Sheik Rawther Sons v. Secretary (Taxes) — 1990 DIGILAW 191 (KER)

Judgment :- Paripoornan, J. The recalcitrant or contumacious assessee, if caught, should pay through his nose. That is what happened in this case. The petitioner in O.P.No.5367 of 1988 is the appellant. It is a firm dealing in stationery articles. It is an assessee under the Kerala General Sales Tax Act. It effects sales in the shop as also sales to retail merchants by employing a salesman and taking its goods in its tempo van KLG 6233. The said vehicle was checked on 21-10-1983 by the Sales Tax Officer. It was found that the goods transported were not covered by a proper or genuine document. Besides the goods belonging to the assessee, goods belonging to another firm M/s. Shaik Rowther & Company were also seen transported in the said van. The permit produced by the salesman was issued to the assessee-firm for the year 1981-82. The Sales-tax Officer suspected that there was an attempt to evade payment of tax. As directed by the Sales Tax Officer, the driver of the vehicle parked the vehicle in front of the Sales Tax Office, Alathur. The officer ordered detention of the goods. He issued notice under S.29A(2) of the K.G.S.T.Act read with S.35A of the K.G.S.T. Rules demanding a security deposit of Rs.5527.15 for allowing transport of the goods. The notice was served on the salesman Mr. V.M.Ismail. The direction was not complied with. On the other hand, in defiance of the order, the vehicle was driven away. Thus there was violation of the provisions of the K.G.S.T.Act and the Rules. The Sales Tax Officer took proceeding to enforce the order passed by him under S.29A(2) of the K.G.S.T. Act read with Rule 35A of the Rules. A notice was issued to the assessee directing it to comply with the order of detention of the goods. It was not complied with. It resulted the Sales Tax Officer invoking S.45A of the K.G.S.T. Act in taking steps for violation of S.29A of the Act read with rule 35a of the K.G.S.T. Rules. After due notice, the Sales Tax Officer imposed a penalty of Rs. 11,054/- on the assessee firm. This is evidenced by Ext.P8 order dated 22-11-1983. Ext.PS was affirmed in revision by the Deputy Commissioner of Sales Tax, Palghat as per Ext. P11 dated 30-6-1986. After due notice, the Sales Tax Officer imposed a penalty of Rs. 11,054/- on the assessee firm. This is evidenced by Ext.P8 order dated 22-11-1983. Ext.PS was affirmed in revision by the Deputy Commissioner of Sales Tax, Palghat as per Ext. P11 dated 30-6-1986. Both the said orders were affirmed in the second revision by the Board of Revenue (Taxes) by Ext.P14 order dated 7-4-1988. Ext.P8, P11 and P14 were challenged by the assessee-firm in O.P.No.5367 of 1988. K.A. NayarJ. by his judgment dated 1-2-1990 dismissed the O.P. The petitioner-firm (assessee) has come up in writ appeal. 2. We heard counsel for the appellant, Mr.K.C.Balagangadharan, as also counsel for the respondent-Revenue, Mr.N.N.D.Pillai. Counsel for the appellant put forward two points:(1) The appellant was issued a permit under S.15 of the Act. In violation of S.15 of the Act read- with rule 7 of the K.G.S.T. Rules, proceedings under S.29Acannotbe initiated. In other words, the provisions of S.15 and 29A of the Act are mutually exclusive. Even if the proceedings initiated by the assessing authority is legal, the penalty imposed - 4 times the tax evaded - is not permissible. It is against S.29A (4) read with S.35A of the Act. Counsel for the Revenue sought to sustian Exts.P5, P11 and P14 orders for the various reasons contained in the said proceedings. 3. In order to appreciate the controversy in this case, it should be useful to quote S.15(1),(2) & (3) of the K.G.S.T. Act, Rule 7(1), (2), (4) & (10), S.29A (1),(2) & (4) and S.45A(1)(a) to (g) of the Act. K.G.S.T. Act: "15. Issue of permits. --(1) Every registered dealer who transacts business at places other than his registered place or places of business or employs a travelling salesman or representative to transact business as aforesaid, shall obtain a permit issued under this Act authorizing himself or, as the case may be, the travelling salesman or representative so to do. (2) The entire turnover of business carried on under the permit shall be included and accounted for by the registered dealer in his accounts and returns and shall be dealt with as if it were the turnover of business done by the registered dealer himself at the registered place of business. (2) The entire turnover of business carried on under the permit shall be included and accounted for by the registered dealer in his accounts and returns and shall be dealt with as if it were the turnover of business done by the registered dealer himself at the registered place of business. (3) Every permit holder shall carry the permit with him and shall produce it on demand by any officer of the Sales Tax Department empowered by the Government in this behalf. He shall maintain and produce on demand to any such officer, a true and correct account of all the transactions carried on under the permit and also a stock book showing the quantities of goods held by him, the quantities disposed of from day to day by sale or otherwise and the balance on hand at the end of each day". K.G.S.T. Rules: 7. Issue of permit: - (1) Every registered dealer who transacts business at places other than his registered place of business or employs a Travelling Salesman or Representative to transact business as aforesaid shall apply for a permit authorizing himself or as the case may be, the Travelling Salesman or Representative so to do. Explanation: - A separate application shall be necessary for the registered dealer himself and for each of his travelling salesman or representatives. (2) Every application for a permit shall be submitted so as to reach the registering authority not later than the first day of May of the year for which permit is applied for or within thirty days from the date on which the registered dealer began to transact business at a place of business or within thirty days from the date on which he employed a travelling salesman or representative to transact the business aforesaid, as the case may be. Provided that in the case of a business which is commenced in the course of a financial year, the application shall be submitted to the said authority so as to reach it not later than thirty days from the date of commencement of the business: Provided further that for the period commencing from the date of commencement of the Act the application shall be submitted to the said authority within thirty days from the date of coming into force of these Rules. Xxx xxx xxx (4) Every permit granted under this Rule shall expire on the thirty first day of March of the year in respect of which it is granted and may be renewed for periods not exceeding one year at a time on receipt of an application from the registered dealer in accordance with the provision contained in this rule. Xxx xxx. Xxx (10) Every permit holder shall carry with him the permit and shall produce it on demand by any officer not lower in rank than that of an Assistant Sales Tax Officer. He shall maintain and produce on demand by any such officer a true and correct account of ail the transactions carried on under the permit and also a stock book showing the quantities of goods entrusted to him by the registered dealer, the quantities disposed of from day to day by sale or otherwise and the balance on hand at the end of each day. The book in which the accounts are maintained and the stock book shall, before making any entries therein, be duly authenticated by the assessing authority by affixing its seal therein. The accounts and the stock book shall be maintained continuously for the whole period covered by the permit". K.G.S.T. Act: - "S.29A. Procedure for inspection of goods in transit through notified areas: - (1) The driver or other person in charge of a vehicle or vessel shall stop the vehicle or vessel at anyplace within a notified area when so required by the officer in charge of that notified area, or at any other place when so required by any officer empowered by the Government in that behalf, for the purpose of enabling such officer to verify the documents required by sub-section (2) of S.29 to be in the possession of the person transporting the goods and to satisfy himself that there is no evasion of tax. (2) If such officer has reason to suspect that the goods under transport are not covered by proper and genuine documents (In cases where such documents are necessary) or that any person transporting the goods is attempting to evade payment of the tax due under this Act, he may, for reasons to be recorded in writing, detain the goods and shall allow the same to be transported only on the owner of the goods, or his representative or the driver or other person in charge of the vehicle or vessel on behalf of the owner of the goods, furnishing security for double the amount of tax likely to be evaded; as may be estimated by such officer: Provided that such officer may, if he deems fit, having regard to the nature of the carrier or the goods and other relevant matters, allow such goods to be transported on the owner of the goods or his representative or the driver or other person in charge of the vehicle or vessel executing a bond with or without sureties for securing the amount due as security. Xxx xxx xxx (4) The officer authorized under sub-section (3) shall, before conducting the enquiry, 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 to be evaded, as may be estimated by such officer". "S.45A. "S.45A. Imposition of penalty by officers and authorities: - (1) If the assessing authority or the Appellate Assistant Commissioner is satisfied that any person, - (a) Being a person required to register himself as dealer under this Act, did not get himself registered; or, (b) Has failed to keep true and complete accounts; or (c) Has failed to submit any return as required by the provisions of this Act or the rules made there under; or (d) Has submitted an untrue or incorrect return; or (e) Has failed to comply with all or any of the terms of any notice or summons issued to him by or under the provisions of this Act or the rules made there under; or (f) After purchasing any goods in respect of which he has made a declaration under proviso to sub-section (3) of S.5, has failed to make use of the goods for the declared purpose; or (g) Has acted in contravention of any of the provisions of this Act or any rule made there under, for the contravention of which no express provision for payment of penalty or for punishment is made by this Act; such authority or officer may direct that such person shall pay, by way of penalty, an amount not exceeding twice the amount of Sales Tax or other amount evaded or sought to be evaded where it is practicable to quantify the evasion or an amount not exceeding five thousand rupees in any other case". 4. A perusal of S.29A of the Act shows that the assessing authority or any other authorized officer has got the power to intercept and inspect the goods in transit. The power is couched in very wide terms. The mere fact that a permit has been issued to a dealer to transact business by employing a travelling salesman, in exercise of the powers under S.15 of the Act cannot in any way detract from the very wide powers specified in S.29A of the Act. We are unable to appreciate the plea that S.15 and S.29A of the Act are mutually exclusive. We are of the view that the wide powers vested in the competent officers under S.29A of the Act are not in any way diluted or taken away by the issue of a permit under S.15 of the Act. We repel the argument advanced by the appellant's counsel in this behalf. 5. We are of the view that the wide powers vested in the competent officers under S.29A of the Act are not in any way diluted or taken away by the issue of a permit under S.15 of the Act. We repel the argument advanced by the appellant's counsel in this behalf. 5. The second and more important question canvassed before us is the legality or eligibility of the quantum of penalty levied in this case in the sum of R.11,054/-. The penalty is levied under S.45A(1)(e) and (g) of the Act. It should be remembered that the Sales Tax Officer ordered detention of the goods and issued a notice under S.29A(2) of the Act and Rule 35A of the Rules demanding a security deposit of Rs.5527.14 for allowing transport of the goods. Notice was served on the salesman Mr.Ismail. This was not complied with. The vehicle was driven away. The assessee has violated the provisions in the Act and the Rules. It is to enforce this order passed by the Sales Tax Officer under S.29A2 of the Act read with Rule 35 A of the K.G.S.T. Rules that further proceedings were initiated under S.45A of the Act. S.45A(1) clearly provides that if the assessing authority is satisfied that any person has failed to comply with all or any of the terms of the notice issued by an officer under the provisions of this Act or the rules made there under, or has acted otherwise in contravention of any of the provisions of the Act or any rule made there under, the concerned officer may direct such person to pay by way of penalty an amount not exceeding twice the amount of sales tax or other amount evaded or sought to be evaded. In this case what was evaded or sought to be evaded is not any amount due by way of sales tax but other amount. The other amount is the 'demand of security deposit' of Rs.5527.14. The Sales Tax Officer was authorized to levy by way of penalty an amount not exceeding twice the amount evaded or sought to be evaded. In this case the penalty imposed by Ext.P5 for evading the security deposit of Rs.5527.14 is Rs.11, 054/-. It is authorized and eligible under S.45A(1) of the Act. In this perspective Ext.P8, Ext.P11 and Ext.P14 are not open to any objection. They are valid and legal. 6. In this case the penalty imposed by Ext.P5 for evading the security deposit of Rs.5527.14 is Rs.11, 054/-. It is authorized and eligible under S.45A(1) of the Act. In this perspective Ext.P8, Ext.P11 and Ext.P14 are not open to any objection. They are valid and legal. 6. It is true that the maximum penalty has been imposed by the assessing authority in exercising its powers under S.45A(1) of the Act. The contumacious conduct of the assessee is self-evident. That has been adverted to by the assessing authority and also by the revisional authorities. Regard being had to the contumacious conduct of the assessee, we are satisfied that the maximum amount of penalty levied is justified and rational. No interference is called for with the quantum of penalty levied in this case. The writ appeal is dismissed. There shall be no order as to costs.