Petitioner challenged penalty orders imposed after an enquiry conducted without notice, preventing his participation and affecting examination of witnesses. Court quashed orders citing violation of natural justice.
Exts.P5 to P5(C) orders set aside; respondent directed to reconsider penalty orders affording petitioner effective opportunity to participate.
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 V.G.ARUN
THURSDAY, THE 04TH DAY OF JUNE 2020 / 14TH JYAISHTA, 1942
WP(C).No.3847 OF 2015(E)
PETITIONER/S:
S.SIVAKUMAR AGED 33 YEARS M/S. STAR AUTO SPARES,AYATHIL P.O,KOLLAM
BY ADVS.
SRI.HARISANKAR V. MENON SMT.MEERA V.MENON
RESPONDENT/S:
SQUAD NO III,DEPARTMENT OF COMMERCIAL TAXES,KOLLAM AT KARUNAGAPPALLY 690 518
R1 BY GOVERNMENT PLEADER
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD
ON 28.05.2020, THE COURT ON 04.06.2020, DELIVERED THE
FOLLOWING:
W.P.(C) No.3847 of 2015
2
JUDGMENT
Dated this the 4th day of June, 2020.
The petitioner is doing business in two and three wheeler spare parts under the name and style 'Star Auto Spares', and is an assessee to sales tax under the VAT Act, 2003. An inspection was conducted at the petitioner's business premises on 18.07.2001 and documents recovered under eight different heads. Based on the inspection report, penalty was imposed on the petitioner under Section 67 of the KVAT Act. Exts.P1 to P1(c) are the penalty orders pertaining to the assessment years 2008-09 to 2011-12. Petitioner challenged the penalty orders in separate appeals, which the appellate authority disposed of under Ext.P4 common order. As regards Recovery No.8, which was projected as proof of major tax evasion, the appellate authority observed that the Intelligence Officer had failed to conduct specific and detailed enquiry with respect to the finding of the alleged unaccounted
W.P.(C) No.3847 of 2015
3
purchase of spare parts and directed the Intelligence Officer to verify the books of accounts and to take evidence from the persons named in Recovery No.8, as to the exact nature of the transactions and to modify the penalty accordingly. Likewise, with respect to Recovery No.3, the Intelligence Officer was directed to verify the returns and the purchase list for the relevant years and also the statements produced and to then reduce the penalty corresponding to the purchases accounted for. The Intelligence Officer was also directed to verify Recovery No.5 and delete the penalty relating to the purchase of cycle parts affected by the petitioner's brother for his business. The maximum penalty imposed under Exts.P1 to P1(C) orders was reduced to 150% of the tax evaded, which
was to be ascertained in accordance with the earlier directions. The petitioner was directed to produce all
the books of accounts and other evidence and statements relating to the recoveries and the affidavit of the persons named in Recovery No.8 before
W.P.(C) No.3847 of 2015
4
the Intelligence Officer within one month from the date of receipt of a copy of the order.
2. In purported compliance of Ext.P4 order, the first respondent issued Exts.P5 to P5(C) orders, which are under challenge in the writ petition. The challenge is on the ground that orders have been issued without affording reasonable opportunity to the petitioner to participate in the proceedings. In elaboration of this contention, the learned counsel for the petitioner submitted that the observation in Ext.P5, of the petitioner having failed to produce the books of accounts, in spite of notice, is patently false. It is submitted that on receipt of the notice on 8.10.2014, requiring production of books of accounts, the petitioner had presented himself before the first respondent on the specified date, but was directed to produce the books, after the examination of the witnesses. It is the specific contention of the
learned counsel that the petitioner was not put on notice regarding examination of the witnesses and
W.P.(C) No.3847 of 2015
5
hence, he could not be present or participate in the proceedings. It is the further submission of the learned Counsel that even though the two witnesses examined by the first respondent seem to have supported the petitioner, their statements were brushed aside, terming the statements to be cooked up and that, even the copies of those statements were not furnished. It is hence submitted that the enquiry resulting in Ext.P5 to P5(C) orders was conducted in derogation of the specific directions by the appellate authority and in violation of the principles of natural justice and fair play.
3. The learned Senior Government Pleader points out that though the appellate authority had directed the petitioner to produce the relevant books of accounts, statements and affidavits, the direction was not complied with, compelling the first respondent to conduct the enquiry after issuing notice to the petitioner. It is contended that since, under Ext.P4, Exts.P1 to P1 (C) orders were not set aside and de
W.P.(C) No.3847 of 2015
6
novo enquiry ordered, the examination of witnesses was just a formality, for which the presence of the petitioner was not required. It is submitted that Exts.P5 to P5 (C) are well founded and need not be interfered with.
4. A perusal of Ext.P5 order shows that the
appellate authority had found substance in the contention of the petitioner that the Intelligence Officer had not verified the entries in the recoveries with other corroborative materials and that it is necessary to have a specific and detailed enquiry before coming to the conclusion that all the entries in the diary, which is the subject matter of Recovery
No.8, pertain to unaccounted sales. Hence, the appellate authority directed to verify the books of accounts and take evidence from the persons named in Recovery No.8 as to the exact nature of transactions made out between them and the petitioner. That being
the case, examination of witnesses was not just an empty formality, for which the presence of the
W.P.(C) No.3847 of 2015
7
petitioner was not necessary. There is no acceptable reason for the first respondent to have examined the witnesses in secrecy and in refusing to provide copies of their statements to the petitioner. On the other hand, the action militates against the principles of natural justice, which are to be read into every statute and strictly followed, unless specifically exempted.
5. The parties are at dispute on the factual
aspect as to whether the books of accounts were actually produced or not. The petitioner would submit that on receipt of summons, he had appeared before the first respondent with the books of accounts on 8.10.2004 and was asked to produce the books after examination of the witnesses. According to the petitioner, thereafter he was not called upon to produce the books and was only served with Exts.P5 to P5 (C) orders. In the impugned orders, as also the counter affidavit filed by the first respondent, it is stated that in spite of direction in the appellate
W.P.(C) No.3847 of 2015
8
order to produce the books of accounts and other evidences, the petitioner had failed to do so and it was the first respondent who issued notice in Form No.17 on 24.09.2014, requiring the petitioner to produce the books of account on 8.10.2014. It is pertinent to note that, neither in the impugned orders nor in the counter affidavit, there is no allegation of the petitioner having failed to produce the books of account on 8.10.2014. On the other hand, what is stated is that, “the dealer had not produced any books of accounts for any of the years 2008-09, 2009-10, 2010-11, 2011-12 for verification now, in spite of the directions by the appellate authority and of the issuance of this office notice”. The above statement lends credence to the submission of the petitioner that, though the books of accounts were produced on 8.10.2014, he was directed to produce them at a later stage, but was not served with any notice thereafter. In such circumstances the impugned orders, passed without reference to the books of accounts and by
W.P.(C) No.3847 of 2015
9
discarding the statements of the witnesses, examined behind the petitioner's back, cannot be sustained.
In the result, the writ petition is allowed by setting aside Exts.P5 to P5 (C) orders and directing the first respondent to reconsider the penalty orders
in terms of the directions contained in Ext.P4 appellate order, providing effective opportunity to the petitioner to participate in the enquiry proceedings, including examination of witnesses. No order as to costs.
Sd/-
V.G.ARUN JUDGE
Scl/04.06
W.P.(C) No.3847 of 2015
10
APPENDIX
PETITIONER'S/S EXHIBITS:
| EXHIBIT P1 | EXT.P1 COPY OF ORDER ISSUED BY THE 1ST RESPONDENT |
|---|---|
| EXHIBIT P2 | EXT.P1(A) COPY OF ORDER ISSUED BY THE 1ST RESPONDENT |
| EXHIBIT P3 | EXT.P1(B) COPY OF ORDER ISSUED BY THE 1ST RESPONDENT |
| EXHIBIT P4 | EXT.P1(C) COPY OF ORDER ISSUED BY THE 1ST RESPONDENT |
| EXHIBIT P5 | EXT.P2 COPY OF AFFIDAVIT FILED BY THE PETITIONER BEFORE THE DY.COMMISSIONER (APPEALS),KOLLAM |
| EXHIBIT P6 | EXT.P2(A) COPY OF AFFIDVIT FILED BY THE PETITIONER BEFORE THE DY.COMMISSIONER (APPEALS) KOLLAM |
| EXHIBIT P7 | EXT.P2(B) COPY OF AFFIDAVIT FILED BY THE PETITIONER BEFORE THE COMMISSIONER(APPEALS),KOLLAM |
| EXHIBIT P8 | EXHIBIT P2(C)COPY OF AFFIDAVIT FILED BY THE PETITIONER BEFORE THE COMMISSIONER(APPEALS),KOLLAM |
| EXHIBIT P9 | EXHIBIT P3 COPY OF RECONCILIATION STATEMENT OF THE PETITIONER |
| EXHIBIT P10 | EXHBIIT P4 COPY OF ORDER ISSUED BY THE DEPUTY COMMISSIONER(APPEALS),KOLLAM |
| EXHIBIT P11 | EXHIBIT P5 COPY OF ORDER ISSUED BY THE 1ST RESPONDENT |
W.P.(C) No.3847 of 2015
11
EXHIBIT P12 EXHIBIT P5(A) COPY OF ORDER ISSUED BY THE 1ST RESPONDENT EXHIBIT P13 EXHIBIT P5(B) COPY OF ORDER ISSUED BY THE 1ST RESPONDENT EXHIBIT P14 EXHIBIT P5(C) COPY OF ORDER ISSUED BY THE 1ST RESPONDENT
2 issues framed by the court
Whether penalty orders passed in violation of natural justice by conducting enquiry without affording petitioner an opportunity to participate and examine witnesses.
Whether the statement that petitioner failed to produce books of accounts was tenable given that the orders did not specifically allege failure on the date of the notice.
S.Sivakumar
Intelligence Officer, Squad No III, Department of Commercial Taxes, Kollam
Tahsildar (RR), Taluk Office, Kollam
V.G.ARUN
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
