1997 (5) TMI 408 - HC - VAT and Sales Tax

Summary

Issues:
1. Levy of penalty for suspected tax evasion and non-maintenance of correct accounts.
2. Challenge to the penalty imposed by the Intelligence Officer.
3. Reduction of penalty by the Deputy Commissioner and confirmation by the Board of Revenue.

Analysis:
The petitioner, a registered dealer under the Kerala General Sales Tax Act, was inspected by the Intelligence Officer, who proposed proceedings under section 45-A based on irregularities observed in the inspection report. The petitioner objected, but the first respondent levied a penalty of Rs. 7,054 for suspected tax evasion and Rs. 250 for non-maintenance of correct accounts. The Deputy Commissioner reduced the penalty to Rs. 3,700, and the Board of Revenue confirmed this decision. The petitioner challenged the penalty for non-maintenance of accounts and the method of fixing stock variations.

The first issue pertains to the levy of Rs. 250 for non-maintenance of correct accounts. The petitioner admitted in exhibit P3 that the book of original entry was not up-to-date at the time of inspection. The court analyzed rule 32 of the Kerala General Sales Tax Rules, emphasizing the mandatory requirement to maintain daily cash books. As the petitioner failed to provide a valid explanation for the lapse, the penalty was deemed justified.

Secondly, the challenge was raised against the method of fixing stock variations in hawai chappels. The Intelligence Officer estimated the production based on the inspection report, leading to a finding of excess stock. The petitioner argued that the estimation was arbitrary, but the court found the process reasonable. The Board of Revenue's evaluation supported the estimation method, concluding that the stock variation was accurately determined. Consequently, the court upheld the penalty imposed under section 45-A, dismissing the petition.

In conclusion, the court upheld the penalties imposed by the Intelligence Officer and subsequent authorities, finding no illegality or irregularity in their decisions. The petitioner's challenges regarding the non-maintenance of accounts and stock variation estimation were not deemed valid, leading to the dismissal of the petition.