Research › Search › Judgment

Karnataka High Court · body

2009 DIGILAW 937 (KAR)

ABHAY SOLVENTS PVT. LTD. v. STATE OF KARNATAKA.

2009-12-01

ARAVIND KUMAR, K.L.MANJUNATH

body2009
JUDGMENT ARAVIND KUMAR, J. - The appellant is questioning the order of the revisional authority dated November 18, 2006 passed in exercise of the revisional power under section 22A(1) of the Karnataka Sales Tax Act, 1957 (hereinafter referred to as "the Act"), wherein, the revisional authority has set aside the order dated December 6, 2005 passed by the appellate authority in Appeal No. 266/05-06, by which order, it had allowed the appeal of the appellants and directed for refund of the amount of penalty collected by the check-post authority. The facts leading to the filing of the appeal are that the Commercial Tax Officer (hereinafter referred to as "the CTO"), (Mobile Check-post - 4), Bangalore, intercepted goods vehicle bearing Regn. No. KA. 14.3025 on October 9, 2004 and issued a notice as to why penalty should not be levied on the appellant since the appellant attempted to evade the tax by not stopping the goods vehicle at Nelamangala check-post and obtained the seal thereof. The CTO on considering the statement of the driver found that the driver was guilty of violating section 28A(2)(d) of the Act and levied a penalty of Rs. 16,650, which has been paid under protest by the appellant. The appellant thereafter, filed an appeal before the Joint Commissioner of Commercial Tax (Appeals). DVO - II and IV, Bangalore, in KST. AP. 266/05-06. The appellate authority on considering the grounds urged in the appeal was satisfied that the cause shown as contemplated under section 28A(4) of the Act was sufficient to annul the penalty levied and accordingly, by allowing the appeal, directed the authorities to refund the amount of penalty collected. The revisional authority in exercise of the revisional power under section 22A(1) of the Act, suo motu sought to revise the order of the appellate authority and after issuance of notice to the appellant herein and considering the objections, came to the conclusion that the order of the appellate authority was erroneous and prejudicial to the interest of the Revenue and revised the order of the appellate authority dated December 6, 2008 and confirmed the order of the CTO dated October 9, 2004 levying penalty of Rs. 16,650 by restoring the same, by order dated November 18, 2006. 16,650 by restoring the same, by order dated November 18, 2006. It is this order, which is now assailed in the appeal by the appellant by raising the following substantial questions of law : (1) In the facts and circumstances of the case, whether the check-post officer was justified in levying penalty under section 28A(4) of the Karnataka Sales Tax Act, 1957 although the appellant being an exempted unit, there was no tax liability on the goods that was being transported by the appellant ? (2) In the facts and circumstances of the case, whether a check-post Officer can levy penalty under section 28A(4) of the Karnataka Sales Tax Act, 1957 in respect of minor technical error for which sufficient cause is furnished ? (3) In the facts and circumstances of the case, whether the respondent was justified in initiating the suo motu revisionary proceedings although the first appellate order, being an order setting aside a penalty order, was not prejudicial to the interests of Revenue ? We find from the records that on July 18, 2008 this court has admitted the appeal by formulating the above referred two questions of law. We have heard Sri Aravind Kamath, learned counsel appearing for the appellant and Smt. Geetha Menon, learned Government advocate, appearing for the respondent - Revenue. Sri Aravind Kamath, learned counsel appearing for the appellant, contends that the object behind the establishment of the check-post is to check evasion of tax and admittedly, in the instant case, the appellant being a 100 per cent exempted unit did not attempt to evade payment of tax or avoid payment of tax and non-stopping of vehicle was on account of the intermittent check-post between Hospet and Harihar having been abolished, the driver under bona fide impression that Nelamangala check-post has also been abolished, did not stop and on interception of the vehicle, the driver of the vehicle has produced all the documents as required and as such, the authorities on being satisfied, did not levy any tax since the said question did not arise particularly as the appellant was 100 per cent tax-exempted unit. It is contended that non-stopping of the vehicle at the check-post as required under section 28A(2)(d) of the Act was only a bona fide mistake and the explanation given by the appellant as required under section 28A(4) of the Act having been reconsidered by the first appellate authority had rightly dropped the penalty proceedings and thus, the revisional authority was in error in confirming the order of the check-post authority and setting aside the first appellate authority's order and accordingly seeks that question of law be answered in favour of the appellant. Per contra, Smt. Geetha Menon, learned Government advocate appearing for the respondent - Revenue, would contend that it is not the question of evasion of tax or avoiding payment of tax but it is the violation of the mandatory provisions of section 28A(2)(d) of the Act, which attracts the levy of penalty and the question of establishing mens rea does not arise insofar as levy of penalty under this sub-section and accordingly; she submits that the revisional authority was fully justified in revising the order of the appellate authority and restoring the order of the CTO and she prays for dismissal of the present appeal and prays that the question of law be answered against the appellant and the appeal be dismissed. Having given our anxious consideration to the submissions made at the Bar, we find from the records that in the grounds of appeal urged by the appellant before the first appellate authority, it is specifically contended that all the requisite documents as contemplated under the Act were accompanying the vehicle in question and there were no discrepancies noticed by the authorities and thus, there being no demand for tax, the levy of penalty was only on the basis of non-stopping of the vehicle and this non-stopping of the vehicle has been explained before the appellate authority and found acceptance as required under section 28A(4) of the Act. The authority under the check-post or the appellate authority is required to consider the sufficient cause given by the party alleged to have contravened the provisions of sub-section (2), (3), (3A) or (3B) of section 28A to arrive at a conclusion that there was justifiable reason to levy the penalty. The authority under the check-post or the appellate authority is required to consider the sufficient cause given by the party alleged to have contravened the provisions of sub-section (2), (3), (3A) or (3B) of section 28A to arrive at a conclusion that there was justifiable reason to levy the penalty. In the instant case, we find that the only ground on which penalty was levied was on account of non-stopping of the vehicle for reporting at the first check-post or barrier situated on the route as required under section 28A(2) of the Act. The authorities having found that there was no violation of any other provisions of law and the first appellate authority having accepted the cause given by the appellant as "sufficient", the revisional authority was not justified in revising the order of the appellate authority and confirming the order of levy of penalty by the CTO. It is no doubt true that insofar as levy of penalty under fiscal statute, the establishing of mens rea does not arise. However, it is for the authorities to ascertain as to whether there was just or sufficient reason or cause as explained by the assessee or person as the case may be to levy the penalty and after considering the said sufficient cause, penalty can be levied. In view of the same, we find that the appellate authority has accepted the cause shown by the appellant herein as "sufficient cause" for annulling the levy of penalty and the said order being revised by the revisional authority only on the premise of the violation of section 28A(2)(d) of the Act would be contrary to the spirit and intention behind sub-section (4) of section 22A of the Act and hence, we answer questions of law in favour of the appellant herein and against the Revenue in the facts and circumstances of case only. Accordingly, the appeal is allowed. The substantial questions of law is answered in favour of the assessee, i.e., the appellant herein and the order of the revisional authority dated November 18, 2006 is set aside and the order of the appellate authority dated December 6, 2005 is restored. No costs.