St. michaels oil mills v. State of Kerala — 1987 DIGILAW 461 (KER)

Judgment :- 1. The petitioner is an assessee to Sales Tax. We are concerned with the assessment year 1977-78. The business premises of the petitioner was inspected on 29-3-1978. Excess stock of 4130 Kgs. of copra was found. So also, an excess stock of 317 Kgs. of coconut oil was found. The total value of the unaccounted stock was fixed at Rs. 32,080/-. Proceedings under S.28(8) of the KIST Act were initiated. The first respondent levied a penalty of Rs. 16,040/- being 50 per cent of the value of the unaccounted stock. This is evidenced by Ext.P2 order dated 31-8-1978- In revision, the Deputy Commissioner of Agrl. Income-tax and Sales-tax fixed the value of the unaccounted stock at Rs. 28,910/- and on that basis limited the penalty to a sum of Rs. 14,455/-. In further revision, the Board of Revenue, by Ext. P5 order dated 1-4-1980, affirmed the decision of the Deputy Commissioner. At the same time, the Board of Revenue initiated suo mote proceedings and by a separate order dated 1-4-1980, passed under S.37 of the KGST Act. cancelled the order passed by the Deputy Commissioner dated 30-7-1979 and restored the penalty levied by the Intelligence Officer, evidenced by Ext. P2 dated 31-8-1978. In this Original Petition, the challenge is against Ext. P2 order passed by the Intelligence Officer. Ext. P3 order passed in revision by the Deputy Commissioner and Ext.P5 order passed by the Board of Revenue, refusing to interfere with Ext. P3. The order passed by the Board of Revenue in revision, dated 1-4-1980, setting aside the order of the Deputy Commissioner dated 30-7-1979 and restoring the order of the Intelligence Officer, evidenced by Ext. P2, is challenged in appeal, M.F.A. No. 318 of 1980. 2. We heard counsel for the petitioner in OP No. 2323 of 1980 and the appellant in MFA No. 318 of 1980, Mr. Jose Joseph, as also the learned Government Pleader, who appeared for the respondents. It was contended that there was no proper physical weighment of the stock at the time of inspection. The Deputy Commissioner, on a perusal of the records of inspection, held that the stock was physically weighed and recorded and Shri K. V. John, Managing Partner, was also present at the time of inspection. This finding of fact was affirmed in revision by the Board of Revenue. The Deputy Commissioner, on a perusal of the records of inspection, held that the stock was physically weighed and recorded and Shri K. V. John, Managing Partner, was also present at the time of inspection. This finding of fact was affirmed in revision by the Board of Revenue. So, in proceedings under Art.226 of the Constitution, it is not open to the petitioner to contend that there was no physical verification of the stock of oil, which is necessary to arrive at the penalty leviable under S.28(8) of the Act. We repel the contention of the petitioner/ appellant to the contrary. 3. Counsel for the petitioner/ appellant vehemently contended that in passing Ext P2 order the Intelligence Officer did not apply his mind at all. It was argued that the total excess quantity of copra and oil were valued at Rs. 32,080/- and the first respondent mechanically levied the maximum penalty of Rs. 16,040/-. There was no application of the mind in levying the maximum penalty. The Board of Revenue by order dated 1-4-1980, has restored the said order, though the Deputy Commissioner interfered with Ext. P2 order in Ext. P3 proceedings. Since there is no application of the mind, Ext. P2 is illegal and infirm. The order of the Board of Revenue is also vitiated in restoring the said proceedings. 4. We see force in the said plea. The first respondent-Intelligence Officer-is a quasi judicial authority. Penalty Proceeding is a quasi-criminal proceeding in character. In imposing the penalty under S.28(8) of the Act, the Officer has to act judicially. He should act fairly and in accordance with the principles of natural justice. He is in duty bound to apply his mind to the facts of the case. He cannot act arbitrarily or mechanically. The section stages that the maximum penalty leviable is 50 per cent of the value of the unaccounted stock. The language employed in S.28(8) of the Act itself shows that the levy of penalty is permissive and not compulsive. The officer should exercise his discretion and apply his mind to the facts of each case. He should be first of all satisfied that penalty is exigible. Even so, he has to further apply his mind judicially and fix the quantum of penalty to be imposed. There are thus two different stages of aspects, in the matter. The officer should exercise his discretion and apply his mind to the facts of each case. He should be first of all satisfied that penalty is exigible. Even so, he has to further apply his mind judicially and fix the quantum of penalty to be imposed. There are thus two different stages of aspects, in the matter. The mere fact that S.28(8) of the Act permits the levy of 50 per cent of the value of the unaccounted stock as penalty, does not mean that the officer can and should impose 50 per cent of the value of the unaccounted stock as penalty in all cases. It depends upon the facts and circumstances of each case, as to whether penalty is exigible, and if so, what is the quantum of penalty that should be levied. The order levying the penalty should show or is should be at least discernible from the records, that both the distinct or different aspects, were borne in mind in levying the penalty. Admittedly, the first respondent has not at all borne the above principles in mind in levying the maximum penalty of 50 per cent of the value of the excess stock in this case. There is no proper discussion or finding on the different aspects discussed above. Ext, P2 order is infirm. The restoration of the said order by the Board of Revenue, by proceedings dated 1-4-1980. is equally infirm. In this connection, counsel for the petitioner/ appellant referred to us the decision of a learned judge of this Court in O. Paramasivan v. State of Kerala (1971 Tax. LIZ 1241). Issac, J. after adverting to the facts of the case and S.10A of the Central Sales Tax Act, observed as follows: "The quantum of the penalty must depend on the gravity of the offence, which in turn depends on the attending facts and circumstances. The case before me is certainly not one for imposition of the maximum penalty. Nor has the Sales Tax Officer considered it to be so. A reading of the impugned orders would show that the Sales Tax Officer acted mechanically on a misconception that he was bound to impose the maximum penalty under S.10A in every case, and that he has no discretion in that matter. Nor has the Sales Tax Officer considered it to be so. A reading of the impugned orders would show that the Sales Tax Officer acted mechanically on a misconception that he was bound to impose the maximum penalty under S.10A in every case, and that he has no discretion in that matter. The quantum of punishment is a thing to be determined in exercise of the judicial discretion vested in the authority under the above section. It follows that the Sales Tax Officer has acted in violation of the law in imposing the maximum penalty on the petitioner " We concur with the said observations. It is also appropriate to note that the said observations were approved by a Bench of this Court in M/s. Marikar (Motors) Ltd. v. Sales tax Officer (ILR 1973(2) Kerala 204). 5. In the light of the above, we quash Exts. P2, P3 and P5 orders in OP No. 2323 of 1980. We also set aside the order of the Board of Revenue dated 1-4-1980, which is appealed against in MFA No. 318 of 1980. 6. The Original Petition and the Miscellaneous First Appeal, are disposed of as above.