2014 (5) TMI 415 - HC - VAT and Sales Tax

Penalty Whether the basic ingredient as contemplated under the provisions, particularly with reference to the element of mens rea stands satisfied, so as to justify the penalty - Imposition of Penalty Held that - No interference was made by the Division Bench in W.A. No.514/2007 w.r.t. the question of penalty and no observation or direction was ever given to the concerned authority in this regard - As such, the contention of the petitioner, that Ext.P11 order has been passed by the third respondent contrary to the mandate given by the Division Bench of this Court as per Ext.P9, is thoroughly wrong and misconceived; which fails and is rejected accordingly. The assessment proceedings and the penalty proceedings are distinct and separate - Petitioner brought to notice that, the first circumstance/ground as raised in Ext.P5 notice with reference to the term reverse tax u/s 12 (4) of KVAT Act, in respect of the taking back of some of the goods after availing the rebate under the Entry Tax Act to places outside the State is correct or not - This is a matter which requires to be reconsidered with regard to the imposition of penalty and the quantum, if any, by the third respondent - Accordingly, Ext.P7 order is set aside and STO is directed to re-consider the matter Writ petition is disposed of Decided in favour of assessee.

Summary

Issues:
Challenge to Ext.P11 order not in conformity with Ext.P9 judgment.

Analysis:
The petitioner company challenged Ext.P11 order passed by the third respondent, alleging non-conformity with Ext.P9 judgment by a Division Bench. The petitioner contended that the authority only considered eligibility for set-off of excess tax paid, neglecting the penalty imposed under Ext.P7. The petitioner, a dealer in lubricating oils, brought goods via stock transfer, paying entry tax under the Kerala Tax on Entry of Goods into Local Area Act, 1994. The petitioner claimed set-off against sales tax under the KGST Act, citing an excess payment of Rs. 15,39,629. The assessing authority rejected the return, leading to Ext.P4 assessment order and Ext.P5 penalty notice under Section 67(1) of the KVAT Act. The petitioner challenged this in W.P.(C) 22607/2006, but the court directed statutory remedy for assessment and deemed the penalty notice premature for writ petition consideration.

Analysis:
The petitioner appealed to the Division Bench in W.A. No. 514/2007, citing misinterpretation of KVAT Act provisions by the assessing authority. The Division Bench intervened in the assessment but left the penalty proceedings untouched. Subsequently, the third respondent modified the assessment per Ext.P11 but maintained the penalty stance, prompting the petitioner's challenge. The petitioner argued that Ext.P11 deviated from Ext.P9 directive, emphasizing the penalty issue's neglect. The court examined the penalty grounds under Section 67(1) of the KVAT Act, addressing issues related to special rebate claims and excess KGST payment set-off eligibility. The court found discrepancies in the penalty imposition, setting aside Ext.P7 and directing a re-evaluation by the first respondent within three months.

Conclusion:
The court dismissed the petitioner's contention that Ext.P11 contravened Ext.P9, emphasizing the penalty issue's separate consideration. The judgment highlighted the distinct nature of assessment and penalty proceedings, urging a reassessment of the penalty in light of legal provisions and factual circumstances. The court's decision to set aside Ext.P7 and order a fresh evaluation underscores the importance of aligning penalty imposition with legal requirements and factual accuracy.