2021 (7) TMI 776 - HC - VAT and Sales Tax

Misconduct under Rule 3 of Karnataka Civil Services (Conduct) Rules, 1966 - registration certificate issued without proper verification - information furnished by the applicant in Form No.1 as required under Rule 9(6) of the Karnataka Sales Tax Rules, 1957, not investigated - HELD THAT - As the tribunal has quashed the order of punishment on the sole ground that act of respondent issuing registration without proper verification was not a misconduct same requires to be examined. From the enquiry report, it is seen that, applicant had mentioned date of commencement of business as 01.04.1999, which was reported by the Inspector to be incorrect. Respondent, who was the responsible officer, was required to have taken hint to make further enquiry even from the report submitted by the Inspector - Sub-rule 6 of rule 9 very clearly stipulates that the Registering Authority should be satisfied after making such enquiry as he thinks necessary that particulars mentioned as correct and complete. Admittedly, application was incomplete in more than one way. Despite the same, respondent without any more proceeded to issue registration relying upon the recommendation made by the Inspector. Therefore, abdication of duty, failure to perform duty in the manner provided is writ clear in this matter. The tribunal allowed the application and set aside order of punishment only on the ground that allegation against respondent did not amount to misconduct. The reason assigned by tribunal is that Section 10 of the KST Act vested discretion in the Registering Officer about conduct of enquiry and as the officer in this case had got the application particulars verified through the Inspector, who recommended for registration, his decision to issue registration was taken in good faith, which cannot be termed as misconduct - It was also observed that disciplinary authority cannot presume that failure of respondent to verify documents before registration resulted in the dealer indulging in malpractice. The ground that the allegation against respondent did not amount to misconduct does not carry any merit, so also, finding that the charge is not distinct or definite - further in the instant case, respondent was a Commercial Tax Officer and registering authority. The vesting of power of registration is coupled with duty to verify particulars of the applicant seeking registration. The purpose of registration is to enable proper assessment and collection of tax by Government and also to find and prevent evasion of payment of tax. Very contents of the reply submitted by respondent reveals that he is aware of loss suffered by State. As respondent admitted loss caused to the State, there is no merit in the observation that loss caused to the State was not established. Lastly, reference to or reliance upon rule 181 whereunder the function of verification of particulars in the application for registration is assigned to the Commercial Tax Inspector under the Karnataka Value Added Tax Rules, do not avail to respondent as the provisions of the KST Act and rules are not on par with the same. In any case, they do not discharge the obligation cast upon the Registering Officer to verify correctness and completeness of particulars mentioned in the application and to record satisfaction about the same. The impugned order passed by the tribunal is capricious and perverse and is therefore, liable to be set-aside - Petition allowed.

Issues Involved:
1. Allegation of misconduct by the respondent in issuing a registration certificate without proper verification.
2. Tribunal's interpretation of the respondent's actions as an error of judgment rather than misconduct.
3. The appropriateness of the punishment imposed by the Disciplinary Authority.
4. The tribunal's decision to set aside the punishment and the subsequent challenge by the State.

Issue-wise Detailed Analysis:

1. Allegation of Misconduct:
The respondent, a Commercial Tax Officer, was charged with issuing a registration certificate to M/s. Karthik Traders without proper verification, violating Rule 9(6) of the Karnataka Sales Tax Rules, 1957. This omission led to the State's inability to recover tax from the assessee, constituting misconduct under Rule 3 of the Karnataka Civil Services (Conduct) Rules, 1966. The Disciplinary Authority found the respondent guilty and imposed a punishment of stoppage of one annual increment with cumulative effect.

2. Tribunal's Interpretation:
The Karnataka State Administrative Tribunal set aside the punishment, interpreting the respondent's actions as an error of judgment rather than misconduct. The tribunal relied on the Supreme Court's interpretation of 'misconduct' in State of Punjab vs. Ram Singh Ex-Constable, which distinguishes between misconduct and mere error of judgment or negligence. The tribunal concluded that the respondent's actions did not amount to misconduct as defined by the Supreme Court.

3. Appropriateness of Punishment:
The State argued that the respondent's failure to verify the particulars in the registration application, as required by law, amounted to misconduct. The respondent's actions were deemed negligent and contrary to the stipulations of the Karnataka Sales Tax Act and Rules. The tribunal's decision to term the respondent's actions as an error of judgment was challenged as it contradicted the established definition of misconduct.

4. Tribunal's Decision and State's Challenge:
The tribunal's decision was based on the grounds that the charge against the respondent was neither definite nor distinct and that there was no allegation of personal gain or abuse of power. The tribunal also referenced several Supreme Court judgments to support its decision. However, the High Court found that the tribunal's interpretation was flawed. The respondent's failure to verify the application particulars and the resulting loss to the State constituted misconduct. The High Court emphasized that the respondent's actions were not merely an error of judgment but a failure to perform his duty as required by law.

Conclusion:
The High Court concluded that the tribunal's decision was capricious and perverse. The respondent's actions constituted misconduct, and the punishment imposed by the Disciplinary Authority was justified. The tribunal's order was set aside, and the writ petition by the State was allowed. The High Court reaffirmed the importance of adhering to statutory duties and the consequences of failing to do so.

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