2016 (1) TMI 1046 - SC - VAT and Sales Tax

Levy of penalty for non-maintenance of complete and true accounts - sale of motor vehicles from another state - According to the Intelligence Officer, the sales were concluded at Kozhikode and hence the vehicles should have been registered within the State of Kerala. Therefore, by showing the sales at Mahe the respondent had failed to maintain true and complete accounts as an assessee under the KGST Act and had evaded payment of tax to the tune of ₹ 86 lakhs and odd during the relevant period. - Kerala General Sales Tax Act (KGST) - Revenue submitted that as per Explanation under Section 45 of the KGST Act, the burden is on the assessee to show that penalty is not liable to be imposed on him. Held that - In the light of circumstances governing motor vehicles which may safely be gathered even from the Motor Vehicles Act and the Rules, it is obvious that the seller or the manufacturer/dealer is bound to transport the motor vehicle to the office of registering authority and only when it reaches there safe and sound, in accordance with the statutory provisions governing motor vehicles it can be said to be in a deliverable state and only then the property in such a motor vehicle can pass to the buyer once he has been given notice that the motor vehicle is fit and ready for his lawful possession and registration. The allegations and facts made or noted by the Intelligence Officer no doubt create some doubts but they do not lead to a conclusive inference that the sales under controversy had taken place at Kozhikode, Kerala. To the contrary, in view of propositions of law discussed hereinbefore, the judgment of the High Court gets reinforced and deserves affirmation. - Decided against the revenue.

Issues Involved:
1. Imposition of penalty under Section 45A of the Kerala General Sales Tax Act (KGST Act).
2. Determination of the situs of sale for tax purposes.
3. Compliance with the Motor Vehicles Act and Central Motor Vehicles Rules.
4. Burden of proof under Section 45A of the KGST Act.

Detailed Analysis:

1. Imposition of Penalty under Section 45A of the KGST Act:

The Commissioner of Commercial Taxes, Thiruvananthapuram, appealed against the High Court's decision to set aside a penalty of Rs. 86 lakhs imposed on the respondent dealer for allegedly not maintaining complete and true accounts during the period 1.4.1999 to 31.3.2000. The Intelligence Officer had initially imposed this penalty on the premise that the respondent had shown 263 cars as sold from its Mahe branch, thereby evading tax in Kerala. The High Court, however, found that the materials did not conclusively prove that the sales occurred in Kerala and set aside the penalty.

2. Determination of the Situs of Sale for Tax Purposes:

The central issue was whether the sales of the vehicles were concluded in Kerala or Mahe. The Intelligence Officer argued that the sales were concluded in Kozhikode, Kerala, and thus should have been registered there. The High Court, however, found that the vehicles were registered at Mahe, indicating that the sales were concluded there. The Supreme Court upheld this view, stating that the vehicles could only be considered ascertained goods at the registration office in Mahe, where they were registered in accordance with the Motor Vehicles Act and Rules.

3. Compliance with the Motor Vehicles Act and Central Motor Vehicles Rules:

The appellant argued that the respondent had facilitated the registration of vehicles at Mahe against the provisions of the Motor Vehicles Act, which requires registration at the place of residence or business of the owner. The Supreme Court noted that under the Motor Vehicles Act, the registration of a vehicle is a post-sale event. However, the sale is closely linked in time with the event of registration. The Court emphasized that the dealer can deliver possession and the owner can take possession of the vehicle only when it reaches the office of the Registering Authority. Thus, the sale is practically co-terminus with the registration.

4. Burden of Proof under Section 45A of the KGST Act:

The appellant contended that under Section 45A of the KGST Act, the burden was on the assessee to prove that the penalty was not liable to be imposed. The respondent argued that the High Court, having examined all the facts and evidence, found that the materials did not conclusively prove that the sales occurred in Kerala. The Supreme Court agreed with the High Court's findings, stating that the allegations and facts noted by the Intelligence Officer created doubts but did not lead to a conclusive inference that the sales took place in Kerala.

Conclusion:

The Supreme Court upheld the High Court's judgment, affirming that the sales were concluded at Mahe and not in Kerala. The Court dismissed the appeal, stating that the materials did not conclusively prove that the sales occurred in Kerala and that the vehicles were registered at Mahe in accordance with the Motor Vehicles Act and Rules. The appeal was found to be without merit and was dismissed without any order as to costs.

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