High Court of KeralaSingle Judge2007-04-03Dismissed

Essar Oil Limited v. Intelligence Officer (Investigation Branch), Commercial Taxes, Ernakulam & Others

Case / Petition Number:WP(C) No. 7803 of 2007-D

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: K. Balakrishnan Nair
Judgment Date: 2007-04-03
Court Decision / Holding: Writ petition dismissed; Ext.P9 challenge repelled. Pending disposal of the grounds raised, the petitioner was ordered to pay one-third of the penalty, with time limits: half of the one-third amount by 16.4.2007 and the balance by 30.4.2007.
Final Disposition: Dismissed

Parties to the Case

Appellants / Petitioners

Essar Oil Limited

Respondents

Intelligence Officer (Investigation Branch), Commercial Taxes, Ernakulam
Deputy Commissioner, Ernakulam
Assistant Commissioner, Assessment I, Special Circle-II, Ernakulam
Shebna Enterprises, Androth Island, Lakshadweep
Ifan Enterprises, Agathy, Lakshadweep
The Manager, HDFC Bank Limited, Mumbai
The Manager, HDFC Bank Limited, Ravipuram Branch, Ernakulam

Legal Representation & Advocates

Counsels for Petitioners

• V. Sivaswamy
• Smt. S. Lakshmy
• K. I. Mayankutty Mather

Counsels for Respondents

• Sri Mohammed Rafiq

Case Synopsis & Summary

Essar Oil Limited filed a writ petition under Article 226 challenging a penalty order imposed by the Lakshadweep-related tax authorities on grounds of reliance on Lakshadweep Administration certificates and SRO declarations. The interim order of this Court dated 8 March 2007 directed the petitioner to pay one-third of the penalty while the revisional authority considered the matter, and the petitioner produced Ext.P9 seeking a stay against the impugned penalty. The petitioner argued that if its dealers had acted illegally, the company should not be held liable and that the State exchequer had suffered a loss of about Rs. 2.5 crores due to the alleged eligibility of diesel at a reduced rate, with the dealers allegedly misusing declarations. It relied on judgments including Hindustan Petroleum Corporation Ltd. v. I.A.C. & Others, Chunni Lal Parshadi Lal v. Commissioner of Sales Tax, and K.G. Industries v. Sales Tax Officer. The court held that many issues could not be adjudicated at the interim stage and fell within the revisional authority’s domain; it rejected the challenge to Ext.P9 as not arbitrary or perverse, and dismissed the writ petition, while directing payment of one-third of the penalty with phased remittance timelines (half by 16.4.2007 and the remainder by 30.4.2007).

Provisions of Law Cited

Article 226 of the Constitution of IndiaSRO No. 1728/93SRO No. 1091/99

Submissions & Arguments

Contentions of Appellants / Petitioners

The petitioner contends that an absolute stay against the impugned penalty order should have been granted; it relies on Ext.P1 series certificates and on declarations under SRO No.1728/93 and SRO No.1091/99, arguing that it acted in bona fide reliance on Lakshadweep authorities. It asserts that the dealers may have acted illegally or fraudulently, but Essar Oil cannot be held fully liable; it relies on Hindustan Petroleum Corp. Ltd. v. I.A.C. & Others, Chunni Lal Parshadi Lal v. Commissioner of Sales Tax, and K.G. Industries v. Sales Tax Officer to support relief. It contends that the matter is to be decided by the revisional authority and seeks intervention only against the interim order.

Contentions of Respondents

The respondents argue that the interim order restricting the penalty is reasonable and that the writ petition is infructuous; the revisional authority’s order directing payment of one-third of the penalty should stand, given the Rs. 2.5 crore loss to the State exchequer; they contend the court should defer extensive scrutiny to the revisional process and not interfere beyond limited grounds.

Cited Precedents (3)

Case Name	Citation	Treatment	Explanation
Hindustan Petroleum Corporation Ltd. v. I.A.C. & others	[(2000) 8 K.T.R. 216 Ker.]	Mentioned Only	Cited by petitioner but not elaborated or distinguished in the judgement.
Chunni Lal Parshadi Lal v, Commissioner of Sales Tax	[(1986) 62 S.T.C. 112]	Mentioned Only	Cited as authority but not integrated into the court’s reasoning.
K.G. Industries v. Sales Tax officer	[(1999) 113 S.T.C. 49]	Mentioned Only	Cited by petitioner; not discussed in detail in the decision.

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Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT :** **THE HONOURABLE MR. JUSTICE K.BALAKRISHNAN NAIR** **TUESDAY, THE 3RD APRIL 2007 / 13TH CHAITHRA 1930** ## **WP(C).No. 7803 of 2007(D)** **-------------------------------------** **PETITIONER:** **--------------------** **ESSAR OIL LIMITED, PUTHIYA ROAD, LFC ROAD, KOCHI-17, REPRESENTED BY ITS DIVISIONAL MANAGER, TOMY VARGHESE.** **BY ADV. SRI.V.SIVASWAMY SMT.S.LAKSHMY SRI.K.I.MAYANKUTTY MATHER** **RESPONDENTS:** **-----------------------** **1. INTELLIGENCE OFFICER (INVESTIGATION BRANCH), COMMERCIAL TAXES, ERNAKULAM.** **2. DEPUTY COMMISSIONER, ERNAKULAM.** **3. ASSISTANT COMMISSIONER, ASSESSMENT I, SPECIAL CIRCLE-II, ERNAKULAM.** **4. SHEBNA ENTERPRISES, ANDROTH ILAND, LAKSHADWEEP.** **5. IFAN ENTERPRISES, AGATHY, LAKSHADWEEP.** **6. THE MANAGER, HDFC BANK LIMITED, MUMBAI.** **7. THE MANAGER, HDFC BANK LIMITED, RAVIPURAM BRANCH, ERNAKULAM.** **BY SR.GOVERNMENT PLEADER SRI. MOHAMMED RAFIQ** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 03/04/2007, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** ## **WPC.NO.7803/2007 D** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** **EXT.P1: COPY OF APPROVAL CERTIFICATE ISSUED BY ADMINISTRATOR OF UT OF LAKSHADWEEP DTD. 23/10/1999.** **EXT.P1(A): COPY OF APPROVAL CERTIFICATE ISSUED BY ADMINISTRATOR OF UT OF LAKSHADWEEP DTD. 12/10/2004.** **EXT.P1(B): COPY OF APPROVAL CERTIFICATE ISSUED BY ADMINISTRATOR OF UT OF LAKSHADWEEP DTD. 09/03/2005. EXT.P1(C): COPY OF THE PERMIT ISSUED BY THE UT AUTHORITIES TO M/S. IFAN ENTERPRISES DTD. 18/05/2004. EXT.P1(D): COPY OF THE PERMIT ISSUED BY THE UT AUTHORITIES TO M/S. IFAN ENTERPRISES DTD. 18/05/2004. EXT.P1(E): COPY OF THE PERMIT ISSUED BY THE UT AUTHORITIES TO M/S.SHEBNA ENTERPRISES DTD. 15/10/1999.** **EXT.P1(F): COPY OF THE EXPLOSIVE LICENCE ISSUED BY IT CHIEF CONTROLLER OF EXPLOSIVES CHENNAI, IN THE NAME OF M/S. IFAN ENTERPRISES DTD. 5/11/2004. EXT.P1(G): COPY OF THE EXPLOSIVE LICENCE ISSUED BY IT CHIEF CONTROLLER OF EXPLOSIVES CHENNAI, IN THE NAME OF M/S. SHEBNA ENTERPRISES DTD. 13/03/2001. EXT.P1(H): COPY OF ANNEXURE I UNDER SRO.1091/99 ISSUED BY M/S. SHEBNA ENTERPRISES. EXT.P1(I): COPY OF ANNEXURE I UNDER SRO.1091/99 AND THE INDENT ISSUED BY MS/.SHEBNA ENTERPRISES.** **EXT.P2: COPY OF ANNEXURE I DECLARATION UNDER SRO.1091/1999 DTD. 18/11/2004. EXT.P2(A): COPY OF ANNEXURE I DECLARATION UNDER SRO.1091/1999 DTD. 29/01/2005.** **EXT.P2(B): COPY OF ANNEXURE I DECLARATION UNDER SRO.1091/1999 DTD. 03/01/2005.** - **EXT.P2(C): COPY OF ANNEXURE I DECLARATION UNDER SRO.1091/1999 DTD. 16/11/2004.** **EXT.P2(D): COPY OF ANNEXURE I DECLARATION UNDER SRO.1091/1999 DTD. 18/11/2004.** **....2/-** **....2....** ## **WPC.NO.7803/2007 D** **EXT.P2(E): COPY OF ANNEXURE I DECLARATION UNDER SRO.1091/1999 DTD. 28/10/2004.** **EXT.P2(F): COPY OF ANNEXURE I DECLARATION UNDER SRO.1091/1999 DTD. 18/11/2004.** **EXT.P2(G): COPY OF ANNEXURE I DECLARATION UNDER SRO.1091/1999 DTD. 29/09/2004.** **EXT.P2(H): COPY OF ANNEXURE I DECLARATION UNDER SRO.1091/1999 DTD. 30/10/2004.** **EXT.P2(I); COPY OF ANNEXURE I DECLARATION UNDER SRO.1091/1999 DTD. 27/11/2004.** **EXT.P2(J): COPY OF ANNEXURE I DECLARATION UNDER SRO.1091/1999 DTD. 30/09/2004.** **EXT.P2(K): COPY OF ANNEXURE I DECLARATION UNDER SRO.1091/1999 DTD. 31/01/2005. EXT.P2(L): COPY OF ANNEXURE I DECLARATION UNDER SRO.1091/1999 DTD. 30/11/2004. EXT.P3: COPY OF THE NOTICE ISSUED BY THE 1ST RESPONDENT DTD. 26/06/2006. EXT.P4: COPY OF PRELIMINARY AND ADDITIONAL OBJECTIONS SUBMITTED BY THE PETITIONER DTD. 21/07/2006.. EXT.P5: COPY OF THE ORDER ISSUED BY THE 1ST RESPONDENT DTD. 28/12/2006. EXT.P6: COPY OF NOTICE ISSUED BY THE 3RD RESPONDENT TO THE PETITIONERS BANK DTD. 3/03/2007. EXT.P7: COPY OF THE ORDER REVISION FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT DTD. 6/03/2007. EXT.P8; COPY OF THE STAY APPLICATION FILED BY THE PETITIONER DTD. 6/03/2007. EXT.P9: COPY OF THE ORDER ISSUED BY THE 2ND RESPONDENT DTD. 23/03/2007.** **KSS** **/TRUE COPY/** ## K.BALAKRISHNAN NAIR, J. ----------------------------------------- W.P.(C) NO. 7803 OF 2007-D ----------------------------------------- ## JUDGMENT This is an appeal pending matter. In view of the interim order passed by this Court on 8.3.2007, practically the writ petition has become infructuous. But, the petitioner has produced Ext.P9 interim order passed by the 1[st] revisional authority, pursuant to the interim order of this Court dated 8.3.2007. It challenges Ext.P9, by amending the writ petition. According to the petitioner, absolute stay should have been granted against the impugned penalty order. But, the revisional authority has directed the petitioner to pay one-third of the amount. The petitioner submits, it has done everything possible from its side and if its dealers have committed some illegality or fraud, it cannot be held liable. In support of the said submission, the learned counsel for the petitioner took me through various materials in the writ petition, including the certificate issued by the Lakshadweep Administration in favour of the dealers of the petitioner. The allegation against them is that they obtained High Speed Diesel at 4% sales tax on the ground that they are transporting it for use in the Islands. Instead of that, the dealers sold the diesel in Kerala itself, where the tax for the said Wpc 7803/07 2 item is 24%. Thus, substantial loss has been caused to the State ex-chequer. The petitioner points out that it acted on Ext.P1 series certificates issued by the Lakshadweep Administration and also the declarations made by the concerned dealers as per the requirement of SRO No.1728/93, as amended by SRO No.1091/99. It is pointed out that the petitioner has been roped in on very slender grounds. It has been found fault with for not verifying whether the demand drafts submitted by the dealers towards the price of the commodity were drawn from the accounts of the dealers. According to the petitioner, normally no oil company will verify the demand drafts submitted on behalf of the dealers. So, practically, without any valid ground, the petitioner has been implicated and mulcted with the penalty, it is submitted. Other contentions are also raised. 2. In support of the submissions, the learned counsel for the petitioner relied on the decision of this Court in **Hindustan Petroleum Corporation Ltd. v. I.A.C. & others** [(2000) 8 K.T.R. 216 Ker.] and also the decision of the Apex Court in **Chunni Lal Parshadi Lal v, Commissioner of Sales Tax** [(1986) 62 S.T.C. 112]. The learned counsel also relied on the decision of the Madhya Pradesh High Court in **K.G. Industries v. Sales Tax officer** [(1999) 113 S.T.C. 49]. Wpc 7803/07 3 3. I think, most of the matters raised by the petitioner cannot be gone into at the stage of considering the validity of the interim order. They are matters, which should be considered by the revisional authority. As evident from the interim order, the State has lost sales tax to the tune of Rs.2.5 crores. So, a penalty of double the said amount has been imposed on the petitioner. As per the interim order, the petitioner is directed to pay onethird of the penalty amount. I feel that the said direction cannot be interfered with under Article 226 of the Constitution of India. This Court can interfere with an interim order only on limited grounds. If the contentions of the petitioner are accepted, the same may absolve it from the liability to pay any penalty. But, the same cannot be treated as a ground at this stage, to interfere with the interim order. So, pending consideration of the grounds raised by the petitioner against the penalty order, it has been directed to pay only one-third of the penalty amount. I think, it is a reasonable order. At any rate, it cannot be described as arbitrary or perverse or one, which no man in his senses will pass. So, I do not think that it is proper for this Court to interfere with Ext.P9. In the result, the challenge against Ext.P9 is repelled. But, the learned counsel for the petitioner prays for some time to remit the amount. The petitioner may pay half of the one- Wpc 7803/07 4 third amount on or before 16.4.2007 and the balance half of the one-third amount on or before 30.4.2007. Subject to the above direction, the writ petition is dismissed. 3[rd] April, 2007. K.BALAKRISHNAN NAIR, JUDGE. Nm/