1998 (6) TMI 541 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Legality of the penalty order under section 45A of the Kerala General Sales Tax Act, 1963.
2. Verification of sales tax returns and accounting of taxable sales.
3. Compliance with notices for verification of books and records.
4. Refund of excess tax collected from the University of Kerala.
5. Applicability of section 46A and its proviso regarding penalty and forfeiture.

Detailed Analysis:

1. Legality of the Penalty Order Under Section 45A:

The petitioner, a dealer in various items, faced a penalty under section 45A of the Kerala General Sales Tax Act, 1963, confirmed in subsequent revisions. The penalty was imposed due to discrepancies in the sales tax returns for March 1986, where the petitioner reported Rs. 56,160 as taxable sales instead of the actual Rs. 2,16,138.50. The petitioner collected Rs. 20,309.45 as sales tax but did not remit it fully to the government.

2. Verification of Sales Tax Returns and Accounting of Taxable Sales:

The discrepancy arose from a sale bill dated March 7, 1986, to the University of Kerala. The petitioner claimed that part of the sales (colour cover) was non-taxable as it was purchased from a local dealer. The petitioner admitted collecting sales tax on the entire bill by mistake and later refunded the excess tax collected on the colour cover to the university.

3. Compliance with Notices for Verification of Books and Records:

Despite multiple notices, the petitioner failed to produce all required documents, including sale bills and the original kurippu book, for verification. The authorities argued that the day book produced later was fabricated. The non-compliance with notices was seen as a deliberate attempt to evade tax and delay proceedings.

4. Refund of Excess Tax Collected from the University of Kerala:

The petitioner refunded Rs. 14,440 to the university only after receiving a notice under section 45A, which was about seven years after the tax was collected. The authorities contended that the refund should have been made immediately upon realizing the mistake, not after the notice.

5. Applicability of Section 46A and Its Proviso Regarding Penalty and Forfeiture:

Section 46A(1) provides for penalty and forfeiture if tax is collected illegally. However, the proviso exempts penalty if the excess tax is refunded to the purchaser. Since the petitioner refunded the excess tax, the proviso to section 46A(1) was applicable, and no penalty was warranted under this section.

Conclusion:

The court found that the petitioner had not submitted an untrue or incorrect return as the sales of colour cover were non-taxable. However, the petitioner's failure to comply with notices and produce necessary documents for verification justified a penalty under section 45A(e) for non-compliance with notices. The court modified the penalty to Rs. 10,000, considering the circumstances and the fact that the petitioner had already remitted Rs. 10,000 during the revision proceedings. The original petition was disposed of accordingly, with no order as to costs.