1990 (6) TMI 207 - HC - VAT and Sales Tax

Summary

Issues:
Exemption claim under Kerala General Sales Tax Act based on forged certificate, imposition of penalty under section 45A, validity of penalty, submission of incorrect returns, burden of proof on Revenue.

Analysis:
The case involved a firm manufacturing liquid paints claiming exemption from sales tax under the Kerala General Sales Tax Act based on a forged certificate. The Sales Tax Officer initiated penalty proceedings under section 45A against the firm for filing incorrect returns allegedly supported by the forged certificate. The firm objected to the penalty, leading to a series of proceedings and appeals. The Board of Revenue canceled the Deputy Commissioner's order canceling penalties and reinstated penalties for three years. The main arguments raised were that the firm did not file false returns, lacked mens rea for penalty under section 45A, and there was no tax evasion. The Board of Revenue contended that the firm filed false returns based on a forged certificate, justifying the penalty. The court emphasized that section 45A is a penal provision requiring strict construction and the burden is initially on the Revenue to prove incorrect returns. The court found that the firm filed returns before possessing the alleged forged certificate, and penalties were imposed based on later-submitted documents. The court ruled that penalties were unjustified as the firm did not submit untrue or incorrect returns at the time of filing.

The court analyzed the timing of the alleged forged certificate submission and the filing of returns, emphasizing that the firm did not rely on the certificate when submitting returns. The court highlighted that the offense charged was submitting incorrect returns based on a forged document, which was not in existence when the returns were filed. The court concluded that penalizing the firm for submitting false returns was unwarranted as the basic requirement to attract section 45A was absent. The court noted the lack of independent investigation to prove the exemption claims were unfounded apart from the later-submitted certificate. The court set aside the Board of Revenue's order, reinstating the Deputy Commissioner's decision and allowing the appeals based on the firm not committing an offense of submitting untrue or incorrect returns.

In conclusion, the court found that penalties imposed on the firm for allegedly filing incorrect returns based on a forged certificate were unjustified. The court emphasized the importance of proving incorrect returns at the time of filing and ruled in favor of the firm, setting aside the penalties imposed by the Board of Revenue.