2014 (4) TMI 879 - HC - VAT and Sales Tax

Validity of Revision Order Evasion of Tax - Whether on the basis of suppression of turnover, the assessee; the second seller of goods taxable at the point of first sale, could be mulcted with the liability to pay tax, since the evasion of tax would be by the first seller Suppression of turnover - Penalty - Held that - What the review petitioner seeks is to review the final order passed in Revision on the basis of a penalty order passed by the Intelligence Officer is passed in total disregard to the final order passed in Revision; though the said order was specifically noticed and read by the Intelligence Officer The matter cannot be covered under jurisdiction conferred u/s 41(7) - The review petitioner contends that he has discovered new and important facts, which were not within the knowledge of the review petitioner and hence could not be produced by him - The orders relied on, being the assessment order and the penalty order passed against the alleged first seller, were even at that point of time (i.e., at the time of filing the review), reversed in appeal and revision. The revisional order is of the year 2007 and the appellate order is of the year 2008, both long before the consideration of STR by this Court - The review petitioner then relied on a subsequent order passed by the Intelligence Officer on remand, wherein the procedure contemplated under the Act was given a complete go-by and attempt was also made to reverse the findings rendered in the final order passed by this Court in STR; which was done on the false pretext of complying with the directions of this Court to re-do the matter afresh - There is absolutely no reason to review the order passed in S.T.Rev.No.11 of 2007 - The review petition is dismissed - Decided against assessee.

Issues Involved:
1. Liability of the second seller for tax evasion by the first seller.
2. Validity of the Tribunal's finding regarding the first sale.
3. Re-opening of assessment under Section 19(1) of the Kerala General Sales Tax Act.
4. Penalty proceedings against the first seller.
5. Authority and conduct of the Intelligence Officer.
6. Review petition based on new facts and penalty order.

Detailed Analysis:

1. Liability of the Second Seller for Tax Evasion by the First Seller:
The core issue was whether the second seller could be held liable for tax evasion committed by the first seller. The court concluded that the second seller could not be held liable as a matter of law. However, the Tribunal found that the alleged second seller was actually the first seller, thus affirming the lower authorities' orders.

2. Validity of the Tribunal's Finding Regarding the First Sale:
The Tribunal determined that the alleged transaction of the first sale was bogus and that the assessee was the first seller. The court upheld this finding, noting that the assessee failed to provide substantial evidence to prove the first sale, such as the movement of goods. The invoice relied upon was not compliant with the Kerala General Sales Tax Rules, 1963, and blank sale bills of the alleged first seller were found on the assessee's premises.

3. Re-opening of Assessment under Section 19(1) of the Kerala General Sales Tax Act:
The assessee's returns were initially filed under Section 17(4) of the Act. Due to detected suppression, the assessment was re-opened under Section 19(1), and the tax was assessed in the name of the assessee, finding them to be the first seller. The court confirmed the Tribunal's decision to re-open the assessment, dismissing the revision petition.

4. Penalty Proceedings Against the First Seller:
The review petition highlighted that penalty and assessment orders were passed against the first seller, which were later set aside by appellate and revisional authorities. The review petitioner argued that the penalty order showed the first sale was by M/s. Star Trading, not the assessee. However, the court noted that the Intelligence Officer's findings contradicted the final order passed in the Sales Tax Revision.

5. Authority and Conduct of the Intelligence Officer:
The court expressed concern over the Intelligence Officer's conduct, noting that he exceeded his authority by effectively sitting in appeal over the court's final order. The Intelligence Officer made incorrect statements, claiming the review petition was admitted and directions were issued by the court, which was not true. The court called for an explanation and directed the Commissioner of Commercial Taxes to conduct an inquiry into these issues.

6. Review Petition Based on New Facts and Penalty Order:
The review petition was based on the claim of new facts discovered, specifically the penalty order against M/s. Star Trading. However, the court found that the review petition did not meet the criteria under Section 41(7) of the Act. The orders relied upon by the review petitioner were already reversed in appeal and revision before the Sales Tax Revision was considered. The subsequent order by the Intelligence Officer was found to be procedurally flawed and an attempt to reverse the court's findings.

Conclusion:
The review petition was dismissed, and the court directed the Commissioner of Commercial Taxes to conduct an inquiry into the Intelligence Officer's conduct and report back within three months. The court's decision reaffirmed the Tribunal's findings and the re-opening of the assessment, emphasizing the procedural and factual correctness of the original orders.

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