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TMI Blog2015 (11) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... presenting the total turnover in respect of sale transactions completed through its online portal to customers in Kerala during the relevant period, as the total sales turnover of the petitioner for the purposes of quantifying the tax liability and penalty against the petitioner. The impugned orders only find that there were transactions of sale that resulted in goods being delivered to customers in Kerala, but do not go further and find that it was the petitioner who effected those sales. Further, there is no consideration of the specific contention of the petitioner that the sales in question were effected by sellers who were registered on its online portal, and that all the said sales were inter-state sales on which the respective sellers had paid applicable tax under the CST Act. A specific finding on the above issues, in my view, was necessary to clothe the authority concerned with the jurisdiction to proceed against the petitioner under the penal provisions of the KVAT Act, and the absence of a finding on these issues, denudes the authority concerned of such a jurisdiction. The most perplexing aspect of the instant case, however, is that WS Retail, the seller responsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a product of his choice, the seller of the particular product is notified of the choice of the customer and he, in turn, raises an invoice on the customer and makes arrangements for the delivery of the product to the customer. Further, depending on the nature of the sale transaction, whether intra-state or inter-state, the seller of the product pays tax either under the local VAT Act or under the CST Act, and the fact of payment of tax is indicated in the invoice issued to the customer. The petitioner contends that it has absolutely no role to play in the transaction of sale and purchase and hence it could not have been proceeded against under the penal provisions of the KVAT Act. It is its further contention that even if the respondent authorities were of the view that it ought to have filed returns and paid tax under the Act, an opportunity ought to have been first afforded to it in terms of Section 22 of the KVAT Act before proceeding to issue a notice under Section 67 of the KVAT Act. Referring to the orders impugned in the writ petition, it is also contended that the findings therein, that the petitioner had effected sales within the State of Kerala, was factually incorrect, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... came into existence whereby the petitioners agreed to sell the product in question to the customer in Kerala for a consideration. ■ The sale in question was a local sale insofar as the product was delivered to the customer in Kerala and from an online portal whose situs could be traced to Kerala. The contention of the petitioners that the sales in question were inter-state sales could not, therefore, be accepted. ■ Even if the petitioner was not the seller of the product in question, the petitioner could nevertheless be held liable to tax in view of the provisions of Section 16(13) of the KVAT Act, because the online portal could be seen as an intangible shop and the situs of the sale would be in Kerala where the agreement to sell was made. ■ As the petitioners were liable to pay tax under the KVAT Act, and they had not complied with the provisions of sub-sections 20 and 40 of the KVAT by filing the necessary returns and maintaining true and correct accounts, they were liable to pay penalty quantified at twice the amount of tax that was payable. 8. It is relevant to note that, on receipt of the notice proposing penalty, the petitioner in W.P.(C).No.53 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raw definite conclusions as regards the commission of an offence by the assessee. There is no indication in the notice as to why the revenue authorities considered the petitioner a dealer, or why the transactions in question had to be treated as local sales as against inter-state sales. The notice adopts the figure furnished by the petitioner, representing the total turnover in respect of sale transactions completed through its online portal to customers in Kerala during the relevant period, as the total sales turnover of the petitioner for the purposes of quantifying the tax liability and penalty against the petitioner. The notice does not, however, spell out how the said figure could be taken as representing the sales turnover of the petitioner, or how the said sales could be seen as intra-state sales for the purposes of the KVAT Act. The tenor of the notices issued to the petitioner gives ample indication that the authority had, more or less, made up his mind to impose a penalty on the petitioner. It is by now well settled that show-cause notices issued by statutory authorities, more so when they propose the imposition of penalty on an assessee, cannot pre-determine the guilt of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32. Therefore, while issuing a show-cause notice, the authorities must take care to manifestly keep an open mind as they are to act fairly in adjudging the guilt or otherwise of the person proceeded against and specially when he has the power to take a punitive step against the person after giving him a show-cause notice. 33. The principle that justice must not only be done but it must eminently appear to be done as well is equally applicable to quasi-judicial proceeding if such a proceeding has to inspire confidence in the mind of those who are subject to it. 10. Turning now to the orders impugned in the writ petitions, I find that the said orders are more or less verbatim reproductions of the notices issued to the petitioner. While this would fortify my observations as regards the manner in which the notices themselves were issued, I find that in the impugned orders, the authority concerned does not enter a specific finding, supported by reasons, as to whether there was any sale effected by the petitioner at all. The impugned orders only find that there were transactions of sale that resulted in goods being delivered to customers in Kerala, but do not go further and find t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ggest that the returns filed by the said seller were rejected by the revenue authorities, one fails to understand how the revenue authorities could proceed to levy tax, or impose penalty, on the petitioner in respect of the same turnover. The findings in the impugned orders reflect a patent non-application of mind by the authority concerned and also smack of arbitrariness. I therefore quash Exts. P11 and P12 orders, Exts. P13 and P14 Demand Notices as also Exts. P8 and P9 show-cause notices that are impugned in W.P.(C).No.5348/2015 and allow the said writ petition. W.P.(C).No.6916/2015: As regards W.P.(C).No.6916/2015, I find that the notices and orders issued to the petitioner in this writ petition are more or less identical to those in W.P.(C).No.5348/2015 discussed above. The only difference in the instant case is that the petitioner herein is a person who actually engages in the business of sale and purchase through an online portal - myntra.com. The petitioner, however, was a registered dealer under the Karnataka Value Added Tax Act during the relevant period, and was paying tax in respect of the local sales and inter-state sales effected from its business premises in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailable and there should be evidence of the amounts sought to be suppressed from the turnover In cases where the same is not discernible, the only option is to make an order of imposition of fine not exceeding Rs, 10,000/-. Any suppression detected or rather any file generated on a crime so detected and penalised necessarily gives the assessing authority the power to make estimations to compensate the State against probable omissions and suppressions. Such exercise, as is mandated by the Statute, has to be regulated by the best judgment of the individual officer which definitely is subject to the principles of reasonableness, proportionality and of course natural justice. Such estimation on best judgment would definitely have to be done with due notice and after affording a personal hearing. Such estimation should be reasonable and should have a nexus with the gravity and frequency of the commission of offences as also the quantum of loss suffered by the state This exercise, in our opinion, cannot be undertaken by the officer empowered with me power to impose penalty under Section 67 of the Act. Section 67 contemplates imposition of penalty on proof of commission of offences as a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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