1996 (3) TMI 493 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of penalty imposed under section 29A(4) of the Kerala General Sales Tax Act, 1963.
2. Assessment proceedings for the year 1989-90 under the Kerala General Sales Tax Act, 1963.
3. Consideration of documents produced by the assessee to substantiate their claim of a sale in transit.
4. Justifiability of the suo motu proceedings initiated by the Deputy Commissioner of Agricultural Income-tax and Sales Tax, Ernakulam.

Issue-wise Detailed Analysis:

1. Validity of penalty imposed under section 29A(4) of the Kerala General Sales Tax Act, 1963:
The assessee, a distributor for Kirlosker Cumine diesel engines, faced a penalty when a consignment was detained due to improper documentation. The Sales Tax Inspector demanded a security deposit, which was later converted into a penalty by the Sales Tax Officer (Enquiry), who claimed the delivery note was not prescribed under the Act and the value of the goods was not shown. The enquiry officer's decision was upheld by the Additional Appellate Assistant Commissioner and the Kerala Sales Tax Appellate Tribunal, which led to the assessee filing a revision petition.

2. Assessment proceedings for the year 1989-90 under the Kerala General Sales Tax Act, 1963:
The original assessment for 1989-90 granted exemption for the turnover of sale in transit. However, the Deputy Commissioner initiated proceedings to cancel this assessment, citing that the transaction attempted to evade tax. Despite objections from the assessee, the Deputy Commissioner upheld the penalty, leading to an appeal which was dismissed by the Appellate Tribunal.

3. Consideration of documents produced by the assessee to substantiate their claim of a sale in transit:
The court noted that none of the authorities, including the Appellate Tribunal, considered the documents produced by the assessee. The delivery note and other documents clearly indicated the nature of the transaction as a sale in transit. The court emphasized that defects in the delivery note were technical and did not imply an attempt to evade tax. The adjudicating authority is required to consider all documents produced to establish the claim of a sale in transit.

4. Justifiability of the suo motu proceedings initiated by the Deputy Commissioner of Agricultural Income-tax and Sales Tax, Ernakulam:
The court found that the suo motu proceedings were based solely on the penalty proceedings, which were erroneous. Since the penalty order was quashed, the subsequent orders by the Deputy Commissioner and the Appellate Tribunal were also set aside. The court restored the original assessment order and directed the refund of the penalty amount to the assessee.

Conclusion:
The court quashed the penalty imposed under section 29A(4) of the Kerala General Sales Tax Act, 1963, and set aside the orders of the Sales Tax Officer (Enquiry), Additional Appellate Assistant Commissioner, and the Appellate Tribunal. The court also set aside the suo motu proceedings initiated by the Deputy Commissioner and restored the original assessment order. The court directed the refund of the penalty amount to the assessee with interest if not paid within the stipulated time. Petitions were allowed.