2013 (5) TMI 158 - HC - VAT and Sales Tax

Exemption as per Entry 55 (2) of the 1st schedule to the KVAT Act - manufacturing and sale of hand made soaps - mechanised unit - Held that - the petitioner got the unit mechanised in September 2005, coming out of the purview of exemption under Entry 55 (2) of the 1st schedule, and has been paying the necessary tax to the department. Since the petitioner did not choose to produce the books of accounts and did not turn up for the personal hearing, there was no opportunity for the first respondent to have the accounts verified and to ascertain the contents of Ext.P1 reply. It is no more open for the petitioner to contend that the first respondent ought to have accepted the returns and should not have proceeded with the Section 6(1A)(b) assessment proceedings. There is absolutely no merit or bona fides in the said submission. More so, when the provision of law is not to be interpreted in favour of the wrong-doer. - Decided against the assessee.

Summary

Issues:
Challenge to assessment orders for April 2005 to September 2005 under Entry 55(2) of Kerala Value Added Tax Act; Exemption withdrawal due to unit mechanization; Allegations of illegal tax collection; Dispute over exercise of option under Section 6(1A)(b); Failure to produce books of accounts; Imposition of penalties under Section 67; Assessment validity and petitioner's compliance with orders.

Analysis:
The petitioner, engaged in manufacturing hand-made soaps, challenged assessment orders for April to September 2005 after mechanizing operations, losing exemption under Entry 55(2) of Kerala VAT Act. The petitioner admitted collecting tax during exemption period, offering to pay Rs. 37,602. Despite this, the respondent issued assessment orders (Ext.P2 to P7) imposing significant liability, prompting the challenge.

The respondent defended the assessment, alleging illegal tax collection during the exempt period, supported by detailed inquiry findings. The petitioner argued non-exercise of the option under Section 6(1A)(b) and failure to submit Form 1F, disputing the assessment basis. However, the court found reliance on non-exercise of the option insufficient to overturn the admitted illegal tax collection.

Regarding penalty imposition under Section 67, the respondent contended the petitioner's inadvertent mistake claim lacked merit, highlighting non-production of books of accounts and absence at the personal hearing. The court emphasized the need for evidence to ascertain the actual tax collected and criticized the petitioner's lack of cooperation in the assessment process.

The court clarified that Section 72 penalties apply to illegal tax collection offenses, with each violation treated separately. Despite the penalty remission in Section 67 proceedings, the court upheld the assessment for April to August 2005 due to the petitioner's failure to provide necessary documentation and participate in the assessment process.

The court dismissed the petitioner's argument that the respondent should have accepted returns, emphasizing the duty to verify accounts and the interpretation of law against wrongdoers. The petitioner's compliance with payment terms was also questioned, leading to the dismissal of the writ petition for lacking merit and warranting no interference.