Edathala Service Co-Operative Bank Ltd. v. Commercial Tax Officer (WC & LT), Office of Commercial Taxes, Mattancherry; Intelligence Officer (B), Ernakulam; Deputy Commissioner (Appeals), Department of Commercial Taxes, Government of Kerala; Kerala Agricultural Income Tax & Sales Tax Appellate Tribunal, Additional Bench, Ravipuram, Ernakulam

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN FRIDAY, THE 23RD DAY OF MAY 2014/2ND JYAISHTA, 1936 ## **W.P.(C).No.13687 of 2012 (I)** ------------------------------------------------- PETITIONER(S):- -------------------------- EDATHALA SERVICE CO-OPERATIVE BANK LTD., EDATHALA NORTH P.O., ALWAYE, REPRESENTED BY ITS SECRETARY. BY ADVS.SRI.P.P.JACOB SRI.T.P.GOPAKUMAR. RESPONDENT(S):- - ---------------------------- 1. THE COMMERCIAL TAX OFFICER (WC & LT) OFFICE OF COMMERCIAL TAXES, MATTANCHERRY, PIN - 682 002. 2. THE INTELLIGENCE OFFICER (B), ERNAKULAM, DEPARTMENT OF COMMERCIAL TAXES, GOVERNMENT OF KERALA, EDAPPALLY, KOCHI - 682 024, 3. THE DEPUTY COMMISSIONER (APPEALS), DEPARTMENT OF COMMERCIAL TAXES, GOVERNMENT OF KERALA, RAVIPURAM, ERNAKULAM, PIN-682016. 4. THE KERAL AGRICULTURAL INCOME TAX & SALES TAX APPELLATE TRIBUNAL, ADDITINAL BENCH, RAVIPURAM, ERNAKULAM, PIN-682016 R1 TO R3 BY SPECIAL GOVT. PLEADER (TAXES) DR.SEBASTIAN CHAMPAPPILLY. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 23-05-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:- W.P.(C).NO.13687 OF 2012-I. ---------------------------------------- ## **APPENDIX** ## PETITIONER'S EXHIBITS:- ------------------------------------- EXT.P1 TRUE PHOTOCOPY OF THE NOTICE ISSUED BY SECOND RESPONDENT VIDE NO. CR.25/08-09 DATED 2.9.08. EXT.P2 TRUE PHOTOCOPY OF THE LETTER ISSUED BY THE SECOND RESPONDENT DTD 23/9/2008 EXT.P3:TRUE COPY OF THE REPLY FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT DTD 13/10/2008. EXT.P4:TRUE PHOTOCOPY OF THE A/D CARD SIGNED BY THE 2ND RESPONDENT DTD 15/10/2008. EXT.P5:TRUE PHOTOCOPY OF THE NOTICE ISSUED BY 2ND RESPONDENT TO THE PETITIONER DTD 15/10/2008. EXT.P6:TRUE PHOTOCOPY OF THE PROCEEDING ISSUED BY THE 2ND RESPONDENT DTD 15/10/2008 TO THE PETITIONER. EXT.P7:TRUE PHOTOCOPY OF THE ORDER DTD 6/9/2010 ISSUED BY THE 3RD RESPONDENT. EXT.P8:TRUE PHOTOCOPY OF THE APPEAL FILED BY THE PETITIONER BEFORE THE TRIBUNAL DTD 7/2/2011 EXT.P10:TRUE PHOTOCOPY OF THE REPLY FILED BY THE PETITIONER BEFORE THE FIRST RESPONDENT DT. 10/10/2008. EXT.P11:TRUE PHOTOCOPY OF THE LETTER ISSUED BY THE IST RESPONDENT DTD 12/11/2008. EXT.P12: TRUE PHOTOCOPY OF THE REGISTRATION CERTIFICATE ISSUED BY IST RESPONDENT DTD.30/4/2009. EXT.13:TRUE PHOTOCOPY OF THE PROCEEDING OF THE FIRST RESPONDENT DTD 18/3/2010. EXT.14:TRUE COPY OF THE ORDER ISSUED BY THE FOURTH RESPONDENT DTD 30/3/2012. EXT.P15:TRUE PHOTOCOPY OF THE NOTICE ISSUED BY FIRST RESPONDENT DTD 21/5/2012. W.P.(C).NO.13687 OF 2012-I **- 2 -** EXT.P16:TRUE PHOTOCOPY OF THE ORDER IN LTA.33/2011 ISSUED BY THIRD RESPONDENT TO THE PETITIONER DATED 29.10.2012. - EXT.P16(a):- TRUE PHOTOCOPY OF THE ORDER IN LTA 34/2011 ISSUED BY THIRD RESPONDENT TO THE PETITIONER DATED 29.10.2012. - EXT.P16(b):- TRUE PHOTOCOPY OF THE ORDER IN LTA 35/2011 ISSUED BY THIRD RESPONDENT TO THE PETITIONER DATED 29.10.2012. ## RESPONDENTS' EXHIBITS:- ----------------------------------------- NIL. Vku/. ( true copy ) K.Vinod Chandran, J. **-------------------------------------** W.P.(C).No.13687 of 2012-I **-------------------------------------** Dated this the 23[rd] day of May, 2014 ## **JUDGMENT** The petitioner is a Co-operative Society, which admittedly had been carrying on business of renting out an Auditorium, named “Rajeev Gandhi Sahakarana Auditorium”. The petitioner had not taken registration under the Kerala Tax on Luxuries Act, 1976 [for brevity “the Act”]; nor had the petitioner satisfied the liability under the same. In such circumstance, Exhibit P1 notice, under Section 17A of the Act, was issued by the Intelligence Officer, Squad No.IV, Ernakulam, alleging non-registration as also non-satisfaction of the amounts due under the Act. Suppression was alleged in so far as the rent received from the Auditorium and penalty was sought to be imposed in the years 2005-06, 2006-07 and 2007-08 as also in the year 2008-09 for the period upto 18.06.2008. The petitioner filed reply, as is evidenced from Exhibit P3, which was also acknowledged by the Department on 15.10.2008, on which date itself Exhibit P6 order was passed. The primary contention with respect to Exhibit P8 is violation of principles of natural justice, insofar as no opportunity - 2 - WP(C).13687 of 2012 having been granted to the petitioner. Exhibit P6 is an order passed with respect to the assessment year 2005-06 and similar orders were passed in the other years also. All the orders were challenged before the first Appellate Authority, who rejected the same by Exhibit P7. Exhibit P7 was challenged before the Tribunal, which also ended in dismissal, as is evidenced by Exhibit P14. 2. The related facts are to be noticed with respect to the subsequent registration and the assessment made for the aforesaid years. Immediately subsequent to Exhibit P1, the petitioner was issued with a notice under Section 4B of the Act, evidenced by Exhibit P9, directing the petitioner to seek registration under the Act, which was replied to by Exhibit P10, contending that the petitioner's business does not come within the taxable limit under Section 4 of the Act. However, later, the petitioner obtained registration by Exhibit P12 dated 30.04.2009 and the Department took up the assessment for the years commencing from 2005-06. One of such orders passed for the year 2005-06 is produced as Exhibit P13 and similar orders were passed for the other years also. Exhibit P13 and similar orders for the other years were challenged by the petitioner before the first Appellate Authority, the orders of which are evidenced by Exhibit P16 series. - 3 - WP(C).13687 of 2012 3. For the assessment year 2005-06, in LTA 33/2011, the Deputy Commissioner (Appeals) took note of the fact that before the amendment brought into Section 4 by the Kerala Finance Act, 2006, luxury tax was leviable only on Auditoriums wherein rent or other charges realized exceeded Rs.6,000/- on a day. Admittedly even going by the penalty orders and the shop inspection report, the petitioner was levying rent only below Rs.6,000/- in the year 2005-06. Hence, the appeal for the said year was allowed and the assessment set aside. The amendment brought in, deleting Section 2B from Section 4 and reducing the limit of rent applicable as Rs.3,000/- per day was with effect from 01.07.2006. Hence, the appeal for the year 2006-07 was remanded for fresh consideration deleting the period prior to 01.07.2006. The assessment orders for the other two periods were confirmed in appeal. 4. In the circumstances explained above, the learned counsel for the petitioner would contend that for the year 2005-06 and the broken period upto 01.07.2006 in the year 2006-07, the petitioner is not liable for registration and, hence, the penalty orders are necessarily to be set aside. With respect to the other years, the petitioner's counsel pointedly refers to the violation of the principles of natural justice and - 4 - WP(C).13687 of 2012 also places reliance on the decision reported in _**Mathew M.Thomas v. Sales Tax Officer**_ **[1990 (1) KLT 18],** to contend that imposition of penalty could not have been done mechanically and the records would eminently demonstrate that none of the contentions raised by the petitioner was considered by the assessing authority. 5. The learned Special Government Pleader (Taxes) appearing for the State, however, would counter the said argument on the ground that in any event the petitioner ought to have obtained registration from 01.07.2006, when the limit for attracting levy was reduced to Rs.3,000/- per day. Hence, the non-registration as also the suppression, which were detected by the Intelligence Officer, are to be sustained, is the contention of the State. The learned Special Government Pleader also specifically points out that the subsequent registration made and the compounding done was only after the detection of suppression and the fact of registration or compounding cannot be a mitigating circumstance in reducing the penalty. 6. It is to be specifically observed that the ground with respect to mechanical consideration, _prima facie_ , has to be sustained, especially since the Assessing Officer has not taken into consideration any of the objections raised by the petitioner. But, however, the - 5 - WP(C).13687 of 2012 petitioner had opportunity before two authorities, being the appellate authorities as provided under the statutes, wherein the factual arguments could also be urged. Hence there would be no purpose served in now remanding the matter. In any event, the only contention is with respect to the non-liability before the amendment. 7. Even the Tribunal failed to notice the amendment and the position prior to such amendment and confirmed the order of penalty in the years 2005-06 and 2006-07 also. In the context of the petitioner having been found to be not liable for registration in the year 2005-06 as also in the broken period prior to 01.07.2006, the penalty orders passed in 2005-06 has to be set aside and that passed in 2006-07 would have to be modified. However, with respect to the subsequent periods, the petitioner ought to have taken registration and paid the tax as levied under the enactment. The learned counsel for the petitioner contends that the petitioner, a Co-operative Society, was under the _bona fide_ belief that the limit for registration remained as Rs.6,000/- and for that sole reason, failed to take registration. It is contended that there was no deliberate intention or an attempt at suppression and in any event, subsequently registration has been obtained, tax has been paid and interest also paid as per the assessment orders. - 6 - WP(C).13687 of 2012 8. In the above circumstances, taking into consideration the fact that the petitioner is a Co-operative Society, it is deemed fit that the Tribunal order Exhibit P14 be modified only to the extent of the quantum of penalty imposed. No penalty could be imposed for the year 2005-06 and upto 01.07.2006. In the facts and circumstances of the case as also considering the dictum laid down in the decision afore-cited, this Court is of the opinion that the petitioner can be imposed with a lump sum penalty of Rs.25,000/- (Rupees twenty five thousand only) for the period subsequent to the amendment, in which registration was not obtained. The Tribunal orders shall stand modified to that extent. If the petitioner remits the said amount within a period of one month, no interest shall be levied on the said amount. Writ petition disposed of, with the aforesaid modification to Exhibit P14 order of the Tribunal. There shall be no order as to costs. Sd/K.Vinod Chandran, Judge vku. ( true copy )