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TMI Blog2018 (10) TMI 517X X X X Extracts X X X X X X X X Extracts X X X X ..... e original records, proceeded to pass erroneous order. Therefore, penalty imposed under Section 77(2) of KVAT Act, 2003 is in accordance with law - the order passed by the Revisional Authority, the same is in accordance with law. Accordingly, the substantial question of law raised in the present appeal has to be answered in affirmative holding that the Inspecting Authority was justified in invoking the provisions of Section 77(2) of KVAT Act, 2003 and Sub Section 1(J) of Section 52 of KVAT Act, 2003. As soon as notice issued under Section 77(2) of KVAT Act, 2003, immediately seven days time has to be given, but in the present case, notice issued under Section 77(2) of KVAT Act, 2003 to the appellant and he did not filed any objection, nor disputed the contents of the notice and the appellant was ready and willing to pay the penalty and accordingly, paid the penalty levied. Therefore, the contention raised by the learned counsel for the appellant that, there is no proper verification and absolutely, there was no unaccountable stock in the factory premises cannot be accepted. The appellant has not made out any ground to interfere with the impugned order passed by the Revisional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at ₹ 30,45,000/- and on the same day reply statement was filed by the Managing Director of the appellant s Company in their own letter head, but without following the required procedure, the Inspecting Authority issued notice under Section 77(2) of the KVAT Act, 2003 proposing levy penalty of ₹ 10,35,300/- for unaccounted stock. 5. Being aggrieved by the said order of the Inspecting Authority, appellant preferred an appeal before the Appellate Authority-Respondent No.2, the Appellate Authority set aside the order of Inspecting Authority. The Revisional Authority- Respondent No.1 invoked revisional proceedings against the appellant by allowing the Revision. Thus, appellant is before this Court by challenging the order passed by the Revisional Authority-Respondent No.1. 6. Heard Sri.M.Tirumalesh, learned counsel for the appellant and Smt. Veena Hegde, learned counsel for the respondents. 7. The substantial question of law framed by this Court in this appeal is as under: Whether the Inspecting Authority was justified in invoking the provision of Section 77 (2) of KVAT Act, 2003 and Sub Section 1(J) of Section 52 of KVAT Act, 2003, under the facts and cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in a printed format and there is no application of mind. Therefore, the same cannot be sustained. 10. He would further contended that the Inspecting Authority has collected the penalty of ₹ 10,35,300/- on the same day, before filing objections to unaccountable stock found in the factory premises and adopted wrong method of stock taking, which is against the instructions of the Addl. Commissioner of Commercial Taxes, Bengaluru and therefore, he sought to allow the appeal by setting aside the order passed by the Revisional Authority. 11. In support of his contentions, the learned counsel relied upon the following judgments: 1) K.M. Puttaswamy (Deceased by Legal Representative) V/s. Commercial Tax Officer (Intelligence), Mysore Circle, Mysore reported in LAWS(KAR) 1986 6 20, STC 1988 68 241. 2) Life Line Devices V/s. Commercial Tax Officer Narayanaguda Hyderabad, reported in Laws(APH) 2000 4 6, STC 2000 119 52. 3) Priyanka Wines V/s. Assistant Commissioner (C.T) (Intelligence), Abids Division reported in (1998) 110 STC 73. 12. Per Contra, Smt.Veena Hegde, learned AGA sought to justify the impugned order passed by the Revisional Authority and produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tkha. The Inspecting Authority has valued the same at ₹ 30,45,000/- based on the market value of finished goods less margin and entry tax and collected penalty twice the rate under Section 77(2) of KVAT Act, 2003 as unaccounted stock held by the appellant and issued levy of penalty of ₹ 10,35,300/-. The appellant on the same day made statement before the Inspecting Authority in its own letter head, dated 30.01.2013, admitted in a categorical terms by stating that I am willing to pay the penalty , the relevant portion reads as under: With the assistants of the my staff working in the factory you have noted down the physical stock of raw materials, packing materials, semi finished products and finished products. The details are separately recorded and the same is compared with the stock as per the books of accounts. As per the verification it is found that there is excess stock of Star Gutkha (ready in 67 barrels each of 50 kg.) The total volume of the excess Gutkha is 3350 Kgs. Converted in to Bags of 812 Bags of Stars Gutkha, The appro. MRP value per bag of Gutkha is ₹ 5,000/-. Thus the total MRP value of 812 bags works out to 40,60,000/-. After deducting 25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the penalty levied without any reasonable objections and penalty amount was also paid vide cheque bearing No.862234 of HDFC Bank, Sangli, Maharashtra, dated 30.01.2013, for ₹ 10,35,300/- drawn in favour of the Additional Commissioner of Commercial Taxes (Enforcement), Bangalore. The Appellate Authority has not taken into consideration the material on record and passed the order by allowing the appeal filed by the appellant by setting aside the order of the Inspecting Authority. The Appellate Authority has not taken into consideration the materials on record while passing the order, which are not supported by the facts and figures, sound reasoning or legal provisions, but based on the vague and general presumptions and misapplication of the case Laws, the Appellate Authority allowed the appeal filed by the appellant. Hence, the Appellate Authority has not exercised the power under proper perspective as contemplated under the provisions of Section 62(6) of the KVAT Act, 2003. 17. The Revisional Authority exercised power under the provisions of Section 64(1) of the KVAT Act, 2003 and initiated suo moto revisional proceedings and call for records, and examined the records ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doubt, it would be open to the prescribed authority to suggest such other sum as in its view would be appropriate, in which case it would be for such person to agree to pay such other sum or not. In our view, the process of compounding is completed only when the money that is agreed upon actually changes hands. If this be the correct view, as we think it is, with great respect to the learned Judge who decided Nanjappa's case [supra], there can never be a situation where the person who has committed or reasonably suspected of having committed an offence under the Act can be aggrieved. The fact that he has made the payment would indicate beyond any doubt that he was a willing party to the compounding and he cannot object thereto. It is, therefore, difficult to see how an appeal can be filed against an order of compounding. 13. Since we are, in effect, reversing the judgment in Nanjappa's case, we must add that until the process of compounding is completed by payment of the agreed compounding fee, the sales tax authorities would be entitled to lodge a prosecution, but not to recover the composition fee by coercive process. 14. For the purpose of this judgment, we ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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