2008 (7) TMI 879 - HC - VAT and Sales Tax

Levy of penalty under section 29A(4) of the Kerala General Sales Tax Act, 1963 - Held that - The Enquiry Officer on mere assumptions and presumptions has once again rejected the explanation offered by the petitioner and has converted the security deposit offered towards the penalty imposed by him. While imposing the penalty under section 29A(4) of the Act, the authority under the Act must have a reasonable suspicion that the person in charge of the goods vehicle or the owner of the goods vehicle is trying to evade payment of tax due to the State. When the vehicle was checked at the check-post, the person in charge of the goods vehicle had produced the photostat copy of the delivery note and the original of which was later produced along with the reply to the show-cause notice within the time specified in the notice itself. In view of this, no mala fide intention or mens rea on the part of the petitioner for avoidance or evasion of payment of tax could be inferred or gathered. In our view, if there is any contravention, that contravention is merely technical and that cannot be the basis for imposition of penalty under the Act. In favour of assessee.

Summary

Issues:
Levy of penalty under section 29A(4) of the Kerala General Sales Tax Act, 1963 questioned by the assessee in a revision petition.

Detailed Analysis:

The assessee, a firm engaged in processing and exporting cashew kernels, imported goods and faced a situation where the goods vehicle transporting the imported goods was detained due to an issue with the delivery note. The check-post authority pointed out that a photostat copy of the delivery note was produced instead of the original, suspecting an attempt to evade tax. Despite explanations and the subsequent production of the original note, a penalty was imposed by the Enquiry Officer, which was upheld by the first appellate authority and the Appellate Tribunal.

The legal requirement under section 29(2) of the Act mandates the proper documentation for goods transportation, and failure to comply allows for detention of the vehicle and a demand for security deposit. In this case, the person in charge eventually produced the original delivery note but was still directed to pay a substantial security deposit, leading to the penalty under section 29A(4) of the Act.

The Enquiry Officer's decision to impose the penalty was based on assumptions rather than concrete evidence of tax evasion. The Court found that the explanations provided were reasonable and acceptable, indicating no malicious intent. The authorities, however, overlooked these crucial points and mechanically upheld the penalty, failing to consider the technical nature of the contravention and the lack of evidence supporting tax evasion.

Conclusively, the High Court set aside the orders imposing the penalty, directing the respondent to refund the amount collected from the petitioner. The Court emphasized the importance of promptly complying with the refund directive and outlined the interest rate applicable if the respondent fails to adhere to the court's orders within the specified timeframe.