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1993 DIGILAW 376 (KER)

V. RAMACHANDRAN v. STATE OF KERALA.

1993-08-11

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

body1993
JUDGMENT K. S. PARIPOORNAN, J. - This revision is filed against the order passed by the Sales Tax Appellate Tribunal, Additional Bench, Palakkad in T.A. No. 299 of 1988 dated October 24, 1991. The petitioner is selling milk powder manufactured by Indodan Milk Products Limited and Foremost Dairies Limited. It is his case that he purchases milk powder from the depots of the above two manufacturers at Ernakulam who collect sales tax on the sales. Milk powder is taxable at the point of first sales in the State, by virtue of entry 122 of the First Schedule to the Kerala General Sales Tax Act, 1963. The petitioner is also a dealer in other items, viz., spices, stationery goods and oils. The petitioner hired a tempo van bearing registration number KLG 7871 for effecting sales of milk powder through the van by employing a travelling salesman. On August 17, 1983, when the van was proceeding from Palakkad to Tirur, it was intercepted by the Intelligence Inspector at 8.10 hours at Kallekkad. It is stated that the salesman was in possession of delivery voucher dated August 17, 1993. According to the petitioner, the bill showed the quantity of milk powder handed over to him for sale. It is further stated that the sale bill was also available with the salesman. The Intelligence Inspector signed the last hill issued on August 16, 1983. He seized the original copy of the delivery note book, which, according to the petitioner, served as a stock register showing the quantity of goods entrusted to the salesman. The Inspector thereafter issued notice to the petitioner stating that no records, as provided in the Act, accompanied the transport. The petitioner personally appeared before the Inspector and made representations. Thereafter, the Intelligence Officer made a surprise inspection in the petitioner's shop. The Inspector demanded security in the sum of Rs. 5,893. It was furnished. The petitioner's accounts were summoned on December 14, 1983. They were examined by the Intelligence Officer. Nothing was heard thereafter. Nearly a year after the event, the petitioner, on June 12, 1984, requested the authority to refund the security amount. He repeated the request on September 28, 1984, February 18, 1985 and June 15, 1985. The accounts were again called for and scrutinised on January 6, 1986. Even then, the authorities did not act in the matter. Nearly a year after the event, the petitioner, on June 12, 1984, requested the authority to refund the security amount. He repeated the request on September 28, 1984, February 18, 1985 and June 15, 1985. The accounts were again called for and scrutinised on January 6, 1986. Even then, the authorities did not act in the matter. The petitioner sent a notice under section 80 of the Code of Civil Procedure proposing to file a civil suit for return of the deposit illegally collected. It was thereafter an order was served by the Intelligence Officer on November 26, 1986. The order seems to have been passed on January 28, 1986. The security deposit was ordered to be converted as penalty. It is annexure VI, available at page 15 of the paper book. It is stated in annexure VI dated January 20, 1986 that at the time of checking of the tempo van, there was no record as contemplated under the Kerala General Sales Tax Act, 1963 and, therefore, the Intelligence Officer was satisfied that there is an attempt at evasion of tax in this case. In the appeal filed by the petitioner, the Appellate Assistant Commissioner, Agricultural Income tax and Sales Tax, Palakkad, by order dated February 8, 1988, held that there was no attempt at evasion of tax and the imposition of penalty is not justified. He cancelled the order imposing the penalty and directed refund of the amount. In the further appeal filed by the State before the Sales Tax Appellate Tribunal, Additional Bench, Palakkad as T.A. No. 299 of 1988, by order dated October 24, 1991, the Tribunal reversed the decision of the Appellate Assistant Commissioner and restored the order of the Intelligence Officer. It is the said order passed by the Appellate Tribunal that is challenged in this revision. 2. We heard counsel. 3. The Tribunal has passed a very detailed order. The Tribunal has found that the transport of goods while effecting van sales should have the permit and the stock book as contemplated by section 15 of the Act read with rule 7(10) of the Kerala General Sales Tax Rules, 1963. In paragraph 6 of the order, the Tribunal has found that neither permit nor stock book, as contemplated in rule 7(10) of the Kerala General Sales Tax Rules, was available when the transport of milk powder was checked on August 17, 1983. In paragraph 6 of the order, the Tribunal has found that neither permit nor stock book, as contemplated in rule 7(10) of the Kerala General Sales Tax Rules, was available when the transport of milk powder was checked on August 17, 1983. There was no compliance of section 15 of the Act read with rule 7(10) of the Rules. In this view, the Tribunal held that the Appellate Assistant Commissioner was in error in holding that the requisite records for transporting goods for effecting van sales as provided in rule 7(10) of the Rules were available with the salesman when the vehicle was checked on August 17, 1983. The finding was found to be erroneous. On going through the relevant records, we are of the view that the said finding is based on material. Indeed, counsel for the petitioner could not successfully challenge the said finding. The said finding, repeated again in paragraph 7 of the order of the Appellate Tribunal, will stand. 4. It was contended by counsel for the revision petitioner-assessee that even so, the penalty could be sustained only if there was an attempt to evade the tax due under the Act. The Tribunal held that since the transport was not accompanied by proper and valid records, as contemplated in section 29-A(2) of the Act read with rule 35(2) of the Rules, the natural presumption is that there was an attempt to evade the tax due under the Act to justify the imposition of penalty under section 29-A(4) of the Act. The discussion on this aspect is contained in paragraphs 8 to 10 of the order of the Appellate Tribunal. It was argued that in entering the above finding, that the penalty imposed is exigible, the Appellate Tribunal has failed to adjudicate an important plea raised by the revision petitioner to the effect that even if the transport of the goods was not accompanied by the requisite documents, there was no attempt to evade the tax due under the Act. This is so stated, because, according to the petitioner, milk powder was taxable only on the first sales in the State by virtue of entry 122 of the First Schedule to the Act. Admittedly, the revision petitioner purchases milk powder from the depots of two manufacturers, viz., Indodan Milk Products Limited and Foremost Dairies Limited, Ernakulam. The sales to the petitioner were the first sales. Admittedly, the revision petitioner purchases milk powder from the depots of two manufacturers, viz., Indodan Milk Products Limited and Foremost Dairies Limited, Ernakulam. The sales to the petitioner were the first sales. Sales tax was collected at that point. So the sales made by the petitioner will be only second sales and will be entitled to exemption, since the petitioner is a second seller. We called for the records and we find from the records that this plea was pointedly raised by the petitioner in his explanation dated January 6, 1986 filed before the Intelligence Officer. He has stated therein thus : "Further the goods in that van at that time were the goods which have suffered sales tax since these goods come under the agency goods which we receive from our principals at Ernakulam. In spite of our repeated representations, they had collected from us the above security deposit of Rs. 5,893. Since we are the distributors for Indodan Milk Products and Foremost Dairies, Regional Office, Ernakulam, we get their bills from time to time for the goods which they supply to us and in their bill they had already collected sales tax from us for these goods and hence the goods of theirs with us have already suffered sales tax. For all these stocks we are keeping day to day stock book for the goods which we receive and for which we effect sales. All these stocks have been incorporated in the stock book". The files also show that the plea was also raised orally that the transported goods are accounted once and that there was no evasion of tax. This aspect was not adjudicated by the Intelligence Officer when he levied the penalty by order dated January 20, 1986. In the appeal filed before the Appellate Assistant Commissioner, this plea was pointedly taken as ground No. 4. The revision petitioner has stated that he is only a second seller and he is not liable to tax and so, the finding that there was an attempt at evasion of tax is illegal. The Appellate Assistant Commissioner has adverted to this plea in paragraph 2 of his order dated February 8, 1988. He has also not adjudicated this specific issue. The appellant was only a respondent before the Appellate Tribunal. He pleaded that no penalty is eligible. The Appellate Assistant Commissioner has adverted to this plea in paragraph 2 of his order dated February 8, 1988. He has also not adjudicated this specific issue. The appellant was only a respondent before the Appellate Tribunal. He pleaded that no penalty is eligible. The Appellate Tribunal was aware of the fact that the appellant had a plea that the goods taken in the van on August 17, 1983, viz., milk powder, was exempted at the hands of the revision petitioner. The plea by the assessee-revision petitioner is so stated in paragraph 3 of the order of the Appellate Tribunal. It is in this background we have to evaluate as to how far the Appellate Tribunal was justified in holding that the penalty is eligible even though the transport of the goods was not accompanied by proper and valid documents. It is true that in many cases it may be possible for the statutory authority to presume that in cases where the transport is not accompanied by proper and valid documents, there is an attempt to evade tax due under the Act. But it is only an inference or presumption of fact. In a case where the appellant had a definite plea that the goods transported are not exigible to tax under the Act at all, the Appellate Tribunal had the duty to consider whether the said plea is justified on facts. If, as a matter of fact, the revision petitioner was only a second seller of the goods and the goods are not taxable in his hands, it may be a case where even if the transport was not accompanied by proper and valid documents, no penalty will be exigible. That is because it cannot be said that there was an attempt to evade tax due under the Act. This crucial aspect has not been properly adverted to or adjudicated by the Tribunal while holding that penalty is exigible in the instant case. We therefore, set aside the order of the Appellate Tribunal dated October 24, 1991 to this extent and order a remit of the matter to the Sales Tax Appellate Tribunal, Additional Bench, Palakkad, for a fresh and proper investigation in accordance with law. The revision is allowed to the above extent. 5. We therefore, set aside the order of the Appellate Tribunal dated October 24, 1991 to this extent and order a remit of the matter to the Sales Tax Appellate Tribunal, Additional Bench, Palakkad, for a fresh and proper investigation in accordance with law. The revision is allowed to the above extent. 5. We are distressed to note that though the transport of the goods was on August 17, 1983 and the explanations were received thereafter, no action was taken in the matter for nearly three years and the order was passed by the Intelligence Officer only on January 20, 1986. The long delay in passing the order by the Intelligence Officer speaks for itself. We do not think that it is prudent to make any further comment in the matter. The revision is allowed, with costs. Petition allowed.