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2024 DIGILAW 526 (KER)

Jalaludeen v. Commissioner of State Taxes

2024-05-20

A.K.JAYASANKARAN NAMBIAR, SYAM KUMAR V.M.

body2024
JUDGMENT : Syam Kumar V.M., J. This appeal is filed by the appellant assessee seeking to set aside Annexure C Order dated 30.10.2018 issued by the respondent Commissioner of State Taxes. The following questions of law are seen raised for consideration: “(a) Whether the Commissioner has statutory mandate to exercise powers under Section 58 of the KVAT Act and to pass order impugned herein, post 01.04.2017 considering the fact that Annexure B order become appealable under Section 60 of the Act and the revision become a deemed appeal as per the amendment brought in Section 55 by FA, 2017? b) Whether on law and in the circumstances of the case, the Commissioner is justified in holding that the finding of the first revisional authority that the tax sought to be evaded by the appellant was only on the value addition was incorrect ? c) Whether on facts and law and in the circumstances of the case, the Commissioner is justified in setting aside the order of the first revisional authority and restoring the penalty order of the Intelligence Officer ? d) Whether on facts and in circumstances of the case, a penalty at the quantum as decided by the Commissioner is warranted?” 2. The brief facts relevant for consideration of this appeal are as follows : The appellant is a registered dealer in timber. He had effected sale of imported teak logs to another registered dealer for an amount of Rs.9,04,050/-vide bill No.10 dated 07.05.2013. The said sale was not reflected in the returns filed by the appellant for the assessment year 2013-14. This was noted by the revenue from the inputs received from the purchaser and the appellant was consequently served with a notice under Section 67(1) of the Kerala Value Added Tax Act, 2003 (hereinafter referred to as the 'KVAT Act, 2003') calling upon him to respond to the said anomaly. The turnover suppression and tax sought to be evaded by the appellant were stated in the said notice as follows: “Local purchase turnover suppressed Rs.9,04,050.00 Add Gross Profit @ 20% Rs.1,80,810.00 Suppressed Sales Turnover estimated Rs.10,84,860.00 Tax due @ 14.5% Rs.1,57,305.00” The said notice, following the mandates of Section 67 of the KVAT Act, 2003, proposed to impose on the appellant a penalty of Rs.3,14,610/-ie., twice the amount of the tax sought to be evaded by him. 3. 3. Upon receipt of the notice, the appellant assessee submitted a reply admitting the omission on his part in uploading the impugned purchase in his purchase list. He sought to avoid the penalty by reasoning that the said omission was neither willful nor deliberate and was only an oversight from the part of his employee. In the reply, the principal objection taken by the appellant assessee was regarding the computation of gross profit in the notice which was estimated at 20%. He termed the same as arbitrary and illegal and contended that it ought to have been at 12.15% that was declared by him. He further contended that, at any rate, he ought to have been given the benefit of input tax claim, which he would have got had it been an accounted purchase. 4. The contention of the appellant assessee that the gross profit should be fixed at 12.15% was accepted by the Intelligence Officer and Annexure A Order dated 31.10.2015 was rendered. However, in the said order, the attempted tax suppression was computed at Rs.1,47,014/-on the whole sale turnover of Rs.10,13,892/-and not on the value addition of Rs.1,09,842/-alone. Computing thus, the penalty was confirmed by the Intelligence Officer in Annexure A Order at double the tax due on the turnover i.e., at Rs.2,94,029/-. 5. Annexure A Order of the Intelligence Officer was challenged by the appellant assessee by filing a revision application under Section 57 of the KVAT Act, 2003. The revisional authority after affording the appellant assessee an opportunity of being heard, modified the quantum of penalty from Rs.2,94,029/-to Rs.15,927/-vide Annexure B Order dated 30.06.2016. The reasoning of the revisional authority for effecting such modification was that penalty can only be limited to the actual amount of tax evaded i.e., Rs.15,927/-by taking only the value addition of Rs.1,09,842/-in the hands of the appellant. 6. Annexure B Order of the first revisional authority was suo motu considered in second revision by the respondent (Commissioner of State Taxes) under Section 58 of the KVAT Act, 2003. The respondent, after a detailed consideration vide Annexure C Order dated 30.10.2018, set aside Annexure B Order passed by the first revisional authority and restored the earlier Annexure A Order passed by the Intelligence Officer. Annexure C Order thus passed in suomoturevision by the respondent is challenged before us in this appeal drawing the questions of law as mentioned above. 7. Annexure C Order thus passed in suomoturevision by the respondent is challenged before us in this appeal drawing the questions of law as mentioned above. 7. We heard Sri.S.Suresh Babu, learned counsel appearing for the appellant assessee and the learned Government Pleader for the revenue. 8. The principal contention raised by the counsel for the appellant assessee is that the tax evaded or sought to be evaded can only be on the value addition and hence the penalty leviable under Section 67 should only be commensurate thereto. Hence according to the counsel, the conclusion arrived at by the first revisional authority in Annexure B Order was valid and justified. It is also contended that Annexure C Order that interferes with Annexure B, suffers from gross jurisdictional error in so far as pursuant to various amendments carried out to the KVAT Act, 2003 through the Finance Acts issued from time to time, the respondent Commissioner of State Taxes has lost his power to exercise suo motu revisional power under Section 58 of the said Act. Thus according to the learned counsel, Annexure B Order rendered by the first revisional authority cannot be interfered with in revision by the respondent and the proper remedy open to the revenue as against Annexure B was to file an appeal before the competent authority. 9. Per contra the learned counsel for the revenue submitted that it is trite law that input tax credit, if any, should be claimed only through the invocation of and in compliance with the relevant norms based on the corresponding monthly returns and it should be supported by valid invoices duly accounted through prescribed registers and books of accounts maintained during the normal course of business. Input tax credit, if it has not been claimed as aforesaid by the dealer, by conceding the purchase through monthly returns, cannot be taken note of by the assessing authority when the net tax liability is arrived at. Pointing to Annexure C Order, learned counsel appearing for the revenue submits that there is no provision in the KVAT Act, 2003 and in the Rules made thereunder for a dealer to claim input tax credit when the purchases are suppressed by him. Pointing to Annexure C Order, learned counsel appearing for the revenue submits that there is no provision in the KVAT Act, 2003 and in the Rules made thereunder for a dealer to claim input tax credit when the purchases are suppressed by him. Based on the above legal premise, learned counsel for the revenue submits that the direction made by the first revisional authority that input tax credit should be allowed for purchases not conceded through returns filed while arriving at the tax sought to be evaded, is bad in law and Annexure C setting aside the same is valid and legal. 10. We have considered the rival contentions. We note that the first revisional authority in Annexure B Order, which we note is cryptic and lacks proper reasoning, concluded that being the second seller, the tax element concerning the appellant assessee, which he is alleged to have evaded, is only on value addition. Based on the said reasoning as per the first revisional authority, tax effect in the matter concerning the appellant assessee comes only to Rs.15,927/-. The first revisional authority had also concluded that since the Intelligence Officer had detected only one purchase omission and no pattern of suppression is established, there was no cause or reason to invoke maximum penalty and that the penalty is to be limited to the actual amount of tax evaded on value addition. We find the said reasoning and conclusion arrived at by the first revisional authority in Annexure B to be contrary to settled principles of law and erroneous. Input tax credit if not claimed as envisaged in law by following the procedure prescribed, cannot be allowed when the net tax liability is arrived at. It is mandatory that input tax credit can be claimed only by filing returns submitted in Form 8 bill and only if legally envisaged registers, duly maintained in the course of business reflect the entitlement to input tax credit. The first revisional authority in Annexure B had, through the erroneous reasoning, apparently rewarded the appellant assessee for the illegal suppression of purchase turnover. The said error committed by the first revisional authority has been rightly corrected by the second revisional authority in Annexure C. 11. That “no man can take advantage of his own wrong” is a cardinal tenet of law extolled by the maxim "Nullus Commodum Capere Potest De Injuria Sua Propria”. The said error committed by the first revisional authority has been rightly corrected by the second revisional authority in Annexure C. 11. That “no man can take advantage of his own wrong” is a cardinal tenet of law extolled by the maxim "Nullus Commodum Capere Potest De Injuria Sua Propria”. It conveys the sound principle that 'he who prevents a thing from being done shall not avail himself of the non-performance he has occasioned'. The Supreme Court recently, had occasion to elucidate on this maxim in Municipal Committee Katra and Others v. Ashwani Kumar (2024 SCC OnLine SC 840). The Supreme Court has therein, opined as follows: 'It is beyond cavil of doubt that no one can be permitted to take undue and unfair advantage of his own wrong to gain favourable interpretation of law. It is a sound principle that he who prevents a thing from being done shall not avail himself of the non-performance he has occasioned. To put it differently, ‘a wrong doer ought not to be permitted to make profit out of his own wrong’.' The conduct of the appellant assessee in this O.T. (Appeal) is fully covered by the aforesaid proposition. 12. Now coming to the contention of the appellant assessee regarding alleged absence of jurisdictional powers in the respondent Commissioner of State Taxes during the relevant time to exercise revisional powers and to issue Annexure C Order, it is seen that no such challenge regarding the jurisdictional competency of the respondent was raised by the appellant assessee when he was heard by the respondent pursuant to the notice issued under Section 58 of the KVAT Act, 2003. Further, the contention of the appellant assessee that the proper statutory remedy against the order passed by the first revisional authority was a second revision before the Commissioner invoking Section 59 of the Act cannot be countenanced in the light of the specific mandate of Section 58 of the Act wherein suo motu power is specifically conferred on the Commissioner to call for and examine any order passed or proceedings recorded under the Act by any officer or authority subordinate to him other than that of the Deputy Commissioner (Appeals) or the Assistant Commissioner (Appeals) if it is prejudicial to the interest of the revenue. In the facts and circumstances of the case at hand, we note that the Commissioner had validly exercised his powers under Section 58 of the KVAT Act in view of the wanton pervasiveness and illegality of reasoning in Annexure B Order of the first revisional authority which otherwise would have prejudicially affected the interests of the revenue. Moreover as mentioned above, the appellant assessee cannot be heard to raise a challenge regarding jurisdiction at the appellate stage for the first time. In view of the above, we see no reason to interfere with Annexure C Order issued by the respondent. The O.T. Appeal is thus dismissed answering the questions of law raised in favour of the revenue and against the assessee.