TMI Blog2024 (1) TMI 668X X X X Extracts X X X X X X X X Extracts X X X X ..... fied the said products under Entry 69(22)(c)(i) of the Third Schedule to the KVAT Act with HSN Code 8443 3100 under the Customs Act and the Customs Tariff Act. When the importer-seller had classified its machine under HSN Code 8443 3100, which falls under Chapter 84 of the Customs Tariff Act corresponding to Entry 69(22)(c)(i) of the Third Schedule to the KVAT Act, the petitioners herein being re-sellers of the machines purchased from the importer-seller could not adopt a different classification. In the present cases, when the importer- seller had classified the said machines as 'Digital Multifunctional Devices' with HSN Code 8443 3100 under the provisions of the Customs Act, 1962 and the Customs Tariff Act, 1975 at the time of import and the said HSN Code is identical to Entry 69(22)(c)(i) of the Third Schedule to the KVAT Act, the petitioners cannot be said to have wilfully classified the machines under a wrong head with the intention to evade payment of correct/higher rate of tax at 13.5%. The penalty proceedings has to be initiated when there is wilful or contumacious act on the part of the assessee to evade payment of correct tax. The petitioners had reason to adop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the importer-seller M/s.Kyocera Mita India Pvt. Ltd., Ernakulam, presently Kyocera Documents Solutions India Pvt.Ltd., Ernakulam, which is the petitioner in WP(C) Nos. 31955, 32003 31902 of 2015. In the case of the petitioner in WP(C) No. 23630/2016, the machine, 'TaskAlfa 180', was purchased from the very same importer-seller during the said period. These machines were classified under Entry 69 of the Third Schedule to the Kerala Value Added Tax Act, 2003 ( KVAT Act , for short). 3. The importer-seller classified the machines as 'Digital Multifunctional Device' with HSN Code 8443 3100 under the provisions of the Customs Act, 1962 and Customs Tariff Act, 1975. The petitioners/purchasers - re-sellers followed the same classification adopted by the importer- seller while re-selling the machines to their customers. The petitioners classified the machines under Entry 69(22)(c)(i) falling under the Third Schedule to the KVAT Act. The products under Entry 69(22)(c)(i) attract 5% VAT. The Intelligence Officer instituted penalty proceedings under Section 67 of the KVAT Act for the years 2011-12, 2012-13 and 2013-14, on the premise that there was wilful misclass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the facts and circumstances of these cases. Therefore, this Court would like to decide the merits of these cases, instead of relegating the petitioners to avail the alternate remedy of statutory appeal. 7. Sri. Rajakannan, learned counsel for the petitioners, submits that there is a mandatory requirement of 'satisfaction' of the assessing authority, inter alia, regarding the assessee submitting untrue or incorrect return and this is an essential ingredient to attract the penalty proceedings under Section 67(1) of the KVAT Act. In these cases, the said mandatory element of 'satisfaction' is missing as the petitioners had adopted the same classification under which the importer-seller, M/s.Kyocera Mita India Pvt. Ltd., imported the machines. 8. It is also submitted that the KVAT Act had adopted the same commodity classification and HSN Code, which are in the Customs Tariff Act. It cannot be said that the petitioners had wilfully misclassified the machines and there was an element of mens rea to evade tax or higher rate of tax. He further submitted that no penalty proceedings could be initiated when there was dispute of classification of the goods. The petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey would not fall under Entry 69(22)(c)(i) of the Third Schedule to the KVAT Act. Unless and until the electronic hardware, namely 'printer kit' and 'printer server' are added to the machine sold by the petitioners, the machine could not be connected to an automatic data processing machine or to a network for printing. The twin conditions provided under Entry 69(22)(c)(i) of the Third Schedule to the KVAT Act were not satisfied and therefore, the machines would fall under Entry 30 of list of goods taxable at RNR rate of 13.5% as specified in SRO 82/2006. 12. If the petitioners were fully aware of the nature of the machines sold to their customers that it would perform only single function of copying, the petitioners made a false claim under Entry 69(22)(c)(i) of the Third Schedule to the KVAT Act to evade payment of higher rate of tax and, therefore, they intentionally classified the machines in their returns under the wrong head to evade higher rate of tax and such returns would be said as untrue and incorrect, and therefore, the penalty proceedings under Section 67(1) of the KVAT Act were initiated and completed against the petitioners, which do not require an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Third Schedule to the KVAT Act, the petitioners herein being re-sellers of the machines purchased from the importer-seller could not adopt a different classification. The Hon'ble Supreme Court in paragraph Nos. 3 to 6 of the decision in Sarvesh Refractories (P) Limited v. Commissioner of Central Excise and Customs [(2007) 13 SCC 601] observed and held as follows: 3. Since the said item had been classified by M/s. Escorts JCB Ltd., the manufacturer and supplier, under Heading 84.29 and had paid duty under the said heading, the authority-in-original, viz., Dy. Commissioner disallowed the MODVAT credit to the appellant by observing that the said Heading 84.29 has been specifically ousted from the definition of capital goods under Rule 57-Q of the Rules. The Dy. Commissioner also imposed a penalty of Rs. 50,000/- under Rule 173- Q(bb) of the Rules. 4. On appeal filed by the appellant, the Commissioner (Appeals) observed that Loadall being an improvised version of material handling equipment would properly fall under Heading 84.27 and not under Heading 84.29. It was further observed that fork-lift truck or crane or similar material handling equipments have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of this Act or any rule made thereunder, for the contravention of which no express provision for payment of penalty or for punishment is made by this Act; or (k) has abetted the commission of the above offences, or (l) has abetted or induced in any manner another person to make and deliver any return or an account or a statement or declaration under this Act or rules made there under, which is false and which he either knows to be false or does not believe to be true, such authority may direct that such person shall pay, by way of penalty, an amount not exceeding twice the amount of tax or other amount evaded or sought to be evaded where it is practicable to quantify the evasion or an amount not exceeding Ten thousand rupees in any other case: Provided that the authority empowered under this Section shall dispose of the case within three years from the date of detection of offence mentioned under this Section except where the extension of time is granted by the Deputy Commissioner. (2) Notwithstanding anything contained in sub-section (1), where on completion of an assessment in relation to a dealer under sections 22, 23, 24 or 25, it is found that the ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... WP(C) Nos. 22343/2015 23630/2016, respectively) impugned in these cases are hereby set aside. 21. In the result, WP(C) Nos. 22343/2015 23630/2016 are hereby allowed, without any order as to costs. 22. The very same petitioner in these cases is a Company engaged in the business of sale of IT products. These writ petitions pertain to the assessment years 2011-12, 2012-13 and 2013-14 and were filed mainly seeking the reliefs as sought for in WP(C) Nos. 22343/2015 23630/2016. 23. The petitioner herein is the importer- seller of the machines, which were purchased by the petitioners in WP(C) Nos. 22343/2015 23630/2016. Penalty orders at Exts.P5 were also issued to the petitioner/importer-seller by Department. 24. This Court has allowed WP(C) Nos. 22343/2015 23630/2016 filed by the purchasers re-sellers of the machines in this judgment as above by setting aside the penalty orders impugned therein. Hence, following the same, the penalty orders issued against the petitioner-importer/seller are also liable to be set aside. 25. In view of the above, WP(C) Nos. 31955, 32003 31902 of 2015 are also allowed and the penalty orders, Exts.P5, issued against the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X
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