2009 (6) TMI 943 - HC - VAT and Sales Tax

Penalty orders issued under section 45A of the Kerala General Sales Tax Act challenged - Held that - Since unaccounted purchase of goods by the appellant from outside State by purchasing D. Ds. in the name of employee is the only irresistible conclusion possible from the facts established by the Department, penalty was rightly levied. Even though the appellant submitted that penalty sustained at one and a half times the tax is high, we do not think any quantum relief is called for because for failure of the Department to file revision against Tribunal s orders, appellant escaped from tax and interest liability which will be more than the penalty. The writ appeal is accordingly dismissed confirming exhibits P15 to P18 orders of penalty on merits.

Summary

Issues:
Challenge against penalty orders under section 45A of the Kerala General Sales Tax Act for assessment years 1991-92 to 1994-95.

Detailed Analysis:

1. Tribunal's Orders vs. Penalty Proceedings:
The petitioner argued that the Tribunal's orders on assessment should bind the Commissioner and lower authorities in penalty proceedings. However, the Government Pleader contended that assessment and penalty proceedings are distinct, and the Tribunal's findings are not binding in penalty cases. The court noted that the Department's failure to challenge the Tribunal's assessment orders does not prevent statutory authorities from independently considering penalty proceedings based on sufficient evidence. The court emphasized that penalty proceedings under section 45A are separate and can proceed without waiting for assessments to conclude.

2. Evidence of Unaccounted Purchases:
The Department found evidence of unaccounted purchases by the petitioner through demand drafts bought by an employee. The court highlighted key points:
- The employee regularly purchased demand drafts for outside suppliers of garments.
- The employee's purchases aligned with the petitioner's known suppliers.
- The employee failed to explain the source of funds for purchases.
- The employee used the petitioner's shop address for purchases.
The court concluded that the evidence supported unaccounted purchases by the petitioner through the employee.

3. Tribunal's Findings and Court's Conclusion:
The court assessed the Tribunal's orders and found that they did not dispute the unaccounted purchases. The court disagreed with the Tribunal's inference that the purchases were not linked to the petitioner. The court asserted that if the Tribunal's orders were challenged, they would not have been upheld. The court upheld the Department's findings and reasoned that the penalty was justified based on the evidence of unaccounted purchases.

4. Justification for Penalty:
The court affirmed the penalty, stating that the evidence pointed to unaccounted purchases by the petitioner. The court rejected the petitioner's argument of high penalty, noting that the Department's failure to challenge the Tribunal's orders had already benefitted the petitioner by avoiding tax and interest liabilities exceeding the penalty amount.

In conclusion, the court dismissed the writ appeal, confirming the penalty orders (exhibits P15 to P18) based on the evidence of unaccounted purchases by the petitioner through the employee.