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2016 (11) TMI 1264 - KERALA HIGH COURT

2016 (11) TMI 1264 - KERALA HIGH COURT - TMI - Jurisdiction of Single Judge Bench to reduce quantum of penalty - tax evasion - whether respondent was able to establish that his conduct was not fraudulent and that his omissions are not so grave so as to attract the maximum penalty, then it would be permissible - Held that: - The fact that the learned single Judge has only reduced the penalty and did not exonerate the respondent from it completely, makes us to conclude that the learned single Judg .....

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and Mr.Kumar before the assessing authority. We see that the case of the respondent that he brought the vehicle to Kerala for executing a work under a contract/agreement with Mr.Kumar appears to be probable. However, his conduct in creating a document, in support of his contention, on a stamp paper that was purchased subsequent to the interception would not give the benefit of exculpation. In such view of the matter, it is, therefore, necessary that he be mulcted with penalty, since he was only .....

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And Devan Ramachandran, JJ. For the Petitioner : Sri. Mohammed Rafiq For the Respondent : Sri Harisankar V. Menon Smt. Meera V. Menon JUDGMENT Devan Ramachandran, J. This appeal has been filed by the Intelligence Officer and State of Kerala assailing the judgment of the learned single Judge, wherein the order of penalty initially imposed by the Tax Authorities at an amount of ₹ 7,08,470/- was modified and reduced by the learned single Judge to an amount of ₹ 1,00,000/-. 2. The appel .....

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r V.Menon, learned counsel appearing on behalf of the respondent. 5. The issue as to whether in all cases where evasion of tax has been established the maximum penalty stipulated under the Statute has to be imposed is a matter that has been considered by this Court in various judgments settled position is, as we will presently state, that the power to impose penalty being quasi judicial in its effect and ambit, will, therefore, have to be exercised with great circumspection and that the quantum .....

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t is made the foundation for the liability (penalty); it is a contumacious or fraudulent or other blame-worthy or objectionable conduct of an assessee in fulfilling his obligations mentioned in section 45A(1) of the Act that will attract the levy of penalty. We have no doubt in our mind that mens rea or the mental element is embedded in the crucial word 'evaded' or 'sought to be evaded' occurring in section 45A(1) of the Act." Even though the referred judgment do not deal wi .....

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statutory authority and it requires the authority to apply its mind to all relevant aspects of the default alleged to have been committed by a dealer. Their Lordships stated the law that the order levying penalty is quasi judicial in character and that it involves exercise of judicial discretion. It was further observed that levy of penalty is not compulsive, but only enabling or permissive. 7. The unequivocal declaration of law on this issue is stated in paragraph 7 of the judgment in Gentle J .....

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ty is levied in a mechanical manner it is a pointer to show that the officer has not exercised the judicial discretion vested in him according to law. In other words, there should be independent evaluation and appraisal and the grounds should be disclosed before the maximum penalty is levied. Before imposing penalty under section 29A(4) of the Act the officer has, therefore, to find that there has been an attempt to evade the tax. Such finding can be rendered only on the basis of materials and t .....

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ame to a definite finding that there were sufficient mitigating circumstances favouring the assessee, which would then warrant reduction of penalty that has been imposed to a much lower one. We are essentially called upon by the appellants to answer whether such a course of action was available to the learned single Judge. We will examine that in the event there are sufficient reasons to show that the Assessing Officer and the other authorities had not considered the relevant materials and have .....

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rised to conduct the inquiry, under the said section, to impose penalty. Section 47(6) reads as under: "The officer authorised under sub-section (5) shall, before conducting the inquiry, serve notice on the owner of the goods and give him an opportunity of being heard and if, after the enquiry, such officer finds that there has been an attempt to evade the tax due under this Act, he shall, by order, impose on the owner of the goods a penalty not exceeding twice the amount of tax attempted t .....

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each case. The section does not prescribe a minimum quantum of penalty to be imposed but only mandates that the penalty so imposed would not exceed twice the amount of tax. It is, therefore, axiomatic that the Officers concerned are under a statutory obligation to exercise the discretion vested with them under the Statute in a manner that would answer the tests of fairness and appropriateness based on the culpability of the assessee as has been determined by due process. The binding caution adv .....

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e that an Excavator Loader of make JCB bearing Reg.No.TN-29/A 4161 in the name of the respondent was intercepted by the Intelligence Squad, headed by the Intelligence Inspector, Squad No.V, Commercial Taxes, Palakkad on 01.07.2013 at Eruthanpatty at about 6.30 A.M. on the allegation that the vehicle did not have the requisite documents under Section 46 of the Kerala Value Added Tax Act (referred to as 'the Act' for brevity). A notice under Section 17A of the Act was issued to the driver .....

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nce Officer imposing a penalty of ₹ 7,08.470/-, being double the amount of tax that is alleged to be evaded under Section 47(6) of the Act. The respondent carried this order in appeal before the Assistant Commissioner (Appeals), Palakkad, who confirmed the order and dismissed the appeal. The respondent, thereafter, filed a further appeal before the Kerala Value Added Tax Additional Appellate Tribunal ('the Tribunal' for brevity), Palakkad, which, on elaborate consideration of all t .....

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y positive material evidencing that the vehicle was brought to Kerala not for sale or transfer, imposition of penalty was not legally sustainable. 14. The State, therefore, filed O.T.Rev.No.25/2014, which was allowed by a Bench of this Court setting aside the order of the Tribunal and remanding the matter back to the Intelligence Officer enabling the respondent herein to adduce evidence to establish that he had brought the vehicle to Kerala based on an agreement with Mr.Kumar for the purpose of .....

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rrying permit dated 17.12.2012, issued by the Geologist, Mining and Geology Department, Manjeri. He then claimed that he had entered into an agreement dated 25.06.2013 with Mr.Kumar for undertaking the work of excavation. He has also produced copies of the permit and agreement before the Intelligence Officer. It appears that the Intelligence Officer summoned Mr.Kumar also and a statement was obtained by him from Mr.Kumar along with that of the respondent herein. These statements are produced in .....

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der of penalty and the matter was finally heard by the learned single Judge on 22.06.2016. 16. It appears that in the writ petition the State had taken a contention that the conduct of the respondent in filing a writ petition without invoking and seeking the effective and efficacious alternative remedy available under the Statute shall not be countenanced. The State also contended that the penalty was imposed without valid reasons and that it requires further modification. 17. The learned single .....

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e availability of alternative remedies and after issuing interim orders, it would not be appropriate, procedurally and legally, to relegate the petitioner to the alternative remedies. We find no infirmity in the findings of the learned single Judge in this regard. 18. As regards imposition of penalty and its quantum, we see from the impugned judgment that the learned single Judge had considered all the relevant aspects and had, for specific reasons, thought it fit to reduce the penalty. It is tr .....

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ng a route that is being normally used for the purpose of travel from Tamil Nadu to Malappuram, the Intercepting Officer and the competent authority under Section 47(6) came to the conclusion that the respondent was using the normal less preferred bye-route with the deliberate intention to evade tax. The appellants, therefore, contend that in view of sub clause (9) of Section 6 and Section 46 of the Act, a presumption runs in favour of the Revenue that the respondent was trying to evade tax. 19. .....

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be seen as an instance where the respondent had any intention to effect sale of the vehicle in Kerala and avoid tax. Further, even at the time of interception, the driver of the vehicle intimated the Intercepting Officer that it was being taken to Malappuram for a work of excavating laterite soil. It is true that the vehicle did not have any documents in support of this claim. However, this obvious lacuna was sought to be explained by the respondent by trying to establish that there was indeed .....

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ed only for the purpose of creating a defence against the proceedings and that the same would not give rise to the evidence to the claim of the respondent. However, various other attendant circumstances, namely, the quarrying permit dated 17.12.2012 favouring Mr.Kumar and the fact that the vehicle was absolutely brand new, would mitigate the suspicion to a large extent. It is true that the agreement has been entered into in a stamp paper that was purchased after the interception. Further, the le .....

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te of agreement as 25.06.2013. We are definitely not in approval of the conduct of the respondent in attempting to create documents in this manner, but we are in approval of the opinion of the learned single Judge that this has been done by the respondent only to establish that he had an agreement ante with Mr.Kumar and that the excavator was transported to Kerala only for the purpose of executing the said work. 20. A reading of Section 47(6) ineluctably leads to a conclusion that imposition of .....

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bviously mitigate the suspicion that was created against the respondent were not considered in its proper perspective and it is, therefore, that the learned single Judge, on a proper examination of all the attendant and related circumstances, decided to reduce the penalty substantially to ₹ 1,00,000/-. The learned single Judge also took note of the fact that the vehicle had been in the custody of the authorities for over three years, and he, therefore, reduced the penalty so as to enable t .....

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