State Of Kerala vs M/S Bafna Enterprises
2021 Latest Caselaw 5993 Ker

O.T.Rev.64 of 2018             1

              IN THE HIGH COURT OF KERALA AT ERNAKULAM

                               PRESENT

                 THE HONOURABLE MR.JUSTICE S.V.BHATTI

                                   &

           THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS

     FRIDAY, THE 19TH DAY OF FEBRUARY 2021 / 30TH MAGHA,1942

                         OT.Rev.No.64 OF 2018

 AGAINST THE ORDER/JUDGMENT IN OTHERS 127/2017 DATED 13-12-2017
          OF KERALA VAT APPELLATE TRIBUNAL, ERNAKULAM


REVISION PETITIONER:

               STATE OF KERALA,
               REPRESENTED BY THE DEPUTY COMMISSIONER (LAW),
               COMMERCIAL TAXES, ERNAKULAM.

               BY GOVERNMENT PLEADER Shamsudheen V.K.

RESPONDENT:

               M/S BAFNA ENTERPRISES,
               VII179 D.S.ROAD, JEW TOWN, KOCHI - 2.

               R1 BY ADV. SRI.R.MURALEEDHARAN

OTHER PRESENT:

               GP SHAMSUDHEEN V.K.

     THIS OTHER TAX REVISION (VAT) HAVING BEEN FINALLY HEARD ON
19.02.2021, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:
 O.T.(Rev.)No.64/2018                  2




                                JUDGMENT

Dated this the 19th day of February 2021 S.V.Bhatti, J.

Revenue is the petitioner. The revision is filed under Section

63 of KVAT Act, 2003 read with Section 81 of KVAT Rules, 2005.

2. On 31.10.2010, the Commercial Tax Officer, Commercial Tax

Check Post, Gopalapuram intercepted the vehicle carrying goods to

M/s Bafna Enterprises, Jew Town, Kochi-2. The verification of

documents by the officer, disclosed that turmeric was declared as the

goods transported by the intercepted vehicle. The actual verification

of subject consignment revealed that turmeric powder, but not

turmeric was transported with wrong or incorrect declaration of

goods in the invoice. It is admitted that the subject consignment was

released to dealer after collecting `14,544/- towards security for the

disputed tax liability. Thereafter, Annexure-A is the order issued

imposing penalty of `14,544/- on the respondent. The respondent

assailed the orders before the Deputy Commissioner (Appeals) and

vide Ann.B, the appeal of respondent was dismissed. The respondent

filed T.A.(VAT) No.127/2017 before the Kerala Value Added Tax

Appellate Tribunal, Additional Bench, Ernakulam. The Appellate

Tribunal through order in Annexure-C held and allowed the appeal

of respondent by recording following findings on levy of penalty.

"Another contention is that the appellant had returned the turmeric power for which security deposit was paid at the checkpost to the consignor as the same was of inferior quality. The appellant has also produced photocopies of credit notes and debit notes in Form No.9 in support of their claim. We are of the view that there is some merit in this contention because, even though, the security deposit was paid for the consignment in dispute, the same was returned to the consignor. So, the element of sale is absent in this transaction."

Hence the revision.

3. The revenue raises the following questions of law for our

consideration.

a) Whether on the facts and the circumstances of the case, Appellate Tribunal has erred in law in remanding the matter with direction to delete the penalty if respondent proves the contention of return of goods?

b) Whether on the facts and circumstances of the case, the appellate Tribunal has erred in law in not considering the facts that penalty under Section 47 of the KVAT Act can be imposed even for attempt of evasion of tax?

c) Whether on the facts and circumstances, Appellate Tribunal has erred in law in remanding the matter after accepting that the defects noted by the detaining authority was correct?

4. Learned Senior Government Pleader Shamsudheen

contends that the indulgence shown by the Tribunal would for all

purposes, defeat the object of Section 47(2) & (6) of KVAT Act,

2003 where an attempt to avoid taxes also dealt with. According

to him, the language of these two sub sections is wide enough

granting power to impose penalty even in case of an attempted

evasion of tax. The reverse entry by the respondent/dealer and

payment of security for release of goods by the supplier are

different aspects. According to him, the thrust of levy of penalty

depends on what was the omission found when the vehicle was

intercepted, inspected and found by the assessing officer viz. there

is variation in description of goods between the invoice and the

goods actually carried. The argument of respondent that under

proper debit notes etc. the consignment has been returned to the

supplier by the respondent is no answer to avoid penalty. The ex

post facto change of mind ought not to be weighed for any

eventuality. The reasoning of the Tribunal for all purposes render

the power granted by sub sections 2 and 6 of Section 47 to

department is ineffective or otiose.

5. The bare reading of the section and the finding recorded

by the Tribunal, we are of the view that indulgence shown by the

Tribunal by referring to credit-debit notes etc. is not correct or

could be accepted in our jurisdiction. Penalty now levied is for a

variation noticed by the Commercial Tax Officer at the time of

search on 31.10.2010. Without much deliberation to reverse the

view of Tribunal, we hold that the findings recorded in paragraph-

6 of the order in Annexure-C are unsustainable and accordingly

warranting setting. The findings are set aside. Hence we answer

the question in favour of Revenue and against the assessee.

6. The conclusion recorded above will not give quietus to the

issue on merit. In the case on hand, the assessee/respondent has,

as a matter of fact, established that the consignor has supplied

goods contrary to the contract entered into by the respondent

means the respondent is not at fault. The respondent returned the

goods under valid documents to supplier. The tax evasion is

secured by the deposit already taken while releasing the goods. The

respondent cannot be treated as having transported/received

subject goods contrary to the contract. On the contrary the

respondent by returning the goods has established the bona fides

in the claim that respondent is not obliged to pay penalty of tax.

Therefore we hold and direct that no further step need be initiated

against respondent herein for the violation noted in the orders in

Annexures A, B & C by the department. Penalty paid and kept as

security by the consignor is permitted to be forfeited by the

Revenue. In other words upon forfeiture of security deposit, no

fresh proceeding for recovery of tax under Sections 22 to 25 could

be initiated by the revenue against respondent, with reference to

the subject transaction.

O.T.Revision allowed as indicated above.

Sd/- S.V.BHATTI

JUDGE

Sd/-BECHU KURIAN THOMAS

JUDGE

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APPENDIX PETITIONER'S EXHIBITS:

ANNEXURE A THE TRUE COPY OF THE ORDER OR NO.680/10-11 DATED 15/02/2016 OF COMMERCIAL TAX OFFICER (AUDIT ASSMT.), DEPUTATION AS CTO (ENQUIRY), INCHARGE INTELLIGENCE OFFICER, (RAPID ACTION).

ANNEXURE B THE TRUE COPY OF THE ORDER DATED 15/10/2014 PASSED BY THE DEPUTY COMMISSIONER (APPEALS- I), ERNAKULAM IN KVATA NO.875/16.

ANNEXURE C THE CERTIFIED COPY OF THE TRIBUNAL ORDER DATED 13/12/2017 PASSED BY THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, ERNAKULAM IN T.A.(VAT) NO.127/2017.