TMI Blog2023 (5) TMI 375X X X X Extracts X X X X X X X X Extracts X X X X ..... decidendi by holding that Intelligence Officer is not empowered while initiating the proceedings under Section 61 of KVAT Act and 45A of KGST Act 1963 on the basis of guess work and estimation. It is not the case where the petitioner failed to supply the documents in response to the notices reflecting the imposition of the penalty impelling the Intelligence Officer to arrive at a proceedings on estimation. The dictum laid down in M.K.Markar and others' case [ 2018 (12) TMI 481 - KERALA HIGH COURT ] would definitely come into play, wherein it has been held that the role of Intelligence Officer is only to impose penalty prescribed in the Act and the matter was referred to the Assessing Officer, who would not be precluded from proceeding to arrive at best judgment on the basis of factors relevant to the activity of the dealer. On the basis of the extracted findings of the Intelligence officer it can irresistibly be concluded, it was not a case of estimation, but based on an actual calculation by reading the contents of the agreement and the invoices. That could not be a case falling in the ratio culled out in Markar's Case where Intelligence Officer was required to refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses to BPCL and this offer was duly accepted by the BPCL by issuing a letter of acceptance dated 15.5.2013. The petitioner as duly authorised by its parent company Air products and Chemicals Inc, agreed to Build, Own, Operate (BOO) and maintain a Hydrogen and Nitrogen manufacturing plant ('Production Plant') at its own cost and expenditure on the land to be allocated by BPCL on lease basis by entering into a supply agreement dated 21.8.2013. In furtherance of Ext.P1 petitioner entered into a separate lease agreement dated 25.11.2013 with the BPCL Kochi Refinery and a land admeasuring 15.50 acres situated near the BPCL Kochi Refinery at Ambalamugal was provided to the petitioner on lease for setting up the production plant for a period of 15 years from 'the date of first delivery of last delivered product'. 3. Sri. Aswin Gopa kumar, learned Counsel for the petitioner submitted that the Agreement, Ext.P1 unequivocally envisages certain conditions that the production plant including all other systems, pipelines, metering system would be the property of the petitioner during the term of the agreement and even after its termination unless transferred or removed in acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there has been no supply of goods by taxing at the rate of 14.5% under Section 6(1) (f) of the KVAT Act instead of 5%, thereafter, resulted in penalty order dated 6.7.2020 for the period from 2016-17 and 2017- 18 respectively. 5. Besides raising certain arguments on merits with regard to the interpretation of the terms and conditions of agreement, scope of work, termination, take over, fair value, liability, insurance clause etc. and period lease etc., learned Counsel for the petitioner submitted that the action of the 2nd respondent is contrary to the basic principles governing the invocation of Section 67 (1) of the KVAT Act. In order to elaborate the aforementioned arguments he submitted that as per the plain and simple reading of the provisions of Section 25 (1) and 25 (3) of the KVAT Act and in view of the decision in U.K.Monu Timbers Vs.State of Kerala 2012 (3) KHC 111], State of Kerala Vs.M.K.Marakkar [2018 59 GSTR 319] and DLF Southern Town (Pvt.) Ltd. vs. State Tax Officer [2019 (5) KHC 2019], the Intelligence Officer is not competent to assess the tax on the basis of guess work/estimation, but do not deny the ratio culled out by the Division Bench of this Court in Dieb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commodities falls under Schedule III and V of KVAT Act, 2003, which cover construction materials, Plant and Machinery and Parts thereof for the years 2013-14, and 2014-15 to the tune of Rs.92,95,023.00 and Rs.169,30,52,811.76 respectively and after verification of the same, it was found that they have not declared in sales for the years 2013-14 and 2014-15. A further verification of return filed for the year 2015-16 revealed that petitioner effected local purchase, interstate purchase and import of commodities coming under III and V Schedule of KVAT Act, 2003, which covered construction materials, Plant and Machinery and Parts thereof etc. to the tune of Rs.539,75,92,860.06. In connection with this, their sales for the year 2015-16 were verified and it was found that there was sale of Scrap (Plastic Iron) to the tune of Rs.15,58,349/-. As per the return filed, the dealer have effected purchase to the tune of Rs.57,12,94,946.90 during the year 2016-17 by declaring sale of Gases under III and V Schedules for Rs.67,61,59,573/-. Sale of Scrap during the year is for Rs.45,29,796/- and on production of the accounts and verification, it was found that respondent BPCL for the years 2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... writ appeal No.2288/2018 as well as the judgment in Bagsvig Vs. Asst. Commissioner 2004 (1) KLT 609, J J Timbers vs. Intelligence Officer 2009 21 GST 377 Ker. and also a notification dated SRO No. 478/2005, whereby the Intelligence Officer have been empowered the role of an Assessing Officer and urges this Court for dismissal of the writ petition on account of the fact that petitioner has an effective and efficacious remedy of appeal. 12. By concluding his arguments, learned Government Pleader also relied the dictum laid down by another Division Bench of this Court in Hotel Surya Vs. State of Kerala [2017 105 VST 238 Ker], wherein, in a proceedings under Section 47A of the Kerala General Sales Tax Act, 1963, the Intelligence Officer on verification of bill, found the gross profit less and after having availed the remedy of appeal, the contention with regard to the role and jurisdiction of the Intelligence Officer did not find favour. 13. No doubt, the Division Bench of this Court had culled out a ratio decidendi by holding that Intelligence Officer is not empowered while initiating the proceedings under Section 61 of KVAT Act and 45A of KGST Act 1963 on the basis of guess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uced and even when they are produced, there could be estimation made based on the various factors like consumption of electricity which was used for the manufacturing process or consumption of LPG in cooking; two activities arising in the cited decisions. But the essential question is as to who has the power to carry out such estimation. 13. An Intelligence Officer invoking his power under Section 45 A of the KGST Act or Section 67 of the KVAT Act (in pari materia provisions) has been held to have no power to carry out an estimation. Estimation is a reasonable and rational reckoning of taxable turnover; which necessarily is a guess work based on various factors, aspects and activity of the concerned dealer, arriving at a probabilistic approximate determination of the taxable turnover; on the best of judgment of the taxation officer, as has been found in Commissioner of Sales Tax, M.P Vs. H.M. Eusafali 1973 (2) SCC 137; by the Hon'ble Supreme Court. There could be no estimation carried out in penalty proceedings and the evasion attempted has to be based on the clear materials or particulars, revealed at an inspection or offence detected otherwise. If the taxable turnover s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Appellate Authority and if there is any estimation made, then necessarily U.K Monu Timbers and Joemon Rajan would apply on all fours. As far as the submission of the learned Counsel appearing for the assessee that there is a proper assessment made by the Intelligence Officer we are not convinced prima facie that any estimation has been carried out. The Intelligence Officer had in attempting to find out the correct figures as per the audited report computed the tax evaded so as to determine the penalty; which is a permissible exercise. We hence leave the assessee to a statutory appeal which if filed within one month from today, shall be deemed to be properly filed in time and considered on merits. 17. As an upshot of the reasoning and on a cumulative reading of the aforementioned judgments, I do not find force in the writ petition warranting interference under Article 226 of the Constitution of India. The petitioner, if so advised, is at liberty to assail the order impugned by filing appeal. The writ petition is accordingly dismissed. 18. Before parting the judgment learned Government Pleader pointed out that even the agreement placed on record is incomplete, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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