to be evasion prone; before the date prescribed for payment under the Act. The said provision empowers the Commissioner to pass orders mandating advance payment of tax even before the liability to pay occurs, i.e., even before the sale which attracts the liability happens. It is under this provision that the subject circular in the instant case has been issued. 15. We are not concerned with the validity of the circular so issued which, in any event, has been upheld by a Division Bench of this Court in KMP Timbers & Saw Mills v. Commercial Tax Inspector and another [(2012) 50 VST 195 (Ker)]. Upholding the validity of the statutory provision, i.e. Section 47(16A), as also the circular issued under the said provision, this Court held: "Further, advance tax is only a provisional deposit towards tax and nothing in the Act requires the appellant or any party to pay tax except on actual sale price. The value fixed under the ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was applied could be a notional value rather than the actual value covered by the transaction at the point of sale which attracts the levy of tax. The subject of challenge therein was Section 4-A of the Rajasthan Sales Tax Act, 1994, which provided for levy of tax on the Maximum Retail Price (MRP), though the first point of sale by the wholesale distributor to the retailer; attracting the levy, was lesser than the MRP. Section 4-A, which was included in the statute itself, sought to bring in an artificial sale price being the 'Maximum Retail Price' for the purposes of levy of tax, by a legal fiction. Having considered the entire line of decisions on the issue of levy of sales tax on the sale of goods, the Hon'ble Supreme Court held: "By substituting the assumed quantity of goods or a price which is not the subject-matter of that contract of completed sale for the purpose of measuring tax, the legislature assumes existence of contract of sale of drugs by legal fiction which has not taken place and which cannot be considered to be a sale in the manner stated in the Sales Act, which alone can be the subject of tax under Entry 54 in List II. Substitution of assumed p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applied has also been specified as "the taxable turnover" of the dealer by Section 6(1). 19. Section 2(xliv) defines "sale price" and sub-sections (l), (li) and (lii) respectively defines "taxable turnover", "total turnover" and "turnover". Shorn off the frills of a diverse inclusive definition, "turnover" means, the aggregate amount for which goods are either bought or sold for cash, deferred payment or other valuable consideration and "sale price" means the amount of valuable consideration received or receivable by a dealer for the sale of any goods. "Total turnover" is the aggregate turnover in all goods of a dealer, including purchase and sale, whether or not such turnover is liable to tax. "Taxable turnover" means the turnover of the dealer which is liable to tax in accordance with the KVAT Act. It is also to be noticed that "prevailing market price" has been defined under Section 2(xxxviA). The definition refers to the publication with respect to wholesale price by the Economics and Statistics Department of the State or any other authorised agency and in the absence of such publication, the price at which similar goods are sold by the Kerala State Civil Supplies Corporati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, there were no discrepancies in the books of accounts, the stock found on inspection and the other documents indicating the sale of goods within the State. The books of accounts were found to be not acceptable for the sole reason that the rates for which timber was sold as evidenced by sales invoices were below the rates prescribed by the Commissioner of Commercial Taxes in Circular No.28/2008. Annexure-A order also speaks about the market rate adopted by the petitioner being lesser than that adopted by other similar dealers. However, the various rates said to have been adopted by the other dealers detailed in the order does not seen to have been put to the dealer. There is also an allegation of fictitious billing, which again has not been put to the dealer. If at all evidences were available with respect to specific under-valuation regarding any variety of timber or regarding the sales not having been effected and property in goods not having been transferred; then it was for the Intelligence Officer to specifically put such instances to the dealer so as to determine the tax sought to be evaded or attempted to be evaded. The entire proceeding is founded on the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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