2013 (2) TMI 642 - HC - VAT and Sales Tax

Penal and prosecution steps against the appellants - penalty proceedings - whether the order is bad for the reason that as all the officers in the team have not decided the matter? Held that - We are at a loss how argument would lie at the mouth of the appellants. Even according to them there are ten members going by exhibit P1 and P1(a). There were only four members who participated. Matters were being processed even according to them by four members out of the team of ten members. They should have been on guard and immediately objected to it if advised. They acquiesced and the conduct of the appellants instils in us the impression that here is a case where the appellants were clearly sitting on the fence. Still further we may notice another development. Though the notice was issued by the Intelligence Officer who was a member of the team subsequently he was transferred. The successor incumbent in the office of the Intelligence Officer Thrissur (IB) took over. He continued with the proceedings and the final order was passed by him. The appellants must be treated as aware that he was not made a member of the team by the Commissioner. So here is a case in which there were ten members in the team vide exhibits P1 and P1(a). Midway through the subsequent incumbent who was not a member of the team previously nor was made a member of the team either proceeded with the matter. This again indicates that at any rate the appellants were gambling for a favourable decision by sitting on the fence. Unlike the facts situation in the case law which were cited for the proposition that the persons who hear must decide being part of the principles of natural justice with which proposition we can have no quarrel we do not see how it can be said that if the officer has jurisdiction and he hears and he decides the said principle is flouted. As informed that the appellants have already approached the appellate forum and sought alternate remedies. Therefore it may not be appropriate to conclude the issue and the appellants will be at liberty to pursue their remedies before the appellate authority. The appellate forum will be free to proceed with the matter untrammeled by anything contained in this judgment and the appellants will be free to seek interim reliefs also. Appeal dismissed.

Issues Involved:
1. Jurisdiction of the Intelligence Officer to impose penalties.
2. Constitution and authority of the special team.
3. Violation of principles of natural justice.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Intelligence Officer to Impose Penalties:
The appellants contended that the orders of penalty passed by the Intelligence Officer, Thrissur, were without jurisdiction. They argued that the Commissioner had constituted a team of officers to handle the investigation and penal actions, and only this team could impose penalties. They cited the notification issued by the Government of Kerala under section 3(3) of the Kerala Value Added Tax Act, 2003, which vested the Commissioner with the authority to assign functions to various officers. They contended that the Intelligence Officer, who issued the penalty orders, was not a member of the team at the time of issuance, as he had been transferred, and no order added the new incumbent to the team. Therefore, they argued that the penalty orders were without jurisdiction.

2. Constitution and Authority of the Special Team:
The Commissioner of Commercial Taxes had constituted a special team by exhibit P1 order dated July 5, 2011, to investigate and, if necessary, initiate penal and prosecution steps against six dealers, including the appellants. The team was later expanded by exhibit P1(a) to include three additional intelligence inspectors. The appellants argued that the team, as constituted, must act collectively, and any action, including the imposition of penalties, must be taken by the entire team and not by an individual officer. They relied on several case laws to support their contention that the decision-making process should be collective and that the person who hears the case must be the one to decide it.

3. Violation of Principles of Natural Justice:
The appellants also contended that there was a violation of the principles of natural justice, as certain witnesses were not allowed to be cross-examined. They argued that this transgression further invalidated the penalty proceedings.

Judgment:
The court dismissed the writ appeals, confirming the view taken by the learned single judge that the appellants should pursue their statutory remedies. The court held that the Intelligence Officer, Thrissur, had jurisdiction to impose penalties and that the special team was primarily constituted for investigation purposes. The court noted that the appellants had not raised the jurisdictional issue before the Intelligence Officer and had participated in the proceedings, thereby acquiescing to the process. The court also observed that the appellants had already approached the appellate forum and could pursue their remedies there, including raising the issue of the alleged violation of natural justice. The court emphasized that the appellate forum would be free to proceed with the matter untrammeled by anything contained in the judgment and that the appellants could seek interim reliefs as well.

Conclusion:
The court dismissed the writ appeals, allowing the appellants to pursue their statutory remedies before the appellate authority, including raising issues of jurisdiction and natural justice. The judgment clarified that the special team's role was primarily investigative and that the Intelligence Officer had the authority to impose penalties.

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