Instyle Earth Movers Parappa Kasaragod Dist v State of Kerala

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE S.V.BHATTI** ## **&** **THE HONOURABLE MR.JUSTICE BASANT BALAJI MONDAY, THE 25[TH] DAY OF JULY 2022 / 3RD SRAVANA, 1944 OT.REV NO. 22 OF 2019** **TAVAT 248/2018 OF AGRL.I.T.ADDITIONAL BENCH,KOZHIKODE** ## **REVISION PETITIONER/S:** INSTYLE EARTH MOVERS PARAPPA KASARAGOD DIST BY ADV RAJESH NAMBIAR ## **RESPONDENT/S:** STATE OF KERALA REPRESENTED BY SECRETARY TO GOVERNMENT DEPARTMENT OF COMMERCIAL TAXES, SECRETARIAT, THIRUVANANTHAPURAM-695 001 SR. GP - V. K. SHAMSUDHEEN THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR ADMISSION ON 25.07.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: **OT.REV NO. 22 OF 2019** -2- ## **S.V.BHATTI & BASANT BALAJI, JJ.** - - - - - - - - - - - - - - -- - - -- - - - - - - - - - -- - - - - - - - - ## **OT.REV NO. 22 OF 2019** - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - ## ORDER (Dated this the 25[th] day of July 2022) ## Basant Balaji J., The petitioner is a registered dealer on the rolls of Commercial Tax Officer (works contract) Kasaragod. They undertake works contract relating to Agricultural operations. The petitioner for the purpose of execution of works contracts, made an inter-state purchase of an Earthmover from JCB India Ltd, Pune on the strength of ‘C’ Form for the year 2012 – 2013. He submitted his return in Form No.10B for the years 2012-13, 2013-14 and 2014-15 declaring nil turnovers. The assessing authority issued a pre-assessment notice under Section 25(1) of the KVAT Act imposing a penalty under Section 10/10A of the Central Sales Tax Act. A penalty of Rs.4,43,934/- **OT.REV NO. 22 OF 2019** -3- was shown as the penalty to be imposed in the preassessment notice. The reasons for penalty was that the was not for use in machinery purchased manufacture/processing of goods for sale and it tantamount to misuse of ‘C’ Form. 2. Aggrieved by the penalty order, the petitioner filed statutory appeal before the Deputy Commissioner (Appeals), Kozhikode. The appellate authority by order dated 5.10.2017 set aside the penalty order and allowed the appeal. The State took up the matter in second appeal before the KVAT Appellate Tribunal as TA (Vat) Nos.248 of 2018 249 of 2018 and 250 of 2018 for the years 201213, 2013-14 and 2015-16 respectively. The Tribunal by the order dated 22.11.2018, allowed the appeal filed by the State and upheld the imposition of penalty reversing the order of the first appellate authority. It is impugning the **OT.REV NO. 22 OF 2019** -4- order of the Tribunal, this Revision is filed with the following substantial questions of law: “I. Whether the order of the Sales Tax Appellate Tribunal setting aside the 1[st] appellate order and confirming the penalty order, is correct in law, facts and circumstances of the case? II. When the notice issued for imposition of penalty and the penalty order are patently illegal and in violation of the statutory provisions, has the tribunal not erred in law in sustaining the penalty order? III. The appellant/ State and the Tribunal have no case that the violation of the statutory provision noted by the appellate authority does not exist. When there is no finding by the Tribunal regarding the legality of the penalty **OT.REV NO. 22 OF 2019** -5- order, was the Tribunal justified in law in setting aside the order of the Appellate authority and confirming the penalty order? IV. Having held that the appellate authority was not justified in setting aside the penalty order, not on merits of the case but relying on the mistake in the contents of the notice, has not the Tribunal committed miscarriage of justice in confirming the penalty order? V. Whether the finding of the Tribunal that the respondent who is engaged exclusively in contract works of labour processing which is exempt from tax under KVAT Act is not eligible for concessional rate of tax on the strength of Form C declaration for the interstate purchase of machinery which is exclusively used for assisting labour, sustainable in law and facts? VI. Is not the findings of the Tribunal arbitrary, **OT.REV NO. 22 OF 2019** erroneous and perverse?” 3. To the pre-assessment notice issued by the Commercial Tax Officer, the petitioner filed objection. By Annexure-B order dated 29.5.2017, the Commercial Tax Officer passed an order imposing penalty Rs.4,43,934/finding that the objections raised by the petitioner is not accepted. Thereafter, the notice of demand was also issued to the petitioner. In the appeal filed by the assessee, the Dy. Commissioner Appeals set aside the penalty order for the reason that if a person is fastened with penalty by a quasi judicial authority, the person proceeded against must be informed clearly of the provision which he has violated. The Deputy Commissioner relied on the judgment reported **OT.REV NO. 22 OF 2019** -7- in **Amrit Foods v. Commissioner of Central Excise, UP [(2005) 13 SCC 419].** 4. The Tribunal, for reversing the order of the first appellate authority, held that the concession rate of tax on the strength of Form C declaration is allowed to only those dealers who have been simultaneously enrolled under KVAT and CST act and only for the industrial purchase of commodities specified under Section (3) of CST Act and which are not included in the Certificate of Registration. It was also held that interstate purchase of any commodity which is not meant directly or indirectly for the subsequent sale of goods or any machinery which is exclusively meant for assisting labour within the territory of the State is not eligible for concessional rate of tax on the strength of Form **OT.REV NO. 22 OF 2019** -8- C declarations and the assessee engaged exclusively in contract works of labour processing which is exempted from tax under KVAT Act is not eligible for concessional rate of tax on the strength of Form C declarations for the interstate purchase of machinery which is exclusively used for assisting labour. The Tribunal went on to hold that the assessee had in fact, enrolled under the CST Act, with the intention to avail concessional rate of tax on the strength of Form C declaration, while the concessional rate of tax is not available as per the provisions contained in Section 8(3) of the CST Act. The reasoning given by the Tribunal for reversing is that the first Appellate Authority did not come to a finding as to the effect that the assessee is eligible for concessional rate of tax or whether the imposition of **OT.REV NO. 22 OF 2019** -9- penalty is valid. The Tribunal set aside the order of the first appellate authority and finding of the Commercial Tax Officer imposing penalty was upheld. No specific reasoning is given by the Tribunal rather than recording a finding that the 1[st] appellate authority neither discussed or decided as to the imposition of penalty is based on the facts and circumstances of the case. 5. The counsel for the petitioner relied on the judgment reported in **Amrit Foods (supra)** . In the said decision the Hon’ble Apex Court found that the Tribunal has not addressed itself at all to the various arguments raised by the appellant and has merely recorded that “before arriving at the conclusion of classification, the Commissioner has considered all the points raised by the **OT.REV NO. 22 OF 2019** -10- learned counsel before the Tribunal and, as such, we do not find any infirmity in the order”. This is an inappropriate method of disposing of the appeal by the Tribunal, particularly when the Tribunal is the Forum, which is the ultimate fact-finding forum. Taking note of the said decision and on going through the order of the Tribunal, we feel that the Tribunal has not appreciated correctly while reversing the order of the first appellate authority and reversing the order of penalty. In view of the matter, we are of the considered opinion that the entire issue has to be reassessed by the Commercial Tax Officer and for the said reason, all the orders including the order of the Tribunal are set aside and the matter is remitted to the assessing officer for fresh assessment in **OT.REV NO. 22 OF 2019** -11- accordance with law. In the result, this O.T. Revision is allowed. **S.V.BHATTI, JUDGE** **BASANT BALAJI, JUDGE** _dl/_ **OT.REV NO. 22 OF 2019** -12- ## **APPENDIX OF OT.REV 22/2019** PETITIONER ANNEXURES ANNEXURE-A TRUE COPY OF THE PER-ASSESSMENT NOTICE DATED 10.04.2017 ANNEXURE-B TRUE COPY OF THE PENALTY ORDER DATED 10.05.2017 UNDER THE CST ACT ANNEXURE-C TRUE COPY OF THE 1ST APPELLATE ORDER DATED 5.10.2017 ANNEXURE-D TRUE COPY OF THE ORDER OF THE TRIBUNAL DATED 22.11.2018 IN T.A.(VAT) NO.248/2018