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Sunitha Diesel Sales & Services Vesrus State of Kerala

    TRC. Nos 145 & 149 of 1993

    Decided On, 27 March 1996

    At, High Court of Kerala

    By, THE HONOURABLE MR. JUSTICE V.V. KAMAT & THE HONOURABLE MR. JUSTICE G. SIVARAJAN

    K.K. Vijayaraghavan For Petitioner Government Pleader (C.K.A. Rahim) For Respondent



Judgment Text

Sivaraj an, J.


T.R.C. No. 145 of 1993 relates to the assessment year 1989-90 in connection with the proceedings under S.29A(4) of the Kerala General Sales Tax Act, 1963. T.R.C. No. 149 of 1993 relates to the same assessment year and arises out of the assessment proceedings for the said year.


2. The assessee is the revision petitioner in both the tax revision cases. The assessee is a distributor for Kirlosker Cumine diesel engine manufactured and marketed by M/s Cumine Diesel Sales and Services (India) Ltd., Pune. The assessee received a purchase order for one engine from M/s. Highland Produce Company Ltd., Pasuparai Estate in Idukki district. The assessee in turn placed an order with M/s. Cumine Diesel Sales and Services (India) Ltd., with specific instruction to despatch the engine directly to costomers site at Pasuparai and to send the document of title to the assessee to enable them to sell the engine by transfer of document of title to the ultimate buyers. In terms of the purchase order, M/s. Cumine Diesel Sales and Service (India) Ltd., Pune, despatched the engine through Kerala Transport Company under cover of delivery note, and a certificate attached thereto showing the full value of consignment at Rs. 3.38.160.15/-



3. While the goods were moving to the designation, that is to Pasuparai in Idukki district, when the vehicle No. TCC 8986 carrying the said goods reached the sales tax checkpost, Perumannoor on April 24,1989, the Sales Tax Inspector attached to the said check post after verification of the records accompanying the transport detained the goods and issued a notice under S.29A(2) of the Kerala General Sales Tax Act, 1963, stating that the document delivery Note No. ES 04290 dt. April 19,1989-accompanying the transport is not the one as prescribed under the Act and the Rules and that the delivery note did not show the value of the goods consigned. As a condition for release of the goods, the Sales Tax Inspector demanded a sum of Rs. 1,01,700/- by way of cash security. It i s seen from the proceedings of the S ales Tax Officer (Enquiry) that the S ales Tax Inspector collected a security deposit of Rs. 67,800/-in the form of a bank guarantee from the assessee for the transport of one Kirlosker Cumine diesel engine valued at Rs. 3,390.000/- from Pune to Pasupari.


4. The Sales Tax Inspector, Sales Tax Check post, Perumannoor, subsequently forwarded the files to the Sales Tax Officer (Enquiry) attached to the office of the Deputy Commissioner, Agricultural Income Tax and Sales Tax, Ernakulam, for conducting necessary enquiries as provided under S.29A(3) of the Act. The Sales Tax Officer (Enquiry) thereafter issued notice as provided under S.29A(4) of the Act. The case was posted for hearing on July 26, 1990 and the proprietor of the assessee-firm appeared before the enquiry officer on July 26,1990 and explained the factual situation, as noted in paragraph 2 of this judgment. The proprietor also produced before the enquiry officer all the documents in support of the claim of the assessee that the transaction is a sale in transit. The enquiry officer rejected the claim of the assessee stating that the delivery note said to have been produced before the Sales Tax Inspector, Sales Tax Check Post, Perumannoor, is not the actual delivery note obtained from the department and it is printed and kept by the company itself. He further observed that it is not a valid record as contemplated under R.35(2)(a) of the Kerala General Sales Tax Rules, 1963 and that the assessee has violated the provisions of the Kerala General Sales Tax Act and Rules. The enquiry officer further stated that explanation for the non-production of invoice or sale bill at the time of interception is not convincing and mat the dealer had also foiled to prove beyond doubt mat there is no attempt to evade tax. He accordingly imposed penalty of Rs. 67,800/- under S.29A(4) of the Kerala General Sales Tax Act, 1963.



5. Aggrieved by the order-imposing penalty, the assessee took up the matter in appeal before Additional appellate Assistant Commissioner of Agricultural Income tax and Sales tax Ernakulam, who confirmed the order-imposing penalty. The first appellate authority also endorsed the reasoning of the enquiry officer. The assessee took the matter in second appeal before the Kerala Sales Tax appellate Tribunal, Additional Bench, Ernakulam. The appellate Tribunal observed that the appellant has failed in observing the rules envisaged in S.6(2) of the Central Sales Tax Act and at the time of interception of the consignment there was no title of goods available for verification. It is also stated that the assessee has not established the case of second inter-state sale by producing the bill raised by the appellant in favour of the transferee or the original sale bill endorsed in favour of the transferee. The Tribunal further observed that in the present case, all the documents relied on by the appellant have been procured/ produced subsequently. The Tribunal thereafter adopted the reasoning of the enquiry officer and sustained the order imposing penalty.


6. As already stated, T.R.C. No. 149 of 1993 arises in connection with the assessment of the assessee under the Kerala General Sales Tax Act, 1963, for the year 1989-90. The assessment for the year in question was originally completed under the said Act for the year 1989-90 granting exemption in respect of the turnover of sale in transit effected by the assessee, which included a sum of Rs. 3,39,367 representing transaction, which is the subject matter of the penalty proceedings. This was based on the assessment order for 1989-90 passed under the Central Sales Tax Act whereby exemption was granted on the turnover of sale in transit.


7. The Deputy Commissioner of Agricultural Income-tax and Sales-tax, Ernakulam, initiated proceedings under S.35 of the Act proposing to cancel the assessment order passed under the Kerala General Sales Tax Act, 1963 for the assessment year 1989-90 on the ground that the subsequent verification of the assessment records reveal that the assessee had transported one Kirlosker Cumine diesel engine valued at Rs. 3,39,000/- from Pune to Pasuparai without records prescribed under the Kerala General Sales Tax Act, 1963 and on enquiry by the Sales Tax Officer (Enquiry), Ernakulam, it was proved that the assessee had attempted evasion of tax and hence a penalty was imposed as per order dt. August 9, 1990, passed by the said officer. According to the Deputy Commissioner, this aspect was not considered by the assessing authority at the time of completion of the assessment and hence the said assessment was irregular and improper. Notwithstanding thee objections filed by the assessee to the said proceedings, the Deputy Commissioner rejected the said objections by stating that they are not acceptable as there is no evidence to show that the transaction in question was sale in transit and that the enquiry officer has clearly stated that thee evasion of tax was proved.


8. Aggrieved by the said order of the Deputy Commissioner of Agricultural Income Tax and Sales Tax Ernakulam, the assessee filed an appeal before the Sales Tax appellate Tribunal, Additional Bench, Ernakulam, as I. A. No. 1097/92. The appellate Tribunal dismissed the appeal filed by the assessee holding that they had in T.A. No. 1027/92 passed on the same day confirmed the imposition of penalty, which is the basis of the suo mote order passed by the Deputy Commissioner.


9. We have heard learned counsel for the assessee as well as the learned Government Pleader appearing for the department. The sole question arising for consideration in both these tax re vision cases is as to whether the proceedings of the Sales Tax Officer (Enquiry), Ernakulam, under S.29A(4) of the General Sales Tax Act imposing penalty on the assessee on the ground that the assessee had attempted to evade payment of sales tax due under the Act is valid and justifiable.


10. It is pertinent to note that none of the authorities including the appellate Tribunal had considered any of the documents produced by the assessee to test the correctness of the claim made by the assessee. Even the enquiry officer before whom the documents were produced did not consider the same.


11. The counsel for the assessee filed a verified petition, C.M.P. No. 3 348 of 1994 in T.R.C. No. 145 of 1993 and produced all the documents including the delivery note produced before the enquiry officer. On a mere perusal of the delivery note accompanying the transport, the nature of the transaction is discernible. The delivery note clearly showed the consignor and the consignee. The consigner is Cumine Diesel Sales and Services (India) Ltd., Pune and the consignee,' s address is shown as the Estate Manager, Highland Produce Company, Pasuparai Estate, Pasuparai. The assessee's address is also shown in the delivery note as the indentor. The delivery note further showed the purchase order placed by the consignee. Though the deli very note did not show the value of the engine, the certificate attached to the said delivery note clearly showed the value of the consignment. In other words, the delivery note and the certificate attached thereto clearly showed that the transaction is in the nature of the claim made by the assessee. The document shows that the transaction is an inter-State one from Pune to Pasuparai in Idukki district. The purchase order issued by the assessee contains the specific instruction regarding the deli very of the goods directly to the dealer at Pasuparai and for despatching the invoice and the connected documents directly to the assessee. It is also made clear in the said purchase order that the order will be treated as sale in transit. The consignor was also requested to draw the in voice in favour of the assessee. We have also verified the other records produced along with the C.M.P. mentioned supra, viz, the invoice raised by the Consigner Cumine Diesel Sales and Services (India) Ltd., Pune the invoice raised by the assessee in favour of thee consignee, the declaration under rule 12(1) of the Central Sales Tax (Registration and Turnover) Rules 1957, "C" form declaration and also E-1 certificate issued under S.6(2) of the Central Sales Tax Act read with R.12(4) of the Central Sales Tax (Registration and Turnover) Rules.


12. All the authorities including the appellate Tribunal, it appears, were under the impression that unless all the above documents accompanied the transport of goods they cannot consider the same to satisfy whether there is attempt at evasion of tax. This is erroneous.


13. A reading of the provisions of S.29A particularly sub-ss.(3) and (4) thereof would clearly show that it is sufficient that the party satisfies the adjudicating authority that there is no attempt at evasion of tax by producing necessary documents. The adjudicating authority is bound to consider the documents produced before him. We are of the view that the documents produced before the Sales Tax Officer (Enquiry) are all documents, which would satisfy the requirements for establishing the claim of the assessee that the transaction is sale in transit. We further find that the case of the Sales Tax Inspector, Sales Tax Check Post in the notice issued under S.29A(2) of the Act is that the delivery note is not one as prescribed under the Rules and that the value is not shown in the delivery note. These according to us, are only defects of a technical or venial nature and that it has nothing to do with attempt at evasion of tax. In these circumstances, we are of the view that the transaction in question is an inter- State and/ or a sale in transit.


14. In order to attract the provisions of S.29A of the Act, it is necessary for the assessing authority to establish that there is an attempt at evasion of tax on the part of the assessee. In the instant case, if the transaction is an inter-State transaction or a sale in transit, as contended by the assessee, there is no question of any tax being exigible under the provisions of the Kerala General Sales Tax Act. We have already found that the transaction in question is an inter-State transaction and/or a sale in transit. As such, there is no question of any tax being exigible under the provisions of the Kerala General Sales Tax Act. A fortiori it follows that the provisions of S.29A of the Act are not attracted in the instant case.


15. We are supported in the above view by the decision of a learned single judge of this Court in McDowell Co. Ltd. v. Sales Tax Officer (Enquiry) (1993) 91 STC 610; (1993) 2 KLT 265 in which it is observed that under S.29A(4) of the Act, a penalty can be imposed only if there was an attempt to evade the tax due under the Act. It is also observed in that decision that a reading of S.29A of the Act as a whole would clearly indicate mat it is enough if a person satisfies the authorities at the enquiry under sub-s.(4) that there was no attempt at evasion of tax. The same view has been taken by a Division Bench of this Court in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Jyothi Liquors (1992) 84 STC 509 and also in Gentle Joseph & Co. v. State of Kerala (1993) 89 STC 494; (1993) KLJ (TC) 523.


16. We accordingly hold that the order of the Sales Tax appellate Tribunal, Additional Bench, Ernakulam, passed in T.A.No.127/92 confi

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rming the order of the Sales Tax Officer (Enquiry), Office of the Deputy Commissioner, Agricultural Income-tax and Sales Tax, Ernakulam and that of the Additional appellate Assistant Commissioner, Agricultural Income-tax and Sales Tax, Ernakulam, are erroneous in law. We accordingly quash and set aside all the three orders, which are the subject matter in T.R.C. No. 145 of 1993. 17. As already stated, the Deputy Commissioner of Agricultural Income Tax and Sales Tax, Ernakulam, had invoked suo mote proceedings under the Kerala General Sales Tax Act only on the basis of the proceedings of the Sales Tax Officer (Enquiry), and the appellate Tribunal also sustained the order of the Deputy Commissioner only on the basis of the appellate order passed in T.A.No.127 of 1992 Since we have already quashed and set aside the penalty order, we set aside the order of the Deputy Commissioner, Agricultural Income Tax and Sales Tax, Ernakulam and the order of the Sales Tax appellate Tribunal, Additional Bench, Ernakulam, in T.A. No. 1097 of 1992 and restore the order of the assessing authority. 18. Accordingly, these tax revision cases are allowed. As a consequence of our order cancelling penalty, there will be a further direction to the concerned authority to refund an amount of Rs. 67,800/- to the assessee on or before May 31,1996. We make it clear that if the amount is not paid within the time stipulated above, it will carry interest at the rate of 18 per cent from June 1, 1996.
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