2006 (3) TMI 702 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to penalty under section 45A of Kerala General Sales Tax Act, 1963 for the year 1992-93 based on omission to return turnover and pay tax, technical violation of rule 8(4)(c) of KGST Rules, payment of tax after verification of accounts, suppression of turnover, lack of clarity on tax remittance by petitioner, failure of UTI to deduct and remit sales tax.

Analysis:
The petitioner challenged the penalty imposed under section 45A of the Kerala General Sales Tax Act, 1963 for the year 1992-93, citing that turnover was returned and tax paid in the subsequent year when the final bill was raised. The Intelligence Officer found an omission to return the turnover and pay tax by the petitioner during the said year. The petitioner argued a technical violation of rule 8(4)(c) of KGST Rules, stating that tax payment was made in the succeeding year, not based on progressive billing. The Government Pleader contended that tax payment occurred after verification of accounts and detection of evasion, but the exact timeline of tax payment in relation to the Intelligence Officer's actions was unclear.

The Intelligence Officer's order did not clearly indicate whether the petitioner paid tax after the verification of records and detection of turnover suppression. The petitioner, having received a significant amount from UTI in 1992-93, was required to account for the receipts during that period. The assessment revealed that the turnover on UTI work was assessed, and tax was purportedly remitted by the petitioner. However, details regarding tax collection from UTI by the petitioner were not available, and the department did not address UTI's failure to deduct and remit sales tax as required by rule 22A(2) of KGST Rules.

Considering the circumstances, including the assessment and remittance of tax, the court determined that the maximum penalty at double the tax amount was unwarranted. Thus, the penalty was reduced to 50% of the amount levied, equivalent to the tax sought to be evaded. As the court had granted a stay, the liability to pay interest was waived on the condition that the petitioner remit the reduced penalty in two installments. The first installment was due on or before May 15, 2006, and the second on or before June 15, 2006. The original petition was disposed of accordingly.