2025 (3) TMI 425 - HC - VAT / Sales Tax

Cancellation of penalty imposed u/s 47 (6) of the KVAT Act - documents accompanied has no connection with the gold detained and said documents are not valid documents because of variation of quantity non declaration of the said delivery chalan before the assessing authority and non mentioning the date of transport - HELD THAT - The appellate tribunal took note of the factual position obtaining with regard to the seizure of the gold ornaments from the employee of the respondent/assessee. As is apparent from a reading of the proceedings of the intelligence officer the jewellery that was seized was found in the possession of one Sumesh who was standing at the hallmarking centre where he had been entrusted to take the gold ornaments by the respondent/assessee. It was not in dispute that the jewellery in his possession was being taken for the sole purpose of hallmarking and thereafter returning to the store of the respondent/assessee. The revenue also did not have a case that the goods were meant for sale and that therefore there was a possible evasion of tax. It is also significant that the respondent/assessee was paying tax on compounded basis based on the tax paid in the immediately preceding assessment year. In the absence of any material to suggest that the gold ornaments that were seized from the employee of the assessee were meant for sale either within the State or inter-state and finding that the assessee was paying tax on compounded basis in which event any suppression of turnover in the present year would have no bearing on his tax liability for the said year the appellate tribunal was of the view that there was no justification for the imposition of any penalty based on the turn over computed of alleged suppressed sales. The tribunal accordingly confirmed the penalty only to an extent of Rs.10, 000/- as mandated under Section 67 (1) (j) of the Kerala Value Added Tax Act. Conclusion - No evidence of tax evasion or suppression of turnover that would impact the assessee s tax liability for the year. Therefore the appellate tribunal s decision to confirm a reduced penalty of Rs. 10, 000 under Section 67 (1) (j) of the Kerala Value Added Tax Act was upheld. The O.T. Revision dismissed.

Summary

The Kerala High Court considered an O.T. Revision challenging the order of the Kerala Value Added Tax Appellate Tribunal in TA(VAT) No.149 of 2020. The case involved the detention of an employee of the respondent/assessee by the commercial taxes department for possessing gold ornaments in excess of the specified quantity, leading to suspicions of tax evasion. The intelligence officer alleged violations of Rule 58 (18A) of the Kerala Value Added Tax Rules and initiated penalty proceedings under Section 47 (2) of the Kerala Value Added Tax Act, resulting in a penalty of Rs. 16,32,040/- imposed on the assessee. The assessee appealed the decision, which was ultimately allowed by the appellate tribunal, prompting the State to file the O.T. Revision.The State raised three substantial questions of law in the revision petition:1. Whether the Appellate Tribunal erred in canceling the penalty imposed under Section 47 (6) of the KVAT Act due to discrepancies in the accompanying documents and failure to declare the delivery chalan to the assessing authority.2. Whether the Appellate Tribunal erred in relying on a previous judgment in a different case.3. Whether the order passed by the Appellate Tribunal was perverse and not in accordance with the law.After hearing arguments from both parties, the Court noted that the jewellery seized from the employee of the assessee was intended for hallmarking and not for sale, as the assessee paid tax on a compounded basis. The Court found no evidence of tax evasion or suppression of turnover that would impact the assessee's tax liability for the year. Therefore, the appellate tribunal's decision to confirm a reduced penalty of Rs. 10,000 under Section 67 (1) (j) of the Kerala Value Added Tax Act was upheld.In conclusion, the Court dismissed the O.T. Revision, ruling in favor of the assessee and against the revenue, as no grounds were presented to justify interference with the appellate tribunal's decision.