2023 (11) TMI 1124 - HC - VAT and Sales Tax

Return of the balance amount kept by the Revision Petitioner on behalf of the customers - sale proceeds for levy of tax for imposing penalty under section 67 of the KVAT Act or not - sufficient material exists for imposing penalty or not - penalty confirmed based on presumptions and surmises or not - non-speaking and cryptic order - failure to grant opportunity to the petitioner for adducing further evidence or not - HELD THAT - On the facts of the instant case, when it is found that the petitioner dealer had clearly contravened the terms of the Central Government Scheme that proposed benefits to purchasers of coir looms subject to their complying with a particular procedure for securing the said benefits, the contention of the petitioner cannot be accepted that, who was a person entrusted with the task of supplying the looms that the supply of parts of the loom (in lieu of a complete loom) for a lesser consideration should be considered as legal and proper and that his tax liability would therefore be only in respect of the reduced consideration received for the parts of the loom actually sold to the customer. The legal presumption to be drawn in the instant case, in the backdrop of the Central Government Scheme, is that the amounts received by the petitioner from the bank represented the actual consideration for the supply of the coir looms, which the petitioner was obliged to sell to the beneficiaries of the Scheme. The obvious illegality also cannot be accepted that would arise if, as contended by the petitioner, it is a fact that he had colluded with the customer and supplied only parts of a loom, instead of an actual loom, and refunded a part of the amounts received from the bank to the customer. In the absence of any evidence to suggest that the loom itself was not sold, it is opined that the impugned order of the Commissioner does not require to be interfered with. This O.T. Revision is disposed off by answering the questions of law raised in favour of the revenue and against the petitioner assessee.

Summary

Issues:
The judgment involves the interpretation of tax liability under the Kerala Value Added Tax Act for a supplier of coir looms who received orders under a Central Government Scheme and billed customers for parts of the looms supplied.

Issue 1: Tax liability on consideration amount
The petitioner, a supplier of coir looms under a Central Government Scheme, received orders from customers and billed them for parts of the looms supplied. The Intelligence Officer imposed a penalty on the petitioner, stating that tax should be paid on the consideration amount received from banks for supplying the looms. The petitioner argued that he billed customers only for the parts supplied and refunded the differential value. The Revision Authority reduced the penalty to the differential tax amount demanded. The Commissioner found it to be a case of underbilling and evasion of tax, upholding the penalty. The High Court held that the amounts received by the petitioner from the bank represented the actual consideration for the supply of coir looms, rejecting the petitioner's argument of selling parts instead of complete looms.

Issue 2: Legality of penalty imposition
The petitioner raised questions regarding the imposition and confirmation of the penalty, arguing that there was insufficient material, and the penalty was based on presumptions and surmises. The High Court found that the petitioner's actions contravened the Central Government Scheme's terms and that the petitioner's contention of selling parts of the loom for a reduced consideration was not acceptable. The Court upheld the penalty imposed, stating that the impugned order of the Commissioner did not require interference.

Conclusion:
The High Court disposed of the Revision by ruling in favor of the revenue and against the petitioner assessee, emphasizing the legal presumption that the amounts received by the petitioner represented the actual consideration for the supply of coir looms. The Court held that the petitioner's actions were not in compliance with the Scheme's requirements, leading to the rejection of the petitioner's arguments regarding tax liability and penalty imposition.