2019 (9) TMI 1211 - HC - VAT and Sales Tax

Imposition of penalty - undisclosed income - Compounded rate of tax - Kerala VAT Act - HELD THAT - In Ext.P7 series of orders, the 1st respondent has given reasons as to why the averments of the petitioner in response to the notices issued proposing penalty could not be considered for dropping the proceedings against the petitioner. There is nothing in the said orders which would suggest that the petitioner was not granted sufficient opportunity to present his case before the 1st respondent or that the 1st respondent had not considered the factors that were relevant for the purpose of confirming the penalty against the petitioner. The petitioner has not made out a case warranting interference with Ext.P7 series of orders in these proceedings under Article 226 of the Constitution of India. This is more so, because I find that against Ext.P7 series of orders the petitioner has an effective alternative remedy by way of an appeal before the First Appellate Authority under the KVAT Act - petition dismissed.

Summary

Issues:
1. Imposition of penalty under Section 67(1) of the KVAT Act for undisclosed income.
2. Cancellation of permission for payment of tax on compounded basis.
3. Validity of penalty orders issued by the 1st respondent.

Analysis:

1. The petitioner, a dealer in studded gold/diamond ornaments registered under the KVAT Act, faced penalty notices for the assessment years 2012-13 to 2014-15 due to undisclosed income discovered during an Income Tax Department survey. The undisclosed income was considered suppressed turnover under the KVAT Act, leading to the cancellation of permission for compounded tax payment and initiation of penalty proposals by the 2nd respondent.

2. The petitioner's counsel argued that the Tribunal had issued a favorable order, restoring the permission for compounded tax payment. The focus was on the penalty proposals by the 2nd respondent, resulting in Ext.P7 series of orders confirming penalties. The High Court noted that the 1st respondent provided reasons in Ext.P7 orders for not accepting the petitioner's responses to penalty notices, indicating due consideration of relevant factors. The Court found no lack of opportunity for the petitioner to present their case or procedural irregularities, suggesting the availability of an appeal remedy under the KVAT Act.

3. The High Court concluded that the petitioner failed to establish grounds for interference with Ext.P7 penalty orders under Article 226 of the Constitution of India. Emphasizing the petitioner's right to appeal before the First Appellate Authority, the Court dismissed the Writ Petition without delving into the case's merits. Recovery actions against the petitioner based on Ext.P7 orders were stayed for a month to allow the petitioner to appeal, as per their counsel's assurance to approach the appellate authority within two weeks.