Allowed

State of Kerala, v. M/S Bafna Enterprises

Kerala HC19 Feb 2021OT.Rev/64/2018

Case brief

AI extract

What is this about?

Revenue filed revision challenging VAT Tribunal order deleting penalty for incorrect goods declaration. Court answered legal questions, initially setting aside Tribunal's view but ultimately clarified evidence of returned goods barred penalty and forfeited security deposit.

What did the court decide?

Set aside findings unsupportable in Tribunal's order; no further step against respondent; penalty not recoverable; security deposit forfeited to revenue.

State of Kerala, Vs M/S Bafna Enterprises — Kerala HC (2021) — LawSathi Research

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O.T.Rev.64 of 2018 1

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

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THE HONOURABLE MR.JUSTICE S.V.BHATTI

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THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS

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FRIDAY, THE 19TH DAY OF FEBRUARY 2021 / 30TH MAGHA,1942

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OT.Rev.No.64 OF 2018

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AGAINST THE ORDER/JUDGMENT IN OTHERS 127/2017 DATED 13-12-2017 OF KERALA VAT APPELLATE TRIBUNAL, ERNAKULAM

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REVISION PETITIONER:

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STATE OF KERALA, REPRESENTED BY THE DEPUTY COMMISSIONER (LAW), COMMERCIAL TAXES, ERNAKULAM.

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BY GOVERNMENT PLEADER Shamsudheen V.K.

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RESPONDENT:

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M/S BAFNA ENTERPRISES, VII179 D.S.ROAD, JEW TOWN, KOCHI - 2.

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R1 BY ADV. SRI.R.MURALEEDHARAN

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OTHER PRESENT:

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GP SHAMSUDHEEN V.K.

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THIS OTHER TAX REVISION (VAT) HAVING BEEN FINALLY HEARD ON 19.02.2021, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:

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O.T.(Rev.)No.64/2018 2

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JUDGMENT

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Dated this the 19th day of February 2021

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S.V.Bhatti, J.

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Revenue is the petitioner. The revision is filed under Section

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63 of KVAT Act, 2003 read with Section 81 of KVAT Rules, 2005.

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On 31.10.2010, the Commercial Tax Officer, Commercial Tax

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Check Post, Gopalapuram intercepted the vehicle carrying goods to M/s Bafna Enterprises, Jew Town, Kochi-2. The verification of documents by the officer, disclosed that turmeric was declared as the goods transported by the intercepted vehicle. The actual verification of subject consignment revealed that turmeric powder, but not turmeric was transported with wrong or incorrect declaration of goods in the invoice. It is admitted that the subject consignment was released to dealer after collecting 14,544/- towards security for the disputed tax liability. Thereafter, Annexure-A is the order issued imposing penalty of 14,544/- on the respondent. The respondent assailed the orders before the Deputy Commissioner (Appeals) and vide Ann.B, the appeal of respondent was dismissed. The respondent

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O.T.Rev.64 of 2018 3

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filed T.A.(VAT) No.127/2017 before the Kerala Value Added Tax Appellate Tribunal, Additional Bench, Ernakulam. The Appellate Tribunal through order in Annexure-C held and allowed the appeal

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of respondent by recording following findings on levy of penalty.

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“Another contention is that the appellant had returned the turmeric power for which security deposit was paid at the checkpost to the consignor as the same was of inferior quality. The appellant has also produced photocopies of credit notes and debit notes in Form No.9 in support of their claim. We are of the view that there is some merit in this contention because, even though, the security deposit was paid for the consignment in dispute, the same was returned to the consignor. So, the element of sale is absent in this transaction.”

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Hence the revision.

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The revenue raises the following questions of law for our

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consideration.

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a) Whether on the facts and the circumstances of the case, Appellate Tribunal has erred in law in remanding the matter with direction to delete the penalty if respondent proves the contention of return of goods?

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b) Whether on the facts and circumstances of the case, the appellate Tribunal has erred in law in not considering the facts that penalty under Section 47 of the KVAT Act can be imposed even for attempt of evasion of tax?

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O.T.Rev.64 of 2018 4

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c) Whether on the facts and circumstances, Appellate Tribunal has erred in law in remanding the matter after accepting that the defects noted by the detaining authority was correct?

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Learned Senior Government Pleader Shamsudheen

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contends that the indulgence shown by the Tribunal would for all purposes, defeat the object of Section 47(2) & (6) of KVAT Act, 2003 where an attempt to avoid taxes also dealt with. According to him, the language of these two sub sections is wide enough granting power to impose penalty even in case of an attempted evasion of tax. The reverse entry by the respondent/dealer and payment of security for release of goods by the supplier are different aspects. According to him, the thrust of levy of penalty depends on what was the omission found when the vehicle was intercepted, inspected and found by the assessing officer viz. there is variation in description of goods between the invoice and the goods actually carried. The argument of respondent that under proper debit notes etc. the consignment has been returned to the supplier by the respondent is no answer to avoid penalty. The ex

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post facto change of mind ought not to be weighed for any eventuality. The reasoning of the Tribunal for all purposes render

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O.T.Rev.64 of 2018 5

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the power granted by sub sections 2 and 6 of Section 47 to department is ineffective or otiose.

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The bare reading of the section and the finding recorded by the Tribunal, we are of the view that indulgence shown by the Tribunal by referring to credit-debit notes etc. is not correct or could be accepted in our jurisdiction. Penalty now levied is for a variation noticed by the Commercial Tax Officer at the time of search on 31.10.2010. Without much deliberation to reverse the view of Tribunal, we hold that the findings recorded in paragraph6 of the order in Annexure-C are unsustainable and accordingly warranting setting. The findings are set aside. Hence we answer the question in favour of Revenue and against the assessee.

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The conclusion recorded above will not give quietus to the issue on merit. In the case on hand, the assessee/respondent has, as a matter of fact, established that the consignor has supplied goods contrary to the contract entered into by the respondent means the respondent is not at fault. The respondent returned the goods under valid documents to supplier. The tax evasion is secured by the deposit already taken while releasing the goods. The

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O.T.Rev.64 of 2018 6

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respondent cannot be treated as having transported/received subject goods contrary to the contract. On the contrary the respondent by returning the goods has established the bona fides in the claim that respondent is not obliged to pay penalty of tax. Therefore we hold and direct that no further step need be initiated against respondent herein for the violation noted in the orders in Annexures A, B & C by the department. Penalty paid and kept as security by the consignor is permitted to be forfeited by the Revenue. In other words upon forfeiture of security deposit, no fresh proceeding for recovery of tax under Sections 22 to 25 could be initiated by the revenue against respondent, with reference to the subject transaction.

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O.T.Revision allowed as indicated above.

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Sd/- S.V.BHATTI

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JUDGE

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Sd/-BECHU KURIAN THOMAS

JUDGE

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O.T.Rev.64 of 2018 7

APPENDIX

PETITIONER'S EXHIBITS:

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ANNEXURE A THE TRUE COPY OF THE ORDER OR NO.680/10-11 DATED 15/02/2016 OF COMMERCIAL TAX OFFICER (AUDIT ASSMT.), DEPUTATION AS CTO (ENQUIRY), INCHARGE INTELLIGENCE OFFICER, (RAPID ACTION).

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ANNEXURE B THE TRUE COPY OF THE ORDER DATED 15/10/2014 PASSED BY THE DEPUTY COMMISSIONER (APPEALSI), ERNAKULAM IN KVATA NO.875/16.

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ANNEXURE C THE CERTIFIED COPY OF THE TRIBUNAL ORDER DATED 13/12/2017 PASSED BY THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, ERNAKULAM IN T.A.(VAT) NO.127/2017.

State of Kerala, v. M/S Bafna Enterprises

Case brief

What is this about?

What did the court decide?

State of Kerala, v. M/S Bafna Enterprises

Case brief

What is this about?

What did the court decide?

What the court decided

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Statutes considered

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