2018 (12) TMI 299 - HC - VAT and Sales Tax

Imposition of penalty - CST Act - purchase tax not paid - exemption under Annexure A notification claimed - invocation of Section 67 of the Kerala Value Added Tax Act, 2003 - Held that - In the present case, admittedly, an audit report was filed and after that penalty proceedings were initiated noticing the discrepancy and the revised returns were filed after the penalty proceedings were initiated. Hence the assessee failed to correct the mistakes in the return by filing a revised return along with the audit report; which was what is enabled by Section 42. The assessee attempted revision of returns only after penalty proceedings were issued, which is not permissible as per the proviso to Section 42(2). The proviso stands against the assessee and there could be no revised return accepted by the Assessing Officer against the clear mandate of the statutory provision. Invocation of section 67 - Held that - Section 10A applies to a purchasing dealer and these are specific offences enumerated under Section 10, none of which is attracted here. Here the offence is of evasion of tax payable under the CST Act, on the interstate sale of rubber, by claiming an exemption without complying with the condition of the exemption notification. The penalty imposed under the CST Act is only proper - decided in favor of Revenue. Revision dismissed.

Summary

Issues:
1. Upholding penalty for non-payment of purchase tax for exemption claim under Annexure A notification.
2. Affirming penalty based on tax liability on inter-state transaction.
3. Invocation of Section 67 of the Kerala Value Added Tax Act for levying penalty under the Central Sales Tax Act.

Issue 1:
The case involved the revision petitioner, an assessee aggrieved by the Tribunal's order upholding a penalty for not paying purchase tax to claim exemption under Annexure A notification. The assessee filed revised returns based on an audited certificate before 31.10.2009. The Intelligence Officer found that the assessee had not paid tax on its purchase of natural rubber and other goods, claiming input tax credit under the KVAT Act. The exemption claimed was for a turnover under the CST Act, and a penalty was imposed for tax evasion. The petitioner argued that the revised turnover was filed within the due date, but the audit report was submitted after the penalty notice. The court noted that the assessee failed to correct mistakes in the return by filing a revised return along with the audit report, as required by Section 42 of the KVAT Act.

Issue 2:
The Tribunal affirmed the penalty based on the tax liability on the inter-state transaction, where the assessee claimed exemption without paying the purchase tax as stipulated in Annexure A notification. The assessee's argument that Section 67 of the KVAT Act cannot be invoked for levying penalty under the CST Act was rejected by the court. The court emphasized that the penalty imposed under the CST Act for evasion of tax on interstate sales of rubber by claiming exemption without meeting the conditions was proper. The court upheld the penalty and answered the questions of law against the assessee and in favor of the revenue.

Issue 3:
The contention that Section 67 of the KVAT Act could not be invoked for penalty under the CST Act was dismissed by the court. The court highlighted that provisions of the general sales tax law, including penalties, apply to the payment and collection of tax under the CST Act. The court clarified that the penalty imposed under the CST Act for evasion of tax on interstate sales by claiming exemption improperly was valid. The court rejected the revision and directed the parties to bear their costs.

In conclusion, the court upheld the penalty imposed on the assessee for not paying purchase tax to claim exemption under Annexure A notification, affirmed the penalty based on the tax liability on the inter-state transaction, and rejected the argument that Section 67 of the KVAT Act could not be invoked for penalty under the CST Act.