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1993 DIGILAW 104 (KER)

GENTLE JOSEPH & CO. v. STATE OF KERALA.

1993-02-17

K.P.BALANARAYANA MARAR, K.S.PARIPOORNAN

body1993
JUDGMENT K. P. BALANARAYANA MARAR, J. - The petitioner is an assessee to sales tax under the Kerala General Sales Tax Act, 1963. It is a dealer in raw rubber, a commodity taxable at the last purchase point. On November 19, 1988, a consignment of rubber sheets sold by the assessee to one Thomas Joseph was intercepted and detained at Angamaly by the Sales Tax Intelligence Squad while the goods were on its way to M/s. Apollo Tyres, Perambra, near Chalakudy. The goods were detained on the ground that the delivery note showed that the goods were sold to Thomas Joseph to be delivered at Apollo Tyres and the nature of the transaction by Thomas Joseph is not ascertainable. The goods were released on November 21, 1988, on payment of Rs. 22,250 by way of security. The enquiry officer converted the same into penalty. The appellate authority confirmed the penalty imposed. The Sales Tax Appellate Tribunal sustained that order and dismissed the second appeal preferred by the assessee. Hence the revision. 2. Heard counsel for the petitioner Dr. K. B. Mohamedkutty and Senior Government Pleader Sri V. C. James for the Revenue. 3. The main grievance of the petitioner is that the detention of the goods was not warranted by any of the provisions of the Sales Tax Act and that the authorities were not justified in holding that there was an attempt at evasion of tax. 4. The delivery note, a copy of which is annexure A, shows that 10,000 kgs. of rubber sheets valued at Rs. 1,78,000 were transported in lorry KLO 4080. The name of the buyer is shown as Thomas Joseph, rubber dealer, Moonnilavu and his registration certificate number is also shown therein. It is further mentioned that the delivery has to be effected at Apollo Tyres Ltd., Perambra, Chalakudy. The goods were intercepted by the Intelligence Officer on November 19, 1988 and the same released on collection of an amount of Rs. 22,250 by way of security deposit. By order dated May 5, 1989, an amount of Rs. 22,250 was imposed as penalty for violating the provisions of section 29 of the Kerala General Sales Tax Act and the security deposit was ordered to be adjusted towards penalty. This order was confirmed by the Additional Appellate Assistant Commissioner. The Appellate Tribunal declined to interfere. By order dated May 5, 1989, an amount of Rs. 22,250 was imposed as penalty for violating the provisions of section 29 of the Kerala General Sales Tax Act and the security deposit was ordered to be adjusted towards penalty. This order was confirmed by the Additional Appellate Assistant Commissioner. The Appellate Tribunal declined to interfere. The main reason given by the Appellate Tribunal is that the penalty to be awarded under section 29A (4) of the Act is different from the penalty to be imposed under other penal provisions in the Act. It is for this reason that the Tribunal refused to place reliance on the decisions cited before it. 5. We were taken through the order of the Tribunal and the provisions of the Kerala General Sales Tax Act. Learned counsel for the petitioner has also placed considerable reliance on the decision of this Bench rendered in P. D. Sudhi v. Intelligence Officer, Agricultural Income-tax and Sales Tax [1992] 85 STC 337. Section 29A (4) of the Act enables the officer authorised under sub-section (3) of that section to serve a notice on the owner of the goods and give him an opportunity of being heard and after such enquiry the officer shall impose on the owner of the goods a penalty not exceeding twice the amount of tax attempted to be evaded in case the officer finds that there has been an attempt to evade the tax due under the Act. The Tribunal attempted to draw a distinction between the penalty provision contained in section 29A (4) and other provisions of the Act referring to sections 19 and 45A. Section 19 enables the assessing authority to direct the dealer to pay penalty if it is satisfied that the escape from assessment is due to wilful non-disclosure of assessable turnover by the dealer. Section 45A authorises the assessing authority or the Appellate Assistant Commissioner to direct payment of penalty on satisfaction of one or other of the grounds mentioned in clauses (a) to (f) of sub-section (1) of that section. 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 is leviable 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 is leviable by way of penalty. On a reading of these provisions of the Act it is seen that section 29A (4) mentions about an attempt to evade the tax due under the Act whereas the other provisions refer to evasion of tax or contravention of any of the provisions of the Act. But that distinction is without any difference since what has to be established is evasion of tax. 6. The word "evasion" and the expression "sought to be evaded" in section 45A (1) of the Act came up for consideration before this Bench in [1992] 85 STC 337 (P. D. Sudhi v. Intelligence Officer, Agricultural Income-tax and and Sales Tax). After referring to the dictionary meanings this Bench held : "From the various shades of meaning given in the above dictionaries for the word 'evasion', it is clear that it is not the mere default that is made the foundation for the liability (penalty); it is a contumacious or fraudulent or other blame-worthy or objectionable conduct of an assessee in fulfilling his obligations mentioned in section 45A (1) of the Act, that will attract the levy of penalty. We have no doubt in our mind that mens rea or the mental element is embedded in the crucial word 'evaded' or 'sought to be evaded' occurring in section 45A (1) of the Act." Section 19 and section 45A of the Act enable the assessing authority or the Appellate Assistant Commissioner, as the case may be, to impose penalty only if the authority is satisfied that there has been either escape from assessment due to wilful non-disclosure of the assessable turnover by the dealer or that any of the grounds mentioned in sub-section (1) of section 45A is established. While interpreting section 45A this Bench in the aforesaid decision held that the section does not confer uncanalised or unguided power in the statutory authority and that the provision itself suggests that the levy to be made under it is in the nature of a penalty which requires the authority concerned to apply his mind to all relevant aspects of the default alleged to have been committed by a dealer. The order levying penalty is quasi-judicial in character and involves exercise of judicial discretion. It is observed that the levy of penalty is not compulsive but only enabling or permissive. 7. Penalty can be imposed under section 29A (4) only if the officer finds that there has been an attempt to evade the tax due under the Act. The other two sections, viz., sections 19 and 45A contain the phrase 'is satisfied'. While interpreting that phrase this Court in Sudhi's case [1992] 85 STC 337, observed that the quantum of penalty should depend upon the gravity of the offence and if the maximum penalty is levied in a mechanical manner it is a pointer to show that the officer has not exercised the judicial discretion vested in him according to law. In other words, there should be independent evaluation and appraisal and the grounds should be disclosed before the maximum penalty is levied. Before imposing penalty under section 29A (4) of the Act the officer has, therefore, to find that there has been an attempt to evade the tax. Such finding can be rendered only on the basis of materials and the reasons for such finding should also be disclosed. The law laid down by this Court in Sudhi's case [1992] 85 STC 337 is, therefore, applicable to the present case also though the phrase used in section 29A (4) is slightly different from the phrase from the phrase used in section 45A which came up for consideration in that case. On a perusal of the impugned order and the orders of the authorities below we are of the view that the maximum penalty stipulated in section 29A (4) of the Act was levied in a mechanical manner without independent evaluation and appraisal. The levy of the maximum penalty therefore, appears to be unreasonable and irrational. The reason given by the Appellate Tribunal that the penalty authorised under section 29A (4) is different from the penalty liable to be imposed under the other penal provisions of the Act is unsustainable. In the light of the decision of the Bench in Sudhi's case [1992] 85 STC 337 the imposition of penalty is not justified. The Tribunal was, therefore, wrong in sustaining the order of the penalty imposed under section 29A (4) of the Act. The order of the Tribunal has, therefore, to be set aside. In the light of the decision of the Bench in Sudhi's case [1992] 85 STC 337 the imposition of penalty is not justified. The Tribunal was, therefore, wrong in sustaining the order of the penalty imposed under section 29A (4) of the Act. The order of the Tribunal has, therefore, to be set aside. For the aforesaid reasons, the revision is allowed and the order of the Tribunal upholding the imposition of penalty is set aside. Petition allowed.