Judgment :- M.R. Hariharan Nair, J. Of these Original Petitions the first two are filed by the Hindustan Petroleum Corporation Ltd. and the Bharat Petroleum Corporation Ltd. and the other Original Petitions are by the Indian Oil Corporation Ltd. 2. The common question that arises for consideration in these Original Petitions is the justifiability of the penalty imposed on the petitioners by the Sales Tax Authorities invoking power under S.45A of the Kerala General Sales Tax Act. 3. As part of the business activity expected of the petitioners, they have to purchase petroleum products from the Cochin Refineries Ltd. and to sell it to the various retail pumps or to the distributors outside the State. In view of the specific provisions in the K.G.S.T. Act no sales tax is due from the petitioner where the petroleum products are got released from licenced warehouse of the Cochin Refineries Ltd. and the sale being from one Oil Company to another. However, under S.5 A of the Act they are so liable to pay tax on the purchase turnover where Central Sales Tax does is not due on the sales turnover. 4. Under agreements oil companies have to pay excise duty on the petroleum products on behalf of the manufacturer, Cochin Refineries Ltd. The question arose whether such excise duty paid by the petitioner also would form part of the purchase turnover for the purpose of tax under S.5A of the Act. Even though originally the law declared by the Court (See 1st Me. Dowell's case - (1977) 39 STC 151) and Burmah Shell - (1981) 48 STC 37) was that the element relating to excise duty was not part of such turnover, it was decided by the Supreme Court in the 2nd Me Dowell 's Case- ((1985) 59 STC 277) on 17.4.1985 that excise duty paid by the Companies like the petitioners herein directly to Central Excise Department at the stage of removal of products from bonded warehouses formed part of the taxable turnover and liable to attract purchase tax. Consequently, a 3 member Bench of this Court overruled the decision in the Burmah Shell's Case in Hindustan Petroleum Corporation Ltd. v. State of Kerala (1993 KLJ (Tax Cases) 233) on 16.12.1992. 5. Consequently, a 3 member Bench of this Court overruled the decision in the Burmah Shell's Case in Hindustan Petroleum Corporation Ltd. v. State of Kerala (1993 KLJ (Tax Cases) 233) on 16.12.1992. 5. The oil companies took up the matter through review petition before Supreme Court and it was finally decided on 9.10.1996 in Deputy Commissioner of Sales Tax (Law) v. Hindustan Petroleum Corporation Ltd. and connected cases ((2000) 118 STC 311) that the Companies would be liable to pay such tax. The Companies did not pay the purchase tax during the period of the interregnum. This resulted in imposition of penalty at twice the amount of tax due on the turnover concerned by the Sales Tax Authorities invoking power under S.45A of the Kerala General Sales Tax Act. Such imposition of penalty was taken up in appeal to the Deputy Commissioner and on dismissal of the appeal, in revision to the Commissioner. As per the orders impugned in these Original Petitions, the Commissioner of Sales Tax has affirmed the liability for penalty, though the quantum was reduced to the amount equal to the tax that has to be paid. It is these orders that are impugned in these Original Petitions. 6. The petitioners had filed returns before the assessing authority through they did not include the excise duty element therein. S.45A(1)(c) of the Act provides that if the assessing authority or the Appellate Assistant Commissioner is satisfied that any person has failed to submit any return as required by the provisions of the Kerala General Sales Tax Act or the Rules made thereunder, such authority 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 ten thousand rupees in any other case. Explanation I to the said provision stipulates that the burden of proving that any person is not liable to pay the penalty under this section shall be on such person. Sub clause 3 of S.45 A provides for challenge of the orders of the Assessing Authority and Sub Clause 5 provides for revision before the Board of Revenue. 7. Explanation I to the said provision stipulates that the burden of proving that any person is not liable to pay the penalty under this section shall be on such person. Sub clause 3 of S.45 A provides for challenge of the orders of the Assessing Authority and Sub Clause 5 provides for revision before the Board of Revenue. 7. The details of the levy involved in these Original Petitions and the final liability pursuant to the reduction allowed by the Commissioner (Successor of the Board of revenue) are as tabulated hereunder: 8. According to the petitioners, the imposition of penalty is totally unjustified in so far as S.45A can be invoked only where it is established that there was attempt to evade tax. That necessarily involves a certain element of mens rea. According to petitioners, the non-inclusion of the details of the element relating to excise duty in the returns and the non-payment of the tax due thereon during the above periods arose only from the uncertainty of law arising from conflicting decisions and as soon as the Apex Court finally pronounced on 9.10.1996 that the petitioners are liable to pay purchase tax inclusive of the excise duty element, the petitioners have voluntarily paid the amounts due and such being the case, it was inappropriate that S.45 A was invoked and penalty imposed. They have also an alternative contention that in any case, in the circumstances aforementioned, the imposition of amount equal to the amount of tax due is certainly unjustified and that the discretion available with the Commissioner has not been properly exercised. 9. The learned Government Pleader, on the other hand, submitted that the law was clear ever since the decision in the 2nd Me Dowell's case dated 17.4.1985 and that merely because the petitioners dragged on the matter by filing review petitions and the like, the liability cannot be reduced. The attempt to evade tax is manifest in filing of the review petition and in the failure to pay tax due and in the circumstances, the Sales Tax Authorities were justified in imposing penalty. As regards the quantum, the Commissioner has taken a lenient view and reduced it to the amount equal to the amount of tax due, though he had the discretion to confirm the original impost, which was twice the amount of tax. As regards the quantum, the Commissioner has taken a lenient view and reduced it to the amount equal to the amount of tax due, though he had the discretion to confirm the original impost, which was twice the amount of tax. It is contended that in the circumstances of the case and considering the large amount involved, which the petitioners withheld for long periods, there is no justification for reducing the penalty and further. In any case, the court may not be justified in intervening in the quantum as it is a matter of discretion for the competent authority contemplated in the Act. 10. Under the Central Excise Act, 1944 and the rules thereunder the liability for payment of excise duty is on the manufacturer. The terms of appointment of a licensee under the Central Excise Rules throws a contractual obligation on the licensee to pay the duty demandable on the goods stored in the warehouse of the manufacturer. So, when the assessees like the petitioners pay excise duty, the obligation discharged is the obligation on the part of the manufacturer namely, Cochin Oil Refinery. 11. The question whether excise duty paid to the Central Excise Department on petroleum products by dealers like the petitioners formed part of their turnover was considered in Deputy Commissioner of Sales Tax v. Burmah Shell Oil Storage & Distributing Co. Ltd. ((1981) 48 STC 37). It was found that though the excise duty is an impost on the manufacture or production of goods and the primary liability therefore is on the manufacturer or producer, the Central Excise Act and the Rules cast a liability for payment of such duty on a purchaser who acquires the ownership of the goods and who has been permitted to store the goods in his bonded warehouse under the licence issued by the Central Excise Authorities. It was held that the payment made by such purchaser is on his own account in discharge of the liability cast on him by the statute and the rules. It was held that the payment made by such purchaser is on his own account in discharge of the liability cast on him by the statute and the rules. The amounts paid by the purchaser directly to the excise authorities by way of duty on the goods owned by him at the stage of their removal from the bonded warehouses cannot be treated as forming part of the taxable turnover in view of the definition of the expression "turnover" contained in S.2(xxvii) of the Act ie., as meaning the aggregate amount for which goods are either bought or sold or as a component part of the price for which the goods were bought by the assessee from the manufacturer. 12. The question came up for consideration before the Apex Court in Mc Dowell and Co. Ltd. v. Commercial Tax Officer (1985) 59 STC 277) (hereinafter referred to as 'the second Me Dowell case). The matter was considered with reference to the decision in the first Me Dowell's case ((1997) 39 STC 151). There the appellant, a manufacturer of liquor holding licence, sold liquor to buyers, who themselves paid the excise duty directly and the department sought to include the amount representing the excise duty in the appellant's turnover. The department took the stand that notwithstanding such collection from the buyer, the manufacturer was liable to pay tax. It was held by the Court that the liability for payment of excise duty was that of the manufacturer and that the Andhra Pradesh Distillery Rules involved therein did not detract from the position that the payment of excise duty was the primary and exclusive obligation of the manufacturer. If payment was made under a contract or arrangement by any other person, it would amount to meeting of the obligation of the manufacturer and nothing more. The payment of excise duty, it was held was a condition precedent to the removal of liquor from a distillery and the liability arose at that stage. According to normal commercial practice, excise duty should have been reflected in the manufacturer's bill either as merged in the price or shown separately. In the hands of the buyer the cost of liquor was what was charged by the manufacturer under its bill together with excise duty which the buyer had paid on the appellant's account. According to normal commercial practice, excise duty should have been reflected in the manufacturer's bill either as merged in the price or shown separately. In the hands of the buyer the cost of liquor was what was charged by the manufacturer under its bill together with excise duty which the buyer had paid on the appellant's account. The consideration for the sale was the total amount and not what was reflected in the bill alone. Therefore, 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 includible in the turnover of the manufacturer. 13. In support of the contention that the law was unsettled in spite of the said decisions, the petitioners placed reliance on the decision in Madras Rubber Factory v. State of Kerala (1989 (1) KLT 827). But the rubber cess involved in the said case was levied not on the production of rubber, but on the manufacture thereof. In other words, the incidence of the levy was not on the producer or owner of the estate; but on the manufacturer. In that perspective, after the amendment of the Act in 1960, the scheme of the Act was held to be to levy the duty on the manufacturer and collection of rubber cess was also to be made from him only. In other words, the cess cannot form part of the sale consideration paid to the producer or grower of rubber. 14. While deciding the above case the 2nd Me Dowell case was also referred to. It was held that the said decision was distinguishable and would not apply to the facts of the case. With regard to the excise duty relating to liquor involved in the 2nd Me Dowell case, the legal liability to pay the duty was on the seller (manufacturer) and it was the seller who transferred such liability through an agreement to the purchaser. That was not the position involved with regard to the rubber cess considered in M.R.F. case aforementioned. The cess paid by the manufacturer was the duty levied on production of the rubber and is due at the stage of manufacture only. That was not the position involved with regard to the rubber cess considered in M.R.F. case aforementioned. The cess paid by the manufacturer was the duty levied on production of the rubber and is due at the stage of manufacture only. The turnover being inclusive of the aggregate amount for which the goods are either bought or sold, it was held by majority that the rubber cess due from and paid by the manufacturer did not form part of his purchase turnover. 15. In Hindustan Petroleum Corporation Ltd. v. State of Kerala (1993 KLJ (Tax Cases) 233) decided on 16.12.1992 the question of purchase tax relating to excise duty paid by the Petroleum Company for and on behalf of the manufacturer was again considered. It was reiterated that excise duty paid by the Company (H.P.C.Ltd.) was in discharge of the liability of the manufacturer and therefore it will form part of the purchase turnover of the assessee for the purpose of S.SA of the K.G.S.T. Act. The aforesaid decision of this Court was confirmed by the Apex Court as per the decision in Deputy Commissioner of Sales Tax (Law) v. Hindustan Petroleum Corporation Ltd. and connected cases ((2000) 118 STC 311) on 9th October, 1996. 16. What can be seen from the case law detailed as above is that the doubts arising in the matter of liability of companies like the petitioner was finally settled only on 9.10.1996 as aforementioned. It is their case that soon thereafter they have paid the dues voluntarily and that as such there is no scope for imposing any penalty on them for the late payment of tax. 17. In support of the above contention learned counsel for the petitioners relied on the decision in Hindustan Steel Ltd. v. The State of Orissa ((1970) 25 STC 211) wherein it was held that that the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. 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 cannot also be imposed merely because it is lawful to do so. Penalty cannot also be imposed merely because it is lawful to do so. Whether penalty should be imposed is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will still be justified in refusing to impose penalty, when the breach of the provisions is technical or venial or where the breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by the statute. 18. In P.C. Sudhi v. Intelligence Officer, Agricultural Income Tax and Sales Tax, Mattancherry & Ann ((1992) 85 STC 337) a Bench of this Court went into the scope and meaning of the term "evasion" for the purpose of S.45A of the K.G.S.T. Act. It was held that the term "evade" means some device or stratagem; some arrangement, trust, or other device (whether concealed, or apparent on the face of the document) by which what is really one thing is made to appear as something else in order to escape payment of duty. It was also held that it is not the mere default that is made the foundation for the liability or penalty; but it is a contumacious or fraudulent or other blame-worthy or objectionable conduct of an assessee in fulfilling his obligations mentioned in S.45A(1) of the Act, that will attract the levy of penalty. Mens rea, it was held, is embedded in the term "evaded" occurring in S.45A(1) of the K.G.S.T. Act. On the facts of that case it was held that the imposition of maximum penalty is a pointer to show that the officer had not exercised his judicial discretion according to law. 19. The Apex Court held in Khemka & Co. (Agencies) Pvt. Ltd. v. State of Maharashtra ((1975) 35 STC 571) that the penalty is not merely sanction. It is not merely adjunct to assessment nor is it merely consequential to assessment. Penalty is in addition to tax and is a liability under the Act. It is part of the assessment proceedings. Whatever may be the objects of levying a penalty, its imposition gives rise to a substantive liability which can be viewed either as an additional tax or as a fine for the infringement of the law. 20. A Bench of this Court held in St. It is part of the assessment proceedings. Whatever may be the objects of levying a penalty, its imposition gives rise to a substantive liability which can be viewed either as an additional tax or as a fine for the infringement of the law. 20. A Bench of this Court held in St. Michael's Oil Mills v. State of Kerala (1987 (2) KLT 610) that 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, first of all, be satisfied that penalty is exigible. He has also to apply his mind judicially and fix the quantum of penalty to be imposed. Merely because the levy of penalty is provided for, it does not mean that the officer can and should impose the maximum. The ultimate decision 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 penalty should show and it should be at least discernible from the records, that both the above aspects were borne in mind by the authority while levying the penalty. The quantum of the penalty must depend on the gravity of the offence, which in turn depends on the attendant facts and circumstances. 21. M/s. Poisons and Others v. Intelligence Officer, Agricultural Income Tax and Sales Tax (1991 KLJ (Tax Cases) 557) has upheld the validity of S.45A of the K.G.S.T. Act. It also went into the scope and ambit of term "evasion" appearing in the Section. It was held that it is not the mere default that is made the foundation for the liability and that it is a contumacious or fraudulent or other blame-worthy or objectionable conduct of an assessee in fulfilling his obligations mentioned in S.45A(1) of the Act, that will attract the levy of penalty. Mens rea, the mental element, is embedded in the crucial word "evaded" or "sought to be evaded" occurring in S.45A(1) of the Act. The officer should be satisfied that the requisites for the exercise of his power actually exists on the facts of the case. The discretion vested in the officer is not an un-examinable or unfettered discretion. The courts can properly enquire independently in appropriate cases whether the conditions are satisfied. The officer should be satisfied that the requisites for the exercise of his power actually exists on the facts of the case. The discretion vested in the officer is not an un-examinable or unfettered discretion. The courts can properly enquire independently in appropriate cases whether the conditions are satisfied. No blanket power is available to the authority to impose penalty where there is no sufficient material or evidence. The officer gets jurisdiction to impose penalty only when one or the other of the ingredients provided for in S.45A(1) of the Act actually exists. The Section provides for only the maximum amount of penalty and not the minimum. Before penalty is imposed, the authority is therefore bound to give an opportunity to the person of being heard on the aspect of quantum and fix the same judicially. The penalty cannot be levied mechanically and without disclosing grounds. The quantum of penalty should invariably depend upon the gravity of the offence. If the maximum penalty is levied in a mechanical manner, that will be an abdication of the judicial discretion vested in the officer. 22. In K.P. Davis v. Assistant Commissioner (1997 KLJ (Tax Cases) 416) this Court held that the burden of proving that a person has not evaded or sought to evade any sales tax, is on such person. It is really a situation where a person is asked to prove the negative. The burden is on the assessee and the extent of proof is as in a civil case; that is, based on preponderance of probabilities. He need not lead any positive material to discharge the burden; nor prove it to the hilt. He may rely on any material or proof available with the department, which could raise probabilities in his favour. He can also point out circumstances which could create doubts, the benefit of which can be taken by him. The matter should be evaluated properly. The question that arose there was whether penalty could be imposed for non-filing of a return. It was found that the court may, in a given case, infer deliberateness; but where the assessee does not include a particular item in the taxable turnover under a bonafide belief that he is not liable so to include it, it would not be allowed to condemn the return as a false return justifying imposition of penalty. 23. It was found that the court may, in a given case, infer deliberateness; but where the assessee does not include a particular item in the taxable turnover under a bonafide belief that he is not liable so to include it, it would not be allowed to condemn the return as a false return justifying imposition of penalty. 23. A Bench of two judges in E.I.D. Parry (I) Ltd. v. Assistant Commissioner of Commercial Taxes and Ann ((2000) 117 STC 457) went into the question whether the levy of penalty would be justified, when there is a change in the declaration of law. It was held as follows: "....Till the judgment of the Madras High Court, on July 15,1991, in Perambalur Sugar Mills Ltd. v. State of Tamil Nadu (1992) 86 STC 17, the correct position of law within the State of Tamil Nadu was not free from doubt. Even thereafter, the Sales Tax Tribunal had in subsequent orders held that transport subsidy was so includible in the taxable turnover. Such a view was held by the Tribunal till March 19, 1993. It appears in the taxable turnover, the appellants had not included those amounts in their turnover and for that reason non-inclusion of these two items in the turnover do not seem to be intentional. Though we have now held that the appellants were not right in not including the amounts of planting subsidy and transport subsidy in the taxable turnover, considering the facts and circumstances of the case, it would not be correct to say that they had acted deliberately in defiance of law or that their conduct was dishonest or they had acted in conscious disregard of their obligation under the Sales Tax Act. The sales tax authorities were, therefore, wrong in passing the orders of the penalty and upholding the same. The High Court also in our opinion, committed an error in upholding the orders of penalty. In the result, these appeals are partly allowed. The order of the High Court and the orders of the sales tax authorities imposing and upholding levy of penalty are set aside....". 24. Associated Cement Co. Ltd. v. Commercial Tax Officer ((1981)48 STC 466) is yet another decision throwing light on the point. There a company engaged in the manufacture and sale of cement, sold the product partly in Rajasthan, where its factory was situated, and partly outside that State. 24. Associated Cement Co. Ltd. v. Commercial Tax Officer ((1981)48 STC 466) is yet another decision throwing light on the point. There a company engaged in the manufacture and sale of cement, sold the product partly in Rajasthan, where its factory was situated, and partly outside that State. In the return filed the assessee did not include freight charges in the taxable turnover on the footing that it was under the bona fide belief that the freight charges were not liable to be included in the taxable turnover, in view of the decision of the Supreme Court in Hyderabad Asbestos Cement Products Ltd. v. State ofAndhra Pradesh ((1979) 24 STC 487 (SQ). Subsequently, through another decision in Hindustan Sugar Mills Ltd. v. State of Rajasthan ((1979) 43 STC 13 (SC», the Apex Court held that freight was a part of the sale price of cement. Thereafter, the assessee filed revised returns including the freight charges for the taxable turnover and also deposited along with the revised returns the balance of the sales tax payable under the State and Central Acts. The said Bench found that the explanation of the assessee for not including the freight charges in the taxable turnover that it arose from a doubt about its liability to pay sales tax as the question was pending adjudication before the Supreme Court was acceptable. This, coupled with the fact that within two months after the judgment of the Supreme Court was delivered in Hindustan Sugar Mill's case ((1979) 43 STC 13 (SC)) the assessee filed revised returns including the freight charges in the taxable turnover and paid tax due before the authority had passed orders of assessment was justification enough to escape liability for penalty. It was, however, found that the assessee was bound to pay interest under S.1 IB of the Act concerned. 25. The aspect of interest is not relevant for the-purpose of the present cases, but what is clear from the said decision is that where there is change of law arising from interpretation of the same by the Courts, the Assessee cannot be mulcted with liability for penalty provided, it files revised returns and pays the tax due under the correct law immediately after the pronouncement is made by the court. 26. 26. Having referred to the legal aspects, I proceed to consider whether the impugned orders of the Commissioner has taken into account the legal principles aforementioned. The important decision in E/.D. Parry (1) Ltd ((2000) 117 STC 457) was not considered by the learned Commissioner for the obvious reason that it was not in existence at the time when the Commissioner considered the question. However, Hindustan Sugar Mills ((1979) 43 STC 13) was very much in existence at the time; but that was also not considered by him. It is stated that at least the H.P.C. had filed revised return and paid tax. Even in the other cases, according to the petitioners, they have voluntarily paid the tax without any undue delay once the Apex Court dismissed the review petition. If these aspects are taken into account, is there justification for imposition of penalty. This is an aspect that the Commissioner has to consider. If at all the answer is in the affirmative, the further question would arise whether these are not fit cases where nominal penalty alone should be inflicted in the circumstances. 27. To enable the Commissioner to consider the aspects from the correct perspective and in the light of the relevant case law about which reference is already made in the earlier paras, I set aside orders of the Revisional Authority (Commissioner) and the consequential orders impugned in these cases. Exts. P7 and P8 in O.P. No. 4304/99, Ext. P5 order in O.P. No. 10445/96, Ext. PH order in O.P. No. 7021/96, Ext. P3 order in O.P. No. 6823/99 and Ext. P4 order in O.P. No. 16793/96 are so set aside. The revisions are remitted to the Commissioner for fresh disposal with due notice of hearing to the assessees concerned. The collection of the disputed penalty amount will stand stayed until the Commissioner passes fresh orders on the revision petitions. The Original Petitions are disposed of as above.