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TMI Blog2023 (5) TMI 375X X X X Extracts X X X X X X X X Extracts X X X X ..... India. The petitioner is a registered dealer under the Kerala Value Added Tax, 2003 and an assessee on the rolls of the Assistant Commissioner (Assessment), Special Circle-II, Ernakulam. 2.1 The Bharat Petroleum Corporation Ltd. (BPCL), owns and operates a refinery at Kochi, in connection with its Integrated Refinery Expansion Project, decided to increase the refining capacity of the Kochi refinery with an objective to transform it into a world class refinery with the largest refining capacity among Public Sector refineries. For carrying out the aforementioned objectives, a continuous and reliable supply of Hydrogen, Nitrogen and HP stem of specific parameters are required and in this regard, invited bid vide bid document dated 14.9.2012. In response to the aforementioned, the parent company of the petitioner submitted a bid by offering to build a Hydrogen and Nitorgen production plant to ensure the supply of industrial gases to BPCL and this offer was duly accepted by the BPCL by issuing a letter of acceptance dated 15.5.2013. The petitioner as duly authorised by its parent company Air products and Chemicals Inc, agreed to Build, Own, Operate (BOO) and maintain a Hydrogen and Nit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of tax etc. 4. The aforementioned notices were duly replied by producing documents as directed by the officer. Even the authorised representative of the petitioner personally appeared before the 2nd respondent on two occasions, ie. on 12.5.2017 and 3.6.2017 and during the course of the meeting, all the discrepancies pointed out by the 2nd respondent were reconciled by him. Thereafter, two notices dated 22.2.2018 under Section 67 (1) of the KVAT Act proposing to impose penalty for filing untrue returns with intention to evade payment of tax for the periods 2016-17 and 2017-18 (April, May and June of 2017) on the erroneous premise that Ext.P1 agreement executed between the petitioner and BPCL comes under the purview 'works contract' as contemplated under KVAT Act and treated the entire amount received by the petitioner from BPCL towards payment of FMC as 'contract receipts' on the specious ground that there has been no supply of goods by taxing at the rate of 14.5% under Section 6(1) (f) of the KVAT Act instead of 5%, thereafter, resulted in penalty order dated 6.7.2020 for the period from 2016-17 and 2017- 18 respectively. 5. Besides raising certain arguments on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer has not only misconstrued the terms and conditions of the agreement, but arrived at a conclusion, which is beyond its domain. The ratio culled out in Diebold System's Case (supra), was in this context of case that on acquiring the knowledge of discrepancy in the return, the assessee therein did not file a revised return. 7. The Intelligence Officer would detect the offences as per the provisions of Section 61 but should not attempt to quantify the tax liability alleged to have been evaded, which is essentially an exercise of estimation of best judgment exclusively exercised by the Assessing Officer. 8. On the other hand, Sri.Govindan, learned Senior Government Pleader refuted the aforementioned contention by submitting that penalty is not based upon the estimation but as per the return filed under the KVAT Act, it was found that petitioner effected local purchases, inter-state purchases. Import of commodities falls under Schedule III and V of KVAT Act, 2003, which cover construction materials, Plant and Machinery and Parts thereof for the years 2013-14, and 2014-15 to the tune of Rs.92,95,023.00 and Rs.169,30,52,811.76 respectively and after verification of the same, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for Nitrogen began from February 2017 and invoice amount is Rs.2,93,26,775/- as per available details. The first receipt towards FMC for Hydrogen began from March 2017 and invoice amount is Rs.33,24,,28,624.45. This amount is inclusive of value Added Tax remitted at 5%. Invoice for variable Charge is 12.5% and VAT @ 5%. Both bills are inclusive of CENVAT @ 12.5% and VAT @5%. On perusal, it is revealed that even though both the bills are issued for supply of industrial gases invoice for Fixed Monthly Charge for Hydrogen and Nitrogen do not involve any supply of gases such as Hydrogen and Nitrogen. It summed up in the following manner: "No material supply involved in the invoice for Fixed Monthly Charge Variable Charge is linked to quantity supplies to BPCL." 11. In order to buttress his argument that Intelligence Officer did not use the path of guess work or estimation, relied upon the judgment in writ appeal No.2288/2018 as well as the judgment in Bagsvig Vs. Asst. Commissioner 2004 (1) KLT 609, J & J Timbers vs. Intelligence Officer 2009 21 GST 377 Ker. and also a notification dated SRO No. 478/2005, whereby the Intelligence Officer have been empowered the role of an Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned Government Pleader points out that the decision refers to many decisions having been cited. None however have been specifically referred to and even if we assume that U.K. Monu Timbers was shown to the learned Judges and they harboured a different opinion, we are sure that in judicial propriety they would have referred it to a larger bench. 12. We cannot, but hold ourselves obliged to follow U.K. Monu Timbers and set aside the estimation of turnover made herein. We take note of the submission of the learned Special Government Pleader (Taxes) that in the event of non-production of books of accounts, the Intelligence Officer could only find out the evaded turnover on the basis of other materials available like electricity consumption use of LPG and so on and so forth. We perfectly agree with the learned Special Government Pleader (Taxes) that when books of accounts are not produced and even when they are produced, there could be estimation made based on the various factors like consumption of electricity which was used for the manufacturing process or consumption of LPG in cooking; two activities arising in the cited decisions. But the essential question is as to who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment of gross profit was differed as assessed by the assessee, it was laid down that interference under Article 226 is not warranted and the only remedy available is to file an appeal and raise all these points. 16. By noticing all these judgments, the Division Bench of this Court found no such discrepancy in the act of the Intelligence Officer, imposing the penalty on any estimation rather it was on the basis of the correct figures as per the audited reported. Paragraph 13 of the judgement reads thus: 13. We also notice that the estimation alleged in the penalty order is with respect to the GP at 60%. We see from the order that the Intelligence Officer states that it is the G.P disclosed and conceded in the return. We have not seen the return nor have we examined or affirmed the said finding of the Intelligence Officer. The assessee would be free to urge such contention before the Appellate Authority and if there is any estimation made, then necessarily U.K Monu Timbers and Joemon Rajan would apply on all fours. As far as the submission of the learned Counsel appearing for the assessee that there is a proper assessment made by the Intelligence Officer we are not convinced ..... X X X X Extracts X X X X X X X X Extracts X X X X
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