JUDGMENT P. SHANMUGAM, J. – Petitioner is engaged in manufacture of foreign liquor. They have challenged exhibit P9 proceedings of the Board of Revenue which confirmed exhibit P4 proceedings of the Assistant Commissioner, Assessment (II). By the impugned proceedings, it was found that the petitioner had deliberately concealed the excise duty element in the return towards taxable 'turnover and thereby failed to file true and correct returns which is an offence warrants maximum penalty under section 45A of the Kerala General Sales Tax Act, 1963. A penalty of Rs. 16,50,000 has thus imposed on the petitioner for the year 1984-85. 2. From April 1, 1984, the Kerala State Beverages (Manufacturing and Marketing) Corporation was given the sole monopoly for the wholesale distribution of liquor in Kerala. Suitable amendments were made in the Kerala Distillery and Warehouse Rules, 1988, the Kerala Foreign Liquor (Storage in Bond) Rules, 1961 and the Kerala Foreign Liquor (Compounding, Blending and Bottling) Rules, 1971 enabling the Corporation to buy and store liquor in their bonded warehouse. On and from April 1, 1984 petitioner discontinued payment of excise duty and the corporation was remitting the excise duty. Prior to the formation of the Beverages Corporation, the distilleries within the State were collecting and remitting sales tax at the first sale point including excise duty. But this system has been discontinued with effect from April 1, 1984 consequent on the formation of the Corporation. However, the Government restored to its old position with effect from April 1, 1985 by an amendment in S.R.O. No. 516/85. The case of the petitioner is that by virtue of the system prevalent with effect from April 1, 1984, petitioner could neither collect excise duty nor had the liability to pay the excise duty and, therefore, it cannot be said that he had submitted incorrect return to attract penalty. 3. It is seen that the assessee had filed annual return excluding the excise duty paid amounting to Rs. 19,03,116.60 by the Beverages Corporation for and on behalf of the petitioner. Since the excise duty paid will form part of the consideration for sale and was includible in the taxable turnover of the assessee. Therefore, even if the petitioner had not paid the excise duty, as a manufacturer's liability was discharged by the Corporation, the petitioner should have brought it in his regular accounts. Since the excise duty paid will form part of the consideration for sale and was includible in the taxable turnover of the assessee. Therefore, even if the petitioner had not paid the excise duty, as a manufacturer's liability was discharged by the Corporation, the petitioner should have brought it in his regular accounts. Petitioner's omission is evident by the fact that he had included Rs. 1,39,425 being the excise duty collected, in the return. Therefore, all the authorities have concurrently found, in my view, correctly that the excise duty paid by the purchaser, viz., the Kerala State Beverages Corporation was part of the consideration for the sale of the petitioner and it will be forming part of the turnover of the petitioner. 4. The next question is whether there was mens rea on the part of the petitioner in seeking to suppress the amount which would form part of the turnover. If an assessee does not include the particular item in the taxable turnover under a bona fide belief that he is not liable so to include it, it will not be possible to condemn the return as a false return inviting imposition of penalty. 5. The Supreme Court in Hindustan Steel Ltd. v. State of Orissa [1970] 25 STC 211 dealing with the provision on failure to register as dealer and penalty, it was held that an order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. It is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. 6. A division Bench of this Court in P. D. Sudhi v. Intelligence Officer, Agricultural Income-tax and Sales Tax [1992] 85 STC 337 on section 45A(1) of the Kerala General Sales Tax Act held that the mere default that is made the foundation for the liability to penalty, but it is the contumacious or fraudulent or other blame-worthy or objectionable conduct of an assessee in fulfilling his obligations mentioned in section 45A of the Act, that will attract the levy of penalty. According to the division Bench, the matter must be evaluated on preponderance of probabilities. 7. The Supreme Court in McDowell & Company Limited v. Commercial Tax Officer [19851 59 STC 277 has held that the excise duty, though paid by the purchaser to meet the liability of the appellant, was a part of the consideration for the sale and was includable in the turnover of the appellant. In the above judgment, the Supreme Court held as follows : "............. the liability for payment of excise duty was that of the manufacturer and rules 80 to 84 did not detract from the position that payment of excise duty was the primary and exclusive obligation of the manufacturer and if payment be made under a contract or arrangement by any other person it would amount to meeting of the obligation of the manufacturer and nothing more. Payment of excise duty was a condition precedent to the removal of the liquor from the distillery and payment by the purchaser was on account of the manufacturer. According to normal commercial practice, excise duty should have been reflected in the appellant's bill either as merged in the price or being shown separately. In the hands of the buyer the cost of liquor was what was charged by the appellant under its, bill together with the excise duty which the buyer had directly paid on the appellant's account. The consideration for the sale was thus the total amount and not what was reflected in the bill. Therefore excise duty, though paid by the purchaser to meet the liability of the appellant, was a part of the consideration for the sale and was includible in the turnover of the appellant." In the light of this categorical pronouncement on similar question, petitioner cannot be heard to contend otherwise. Therefore, there is a clear failure on the part of the petitioner in submitting untrue and incorrect return. Petitioner cannot take advantage of the change in the Warehouse Rules. Form the facts and circumstances of the case, it has to be held that the petitioner had acted deliberately and knowing full-well of his obligation in not furnishing the true and correct accounts. It is not possible to accept the contention that he has acted bona fide without knowing the legal position. 8. Therefore, the conclusion and finding rendered by all the three authorities are to be confirmed. It is not possible to accept the contention that he has acted bona fide without knowing the legal position. 8. Therefore, the conclusion and finding rendered by all the three authorities are to be confirmed. However, taking into account the facts and circumstances of the case, the penalty imposed appears to be on the higher side. Hence I am of the view that the ends of justice would be met if the penalty is reduced to Rs. 2 lakhs which has already been remitted by the petitioner during the pendency of the proceeding. The impugned orders are modified only to that extent. The learned Government Pleader submitted that there was delay on the part of the petitioner in remitting even the tax due. If it is so, the department is at liberty to charge the penal interest for the delay in payment of tax. Original petition is disposed of as indicated above. Petition disposed of accordingly.