2003 (9) TMI 738 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Applicability of Rule 21(7) of the Kerala General Sales Tax Rules, 1963.
2. Imposition of penalty under Section 45A of the Kerala General Sales Tax Act, 1963.
3. Quantum of penalty exceeding Rs. 10,000.
4. Applicability of Section 45AA of the Act.
5. Validity of the explanation provided by the appellant for the delay in tax payment.
6. Consideration of the appellant's conduct as wilful and intentional.

Detailed Analysis:

1. Applicability of Rule 21(7) of the Kerala General Sales Tax Rules, 1963:
The appellant, a private limited company, was required to file monthly returns and pay not less than 90% of the tax payable on the taxable turnover for March before the end of the month. The appellant paid Rs. 3,00,000 on March 25, 2002, but failed to pay the remaining Rs. 5,24,400 by March 31, 2002, which was a contravention of Rule 21(7).

2. Imposition of Penalty under Section 45A of the Kerala General Sales Tax Act, 1963:
The assessing authority initiated proceedings under Section 45A for the appellant's failure to comply with Rule 21(7). The appellant argued that the delay was due to unforeseen circumstances and was a technical default without tax evasion. However, the assessing authority found the non-payment intentional and imposed a penalty of Rs. 5,68,957.

3. Quantum of Penalty Exceeding Rs. 10,000:
The appellant contended that the maximum penalty should be Rs. 10,000 since there was no tax evasion. The learned single Judge, however, held that the appellant's conduct attracted the provisions of Section 45AA, which allows for a penalty up to the amount of tax evaded. The penalty was reduced to Rs. 50,000 by the learned single Judge.

4. Applicability of Section 45AA of the Act:
The appellant argued that Section 45AA was not applicable as there was no notice of demand. The learned single Judge justified the penalty under Section 45AA, but the appellate court disagreed, noting that a written demand and default were prerequisites for invoking Section 45AA. Nevertheless, the penalty was sustained under Section 45A(1)(g) read with Section 45AA.

5. Validity of the Explanation Provided by the Appellant for the Delay in Tax Payment:
The appellant's explanation for the delay, including unexpected sales and the manager's illness, was rejected by the assessing authority and the learned single Judge. The Judge noted that the appellant did not make any effort to remit the tax even on subsequent working days, indicating a wilful default.

6. Consideration of the Appellant's Conduct as Wilful and Intentional:
The court found that the appellant's conduct in paying only Rs. 3,00,000 on March 25, 2002, knowing there would be substantial transactions before the end of the month, was wilful. The appellant's failure to remit the remaining tax by March 31, 2002, was considered an attempt to evade tax, justifying the imposition of a penalty.

Conclusion:
The court upheld the judgment of the learned single Judge, sustaining the penalty of Rs. 50,000 under Section 45A of the Act. The appeal was dismissed, confirming that the appellant's conduct amounted to tax evasion, and the penalty imposed was justified.