2014 (12) TMI 1421 - HC - VAT and Sales Tax

Imposition of penalty under Section 67(1) of the KVAT Act. Petitioner points out that, the course and procedure pursued by the concerned respondent is per se wrong and illegal in all respects as the 3rd respondent has ventured into an exercise, whereby the classification dispute has been wrongly decided in a penalty proceedings, which cannot be a proper course. HELD THAT - After hearing both the sides and after going through the materials on record, this Court finds that there is considerable force in the submission made by the learned counsel for the petitioner. This Court finds that the matter requires to be considered in the light of the ruling rendered by this Court as per the decision in M/S. CHAKKIATH BROTHERS VERSUS THE ASSISTANT COMMISSIONER, COMMERCIAL TAXES SPECIAL CIRCLE-1, ERNAKULAM 2014 (6) TMI 974 - KERALA HIGH COURT . Accordingly, Exts. P7 to P9 orders are set aside and the matter is directed to be reconsidered by the 3rd respondent. The writ petition is disposed of.

Summary

Issues:
1. Imposition of penalty under Section 67(1) of the KVAT Act based on classification dispute.
2. Legality of the procedure followed by the 3rd respondent in finalizing the penalty proceedings.
3. Challenge to the orders issued by the 3rd respondent.
4. Compliance with the decision in Chakkiath Brothers Vs. Assistant Commissioner, Commercial Taxes, Ekm.

Analysis:
1. The petitioner challenged the imposition of a penalty under Section 67(1) of the KVAT Act based on a classification dispute. The petitioner submitted replies to the notices proposing the penalty, but the final orders issued by the 3rd respondent were challenged in the writ petition.

2. The petitioner's counsel argued that the procedure followed by the 3rd respondent was incorrect and illegal. It was contended that the 3rd respondent wrongly decided the classification dispute in a penalty proceeding, which was deemed improper based on a previous decision reported in 2014 (3) KHC 55. The High Court acknowledged the force in the submission made by the petitioner's counsel after hearing both sides and reviewing the records.

3. After considering the arguments and the legal precedent cited, the High Court set aside the orders (Exts. P7 to P9) issued by the 3rd respondent and directed the matter to be reconsidered. The Court emphasized that the matter should be reviewed in accordance with the ruling in 2014 (3) KHC 55. The High Court instructed the 3rd respondent to provide the petitioner with an opportunity for a hearing during the reconsideration process.

4. The High Court ordered the finalization of the proceedings within two months from the date of receipt of the judgment copy by the concerned parties. The petitioner was instructed to provide a copy of the judgment and the writ petition to the 3rd respondent for further action. The writ petition was disposed of based on the above directions and observations.