2019 (6) TMI 1134 - HC - VAT and Sales Tax

Penalty u/s 47(6) of the KVAT Act - release of consignment with vehicle - sub-sections (2) and (6) of Section 47 of the KVAT Act - opportunity of being heard - HELD THAT - The Enquiry Officer had failed to conduct a proper enquiry in the matter and the findings arrived by him that there has been an attempt to evade payment of tax, is based on no legal and acceptable materials. Consequently, confirmation of the order imposing penalty, by the Appellate Authorities, are also not sustainable. Therefore the above revision is liable to be allowed. Revision petition allowed.

Summary

Issues:
Challenge against order imposing penalty under Section 47(6) of the Kerala Value Added Tax Act, 2003.

Analysis:

1. Allegations and Initial Proceedings:
The revision petitioner challenged an order passed by the Kerala Value Added Tax Appellate Tribunal confirming a penalty imposed under Section 47(6) of the KVAT Act. The challenge arose from the interception of a vehicle carrying goods consigned by the petitioner, leading to suspicions of multiple transactions and non-compliance with invoicing rules.

2. Enquiry and Initial Findings:
The Intelligence Inspector demanded security for the consignment, suspecting tax evasion due to discrepancies in the invoices. The petitioner provided relevant documents during the enquiry, but the Intelligence Officer converted the security into a penalty, alleging lack of evidence regarding the vehicle breakdown and repair.

3. First Appellate Authority Decision:
The revision petitioner contended that a breakdown caused a delay in transport, supported by a certificate from the vehicle owner. However, the Authority upheld the penalty, citing a previous tribunal decision and emphasizing the time lag as a ground for penalty imposition.

4. Tribunal's Decision and Grounds of Appeal:
In the second appeal, the tribunal upheld the penalty, questioning the sufficiency of evidence regarding the vehicle breakdown and noting the absence of delivery dates on invoices. The main contention in the appeal was the lack of a proper enquiry by the Intelligence Officer under Section 47(5) of the KVAT Act.

5. Court's Evaluation and Conclusion:
The Court analyzed the discrepancies in the invoices and the lack of verification by the Intelligence Officer regarding multiple transports. It emphasized the necessity for clear findings to justify penalty imposition. Relying on a previous judgment, the Court concluded that the penalty imposition lacked legal basis and ordered the penalty to be set aside, directing any realized amount to be refunded.

6. Legal Precedent and Final Decision:
The Court highlighted the importance of a thorough enquiry and legal grounds for penalty imposition. It distinguished a previous case to emphasize the need for clear evidence of tax evasion. Ultimately, the Court found the penalty imposition unjustified due to the lack of proper enquiry and legal basis, leading to the allowance of the revision petition and the setting aside of the penalty.