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TMI Blog2009 (10) TMI 838X X X X Extracts X X X X X X X X Extracts X X X X ..... t petitions are allowed quashing the impugned orders in all the three cases, wherein registration of the petitioners under KVAT Act and CST Act is cancelled. - W.P. (C). Nos. 29206,29600,29900 of 2009 - - - Dated:- 27-10-2009 - ABDUL REHIM C.K. , J. C. K. ABDUL REHIM J. W.P. (C). No. 29206 of 2009 was originally filed seeking direction for permitting inter-State consignment of dressed chicken, poultry feeds, etc., which are supported by documents prescribed under section 46 of the Kerala Value Added Tax Act, 2003 (the KVAT Act), on payment of advance tax in accordance with the directions contained in circular No. 50/06. After filing the writ petition the petitioner was issued with exhibit P10 notice under section 16(10) of the KVAT Act read with rule 17(18)(vii) of the Kerala Value Added Tax Rules 2005. By the said notice the petitioner was required to submit reply if any against the proposal for cancellation of the registrations under the KVAT Act and the Central Sales Tax Act, 1956 (the CST Act), within 24 hours. Further the petitioner was also required to furnish additional security under section 17(1) of the KVAT Act to the tune of Rs. 89,33,177. On receipt of exhibit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Palakkad and the description of the signature in the instrument was printed in order to mislead the check-post authorities that those are pay orders . But, in fact those instruments were cheques issued by Peroorkkadavu Farmers Development Society in favour of the Commercial Tax Inspector, Naduppuni. Therefore the nature of offence committed by the dealer is grave and is liable to be dealt with under the provisions of section 16(10) of the KVAT Act read with rule 17(18)(vii) of the KVAT Rules and section 7(4)(b) of the CST Act. The proceedings further say that the dealer had failed in filing reply and only sought seven days time on the ground of pendency of the writ petition. But since the matter relates to proposal for cancellation of registration in a case of fraud perpetrated on the State revenue and forgery committed, the request cannot be acceded to, because sustaining the registration alive is against the interest of Revenue. Therefore the objection is overruled and the registration is cancelled. Similarly, in W.P. (C.) No. 29600 of 2009 the allegation is that the report of the Deputy Commissioner, Palakkad is to the effect that the petitioner had presented the chequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The mistake was apologised and the petitioner had offered to pay the whole amount. It is submitted in the objection that the petitioner is not a practitioner of any malpractice mentioned and he was made a victim by some culprits for their wrong doings and in the history of transactions he never defaulted any payments due to the Government. But the assessing authority after considering the objections held that there is a duty cast upon the dealer to see that the tax due to the State exchequer is settled then and there and the advance tax payments reaches the Government timely without fail. Since the petitioner received illegal gains and thereby cheated the Government exchequer, and since the investigation is in progress, continuance of registration is prejudicial to the Revenue. It is noticed that in W.P. (C). No. 29600 of 2009 the petitioner had produced demand drafts for an amount of Rs. 2,05,100 being the amount covered by dishonoured cheques with interest under section 31(5) and penalty, as evidenced by exhibit P8 series. In that case the first respondent had issued notice under section 67 of the KVAT Act demanding penalty of Rs. 4 lakhs plus Rs. 2 lakhs as tax. The notice p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealer. Contention of the petitioners is that dishonour of cheque cannot be considered as any other act or omission of a like nature mentioned in clause (vii) of sub-rule (18) of rule 17. In support it is contended that procedure to be followed in case of dishonour of cheque is enumerated in rule 28 of the KVAT Rules, which reads as follows: 28. Procedure where a cheque is dishonoured. If a cheque presented by a dealer towards payment of tax or other amount due under the Act is dishonoured the assessing authority shall issue a notice to the dealer in (form No. 10H. On receipt of the notice, the dealer shall make the payment of the amount within the time specified therein, but not later than ten days from the date of receipt of the notice, along with interest under sub-section (5) of section 31. The dealer shall not be permitted to make payment by means of cheque for a period of six months as specified in the notice,) which may be extended by the assessing authority, with due notice to the dealer, for good and sufficient reasons to be recorded in writing. However, if the dealer pays the amount covered by the cheque and makes prompt payment of tax or other amount due un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons/objections submitted to the proposal. Inspite of specific denial of any role in the perpetration of the alleged forgery or fraud, and inspite of the specific contention that presentation of the cheques was made without any involvement or connivance of the dealers, such contentions were not at all adverted to by the authority nor any conclusion was arrived on the merits of such contentions. Therefore the impugned orders are not sustainable, is the submissions. The respondents have filed statements in W.P. (C). Nos. 29206 of 2009 and 29600 of 2009. It is stated therein that, investigations conducted subsequent to dishonour of cheques revealed massive fraud being committed in payment of advance tax causing huge loss to the State coming to crores of rupees. It is further stated that suspecting connivance of officers, Seven Commercial Tax Inspectors at the check-post and Deputy Commissioner, Palakkad and Inspecting Assistant Commissioner, Chittoor, were already placed under suspension. The acceptance of cheque was against specific directions contained in circular No. 25/2007 dated July 3, 2007 and the petitioner had played an active role in the commission of the fraud. It is furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase and nature of the grounds raised, there is no impediment for this court to examine sustainability of the impugned orders, notwithstanding availability of the alternate remedy. Hence I am proceeding to deal with the contentions with respect to sustainability of the orders in the eye of law. The prime question to be considered in these cases is as to whether the ingredients of section 16(10) read with rule 17(18)(vii) was established, justifying cancellation of registration. The crux of the allegation is about dishonour of the cheques issued towards payment of advance tax. But dishonour of cheques as such cannot be considered as good and sufficient reason contemplated under section 16(10) or as an act or omission of a like nature enumerated in rule 17(18)(vii). This is especially because of the specific procedure provided with respect to dishonour of cheques in rule 28 of the KVAT Rules. When consequential actions are specified in the said rule, mere dishonour of cheque cannot be taken as reason under section 16(10) or as an act or omission coming under rule 17(18)(vii), and such a reason alone will not constitute the ingredients necessary to invoke action for cancellati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these cases do not reveal any such instances or they do not contain any such narrations. The question as to whether there is any direct involvement of the dealers in perpetrating such a fraud is yet to be enquired and no such specific allegation is raised. On the other hand inspite of specific contention raised by two of the petitioners that they are innocent and the malpractices were committed by some third person without their knowledge or connivance, no advertence to such contentions is seen made, nor any conclusion was seen arrived repelling such contentions. Considering the haste at which the matter was dealt with and considering the contents of the proposals issued as well as contents of the orders impugned, I am of the opinion that there was no independent application of mind rendered by the competent authority while issuing the proposals and while finalizing the proceedings. It is evident that the entire proceedings were pursued in an attempt to give effect to the instructions issued by the Commissioner of Commercial Taxes. The cryptic nature of the conclusions narrated in the impugned orders, itself reveals non-application of mind and non-advertence to the objections. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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