The Court held that cleaning materials used for general housekeeping do not qualify for tax exemption under the KVAT Act and that penalty proceedings were justified as the petitioner acted deliberately to evade tax.
Writ petitions dismissed; petitioner to approach revisional authority if aggrieved.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE
FRIDAY, THE 26TH DAY OF AUGUST 2016/4TH BHADRA, 1938
WP(C).No. 2159 of 2016 (T)
PETITIONER: -
HYGIENE SOLUTIONS, 48/2565C(1), MAMANGALAM-POTTAKUZHY ROAD, NEAR KARUKAPPILLY JN., ELAMAKKARA, KOCHI-26, REPRESENTED BY ITS PARTNER, NOORUDIN.R.J.
BY ADV. SRI.R.MURALEEDHARAN (AROOR)
RESPONDENTS: -
KALAMASSERY, COCHIN, PIN-682015.
BY GOVERNMENT PLEADER SMT. LILLY K.T.
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 26-08-2016, ALONG WITH WPC. 24007/2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
WP(C).No. 2159 of 2016 (T)
APPENDIX
PETITIONER'S EXHIBITS : -
RESPONDENTS' EXHIBITS : - NIL.
// TRUE COPY //
P.A. TO JUDGE
DMR/-
A.M.SHAFFIQUE, J.
W.P (C) No. 2159 of 2016 &
W.P (C) No. 24007 of 2016
Dated this the 26th day of August, 2016
J U D G M E N T
In W.P. (C) No.2159/2016 petitioner challenges penalty
orders issued by the competent authority for the assessment years 2012-13, 2013-14 & 2014-15. The main contention urged by the petitioner is that petitioner had claimed exemption from payment of tax on the turnover based on Form No.43 issued by the purchaser. However, penalty proceedings had been taken by issuance of notice under Section 67(1) of the KVAT Act inter alia observing that the commodity described in Form No.43 did not come within the purview of Section 6(7)(b) of the KVAT Act 2003. Though the petitioner preferred objection without considering the same penalty orders had been passed by which the petitioner had been called upon to pay double the amount of tax sought to be paid for the respective years. Without challenging the impugned orders by way of statutory revision, petitioner had approached this Court inter alia contending that the penalty proceedings had been taken without jurisdiction.
W.P (C) Nos. 2159 & 24007/16
2
notices issued under Section 25(1) for the assessment years 2012-13, 2013-14 and 2014-15 on the ground that the proposed assessment is based on the penalty orders issued which are the subject matter in W.P. © No.2159/2016. It is contended that when the very basis of penalty is liable to be set aside, there is no question of the Assessing Officer further proceeding under Section 25(1) after lapse of considerably long time. It is contended that the assessment had been finalized without any objection by the Assessing Authority. No steps had been taken under Section 22 of the KVAT Act and now after the penalty orders are issued, fresh notice had been issued under Section 25(1), which is without jurisdiction.
W.P (C) Nos. 2159 & 24007/16
3
on the basis of the counter affidavit submits that petitioner had not raised any invoice showing the tax payable whereas petitioner has raised invoices on the purchasers showing nil tax. It is based on the said invoice, the purchasers had issued Form No.43. Therefore, it is a clear case of evasion of tax which has been deliberate and there is justification on the part of the Intelligence Officer who have initiated proceedings under Section 67(1) of the Act and passed final orders. It is also stated that there is no legal bar for issuing a fresh notice under Section 25(1) of the KVAT Act on the basis of the material made available after investigation. In paragraph 9 of the counter affidavit it is stated as under:
“In the VAT scenario self assessment is being taken place. The Assessing Authority has normally no means to physically verify the goods dealt with by the dealer. It is the duty of the Intelligence Wing to verify those aspects and initiate action, if any discrepancies are noticed. Hence the absence of action from the part of the Assessing Authority is not an obstacle for the Intelligence Wing to invoke Section 67(1) of the Act.”
that even assuming for the sake of argument that materials
W.P (C) Nos. 2159 & 24007/16
4
are taxable, still penalty cannot be imposed as there is no deliberate act in evading tax and the petitioner only relied upon Form No.43 given by the purchasers. Reference is made to judgment of the Apex Court in E.I.D. Parry (I) Ltd. v. Assistant Commissioner of Commercial Taxes and Another (2000) 117 STC 457, Chakkiath Brothers (Mls.) v. Assistant Commissioner, Commercial Taxes, Ekm and Others [2014 (3) KHC 55], a Division Bench judgment of the Orissa High Court in Tilakraj Mediratta v. State of Orissa and Others (1992) 86 STC 453 and a Division Bench judgment of the Madras High Court in State of Tamil Nadu v. Madras Petro Chem. Ltd (1993) 89 STC 438.
“6(7)(b) Sale of any building materials, industrial inputs, plant and machinery including components, spares, tools and consumables in relation thereto to any developer or industrial unit or establishments situated in any Special Economic Zone in the State for setting up the unit or use in the manufacture of other goods shall, subject to such conditions or restrictions, as may be prescribed, be exempted
W.P (C) Nos. 2159 & 24007/16
5
from tax.”
Statute exempts certain items from being taxed. Contention of the petitioner is that cleaning material being a consumable supplied to an establishment in Special Economic Zone of the State, it is liable to be exempted. But, a close reading of the Statute would show that the consumable used by the developer or industrial unit or establishments situated in the Special Economic Zone should be for setting up of the unit or use in the manufacture of other goods. The cleaning material used for the purpose of cleaning the building and other facilities, furniture etc cannot be treated as a consumable used in relation to setting up of the unit or in the manufacture of other goods. Therefore, it is apparent from the Statute itself that the petitioner is not liable for any exemption. The Intelligence Officer had issued notice clearly indicating that the petitioner is not entitled for the exemption. The only ground taken by the petitioner is that Form No.43 has been submitted by the purchaser. It is stated in the impugned order at Exhibit P6 that even in Form No.43 submitted by the dealer it is clearly mentioned as house keeping materials and house
W.P (C) Nos. 2159 & 24007/16
6
keeping consumables. Therefore, the Officer had no doubt about the fact that exemption will not apply. A different contention is not urged by the petitioner as well. Under such circumstances, I do not find anything wrong on the part of the Intelligence Officer to have taken further proceedings under the Statute.
W.P (C) Nos. 2159 & 24007/16
7
payment of tax knowing fully well that there is an obligation to pay tax on the said consumables. Under such circumstances, I do not think that any error had been committed by the Intelligence Officer in imposing penalty on the petitioner.
Having regard to the aforesaid finding, I do not think that
the petitioner has made out any case for interference at this stage. If aggrieved, the remedy of the petitioner is to challenge the penalty orders by approaching the revisional authority and it shall always be open for the petitioner to file appropriate objection to the notice under Section 25(1) of the Act. Reserving the above right, these writ petitions are dismissed.
A.M.SHAFFIQUE JUDGE
DMR/-
3 issues framed by the court
Whether the petitioner was entitled to tax exemption for cleaning materials supplied to a Special Economic Zone under Section 6(7)(b) of the KVAT Act.
Whether penalty proceedings could be initiated under Section 67(1) when the petitioner relied on Form No.43 issued by the purchaser.
Whether there was a legal bar on issuing a fresh notice under Section 25(1) after the issuance of penalty orders.
Colour shows how this judgement treated each authority
E.I.D. Parry (I) Ltd. v. Assistant Commissioner of Commercial Taxes and AnotherReferred¶51
(2000) 117 STC 457
Chakkiath Brothers (Mls.) v. Assistant Commissioner, Commercial Taxes, Ekm and OthersReferred¶51
[2014 (3) KHC 55]
Tilakraj Mediratta v. State of Orissa and OthersReferred¶51
(1992) 86 STC 453
State of Tamil Nadu v. Madras Petro Chem. LtdReferred¶51
(1993) 89 STC 438
4 provisions across 2 enactments
Hygiene Solutions
The Commercial Tax Officer
The Intelligence Officer(IB)
A.M. Shaffique
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
