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TMI Blog2015 (9) TMI 1633X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the product ought to have been under a different entry, cannot be legally sustained. Impugned order set aside - petition allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... e notices and imposing penalties on the petitioner for misclassification of the product. In the writ petition, Exts.P7 and P8 orders are impugned, inter alia, on the ground that the 3rd respondent had exceeded its jurisdiction in imposing a penalty on the petitioner on a matter relating to classification of products under the KVAT Act. 2. I have heard the learned counsel appearing for the petitioner as also the learned Government Pleader appearing for the respondents. 3. The learned Government Pleader would vehemently oppose the prayers in the writ petition. It is his contention that, in a case of the petitioner, the classification of the item in question as photocopier was never in doubt. It is pointed out with reference to the material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the rate of 5%. It is not in dispute that the returns filed by the petitioner adopting the aforesaid classification have not been called into question by the assessing authority, in that there has been no notice issued to the petitioner for the aforesaid years questioning the classification adopted by the petitioner. It is in that background that one has to examine whether the 3rd respondent is justified in issuing notice a notice proposing a penalty on the petitioner for alleged misclassification of the product. This would assume importance especially in view of the fact that under Section 67 a penalty is contemplated only if there is any willful act on the part of the assessee with a possibility of evasion of tax. In the instant case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto the annual return as also the books of accounts and determine the classification of a product cannot also be brought into question, nor is it up for consideration herein. The assessee having included the goods dealt with by the assessee as turn over, it would have been competent for the Assessing Officer to classify exempted goods as being exigible to tax and adjudicate upon the classification under the relevant entries; and to have modified the assessment accordingly. 8. In almost similar circumstances the Honourable Supreme Court in Cement Marketing Co. of India Ltd. (supra), held that if the assessee does not include a particular item to tax under a bona fide belief that he is not liable so to include it, the return filed cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set aside." 10. On the strength of the above binding precedents and on the fairly neat facts stated above, this Court finds that no penalty proceedings can be initiated in the aforesaid case on the basis of a mere dispute in classification; which, as noticed above, according to the assessee, the Assessing Authority and the Intelligence Officer are under three different entries. Such a debatable issue definitely cannot lead to a presumption of any contumacious conduct on the part of the assessee or a finding of attempt to evade tax. The assessee has made a claim, in turn which can be rejected or accepted in assessment proceedings. Even on rejection, sufficient grounds do not exist for attracting penalty." 5. Taking cue from the said judgm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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