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TMI Blog1992 (12) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... 22, 1988 (in respect of ADT) and July 10, 1988 (in respect of ATE). 2.. The running business of the tea estates as going concerns, of the KDHP, ADT and ATE was purchased by the petitioner herein by three separate deeds of conveyance dated December 31, 1976 (document No. 380 of 1977), December 31, 1976 (document No. 380 of 1977) and April 19, 1977 (document No. 824 of 1977), respectively. Each of these three business establishments comprised of tea growing estates and factories in which tea was processed. The KDHP, ADT and ATE held registration certificates under the Central Sales Tax Act, hereinafter referred to for the sake of brevity as "the CST Act" issued on July 1, 1957. These certificates which covered all goods necessary for the business of tea estates specified that the holders could deal, inter alia, in goods under the heads "cultivation" and "crop protection" which attracted concessional rate of sales tax under section 8 of the CST Act. 3.. In proceedings numbered as K-1/C, the Sales Tax Officer, Devikulam, concluded that KDHP was not entitled to buy goods under the heads "cultivation" and "crop protection" as they were not necessary for the business of tea estates. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. v. State of Kerala [1977] 39 STC 1 (SC).-Ed. be imposed under section 10A of the CST Act for violation of sections 10(b) and 10(d) thereof. The substance of his accusation was this: C forms under the CST Act were issued by the KDHP, ADT and ATE to the dealers for the purchase of goods not directly connected with the production, manufacture or processing of tea. The issue of C forms which resulted in the collection of tax at concessional rates was a violation of section 10(b) and 10(d) of the CST Act. Therefore he proposed the penalty of 15 per cent of the purchase value. 7.. The alleged violations of the CST Act by the three companies were in respect of different years. In the case of KDHP notices referred to in the last paragraph related to the goods purchased during 1967-68 to 1972-73. In the case of ADT they related to the periods 1968-69, 1971-72 and 1972-73. In the case of ATE the period of the alleged violation was 1967-68 to 1971-72. The Sales Tax Officer, Devikulam, by separate orders made on August 15, 1975, overruled the objections by the KDHP, ADT and ATE and imposed a penalty of 15 per cent on the value of each year's purchase of goods. 8.. The orders impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cate of registration', or (b) after purchasing any goods for any purpose, specified in the certificate of registration, fails without reasonable excuse, to make use of the goods for any such purpose(4). These offences attract punishment of six months imprisonment or fine or both(5). Section 10A has the marginal note "imposition of penalty in lieu of prosecution". If a person is guilty of the offences referred at (a) or (b) above, the authority is empowered to impose upon him a penalty "not exceeding" one and a half times the tax which would have been levied under sub-section (2) of section 8. As already stated, under section 9 of the CST Act the Central tax is levied and collected by the agency of the Kerala General Sales Tax Act, 1963. Section 26 of the Kerala General Sales Tax Act provides for recovery of tax when, as in this case, the business is transferred. Where the ownership of business of a dealer liable to pay "tax" or "other amounts" payable under the Act is transferred, "any tax" or "other amounts" payable under the Act and remaining unpaid on the date of transfer, and any "tax" or "other amount" due up to the date of the transfer though unassessed, may be recovere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ural Income-tax and Sales Tax v. P.S.B. Paul Pandian [1981] 128 ITR 809 (Ker), a revision of assessment initiated 10 years after the completed assessment and in the case of Nelliyampathi Tea Produce Company Ltd. v. Commissioner of Agricultural Income-tax [1991] 190 ITR 227 (Ker), the revision proposed after 12 years were held to be unreasonable. In K.P. Narayananappa Setty Co. v. Commissioner of Income-tax [1975] 100 ITR 17 (AP), 9 years' delay was held fatal. It has been held in Nelliyampathi Tea Produce Company Ltd. v. Commissioner of Agricultural Income-tax [1991] 190 ITR 227 (Ker), that the power should not only be exercised within reasonable time but the Revenue should demonstrate that the delay was caused by circumstances beyond their control and by insurmountable difficulties. It is thus well-settled that the revision of assessment proposed beyond a reasonable period is unreasonable and that in such cases the burden to prove that the delay was justified by circumstances beyond their control, is on the authorities. The validity of penalty imposed by tax authorities has also been subjectmatter of judicial decisions. The authorities are not bound to impose penalty but h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16.. Since the petitioner has been penalised for the offence under clause (b) of section 10 of the CST Act, it is necessary to know what constitutes the offence under that clause. 1 refer to the act as offence because section 10 which creates the liability is captioned "penalties" and section 10A has the marginal note "imposition of penalties in lieu of prosecution". Commission of the acts set out in clause (b) and other clauses attract punishment of imprisonment which may extend to six months or fine or both. The essential ingredients of clause (b) of section 10 are: (i) the offender is a registered dealer. (ii) the registered dealer when purchasing goods falsely represents. (iii) that the goods are covered by the certificate of registration. In this case the dealers who purchased the goods were KDHP, ADT and ATE and not the petitioner. The words "false representation" imply that the dealer made the representation that the goods were covered by the certificate, with the knowledge that they were not so covered. There is an element of fraud, deception, and representing something which the dealer did not believe to be true. This deceptive fraudulent representation involves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les Tax Officer [Hindustan Steel Ltd. v. State of Orissa [1970] 25 STC 211 (SC)]. If he does not, the exercise of discretion is vitiated. 18.. Has the respondent considered the factors relevant to the imposition of penalty on a transferee of the business? It should be remembered that the proceedings under section 10A are quasicriminal. As the marginal note to the section indicates, penalty is the legislative alternative to prosecution. Therefore the respondent ought to have considered whether transferee of business can be visited with quasi-criminal action. There is no vicarious liability in respect of crimes. But it is urged on the basis of section 26 of the Kerala General Sales Tax Act that a transferee of business is liable to pay tax or penalty as if he were a dealer. I will presently examine the validity of this argument. Penalty can be imposed on "any person" guilty of the offence under clauses (b) and (d) of section 10 of the CST Act. "Any person" is not the transferee but the dealer or purchaser of goods which means the KDHP, ADT and ATE. Thus the CST Act conceives the dealer as the person liable to penalty. Under sections 10 and 10A of the CST Act which are the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies to impose penalty. Upon consideration of the circumstances in which the offence was committed and the nature of the offence, the authority may refrain from imposing penalty. That is why the word "may" has been used in section 10A of the CST Act. The tax on the sale of goods becomes payable upon the sale of goods, though the amount of tax is fixed by assessment. While the amount of tax is assessed, in the case of penalty, there is no assessment. It is payable only when levied. The words "other amount" have been qualified by saying that such amount may be "unassessed". Assessment is a process connected with tax and not with penalty. After the tax is assessed, penalty may be levied. Therefore the word "assessed" suggests that the "other amount" is the amount which is subject to the process of assessment. Since the amount of penalty is not "assessed", it is outside the meaning of the words "other amount ". 20.. There are specific provisions in the KGST Act which impose liability to pay penalty on persons other than dealers. These provisions to which I will presently call attention indicate that wherever the Legislature intended to make successors-in-interest of the dealer lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rotection" were disallowed. The authorities who ought to have amended the certificate did not do so with the result that the certificate which included the above goods continued to be used by the dealer. It is therefore urged by learned counsel for the petitioner that the KDHP committed no offence of false representation that the goods were covered by the certificate. This is apparently true, but not really true. The dealer, aware of the order by which these goods were disallowed, continued to use the certificate. The certificate was not physically amended. But the order deleting the goods clearly means that the dealer knew that it was ordered to be amended. Therefore when he used the certificate ordered to be amended but not actually amended, he was representing that lie was entitled to buy the goods, a fact which he knew to be false. The argument is untenable. 24.. Learned counsel for the respondent urged that the words "other amount" occurring in section 26 of the KGST Act include penalty imposed under 1 Section 21 A of the KGST Act. section 10A of the CST Act. I have already rejected this submission in paragraphs 19 and 20 above. Counsel then urged that sections 36 and 37 o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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