M. Vasudevan, Proprietor of Sri Guruvayurappan Agency, Kinasseri-Peruvemba Road, Kinasseri P.O., Palakkad District v. Commercial Tax Officer, 1st Circle, Palakkad; Inspector of Assistant Commissioner, Department of Commercial Taxes, Palakkad; Inspector of Assistant Commissioner (Intelligence), Department of Commercial Taxes, Palakkad; Deputy Commissioner, Department of Commercial Taxes, Palakkad

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE TUESDAY, THE 19TH DAY OF NOVEMBER 2013/28TH KARTHIKA, 1935 WA.No. 1696 of 2013 IN WP(C).20114/2013 -------------------------------------------AGAINST THE JUDGMENT IN WP(C) 20114/2013 of HIGH COURT OF KERALA DATED 14-08-2013 ................ ## APPELLANT/PETITIONER : ----------------------------- M.VASUDEVAN PROPRIETOR, SRI GURUVAYURAPPAN AGENCY KINASSERI-PERUVEMBA ROAD, KINASSERI.P.O. PALAKKAD DISTRICT. BY ADVS.SRI.HARISANKAR V. MENON SMT.MEERA V.MENON SRI.MAHESH V.MENON ## RESPONDENTS/RESPONDENTS : ------------------------------------- 1. COMMERCIAL TAX OFFICER, - 1ST CIRCLE, PALAKKAD. 678 001. 2. INSPECTING ASST. COMMISSIONER, DEPARTMENT OF COMMERCIAL TAXES, PALAKKAD. 678 001. 3. INSPECTING ASST. COMMISSIONER (INTELLIGENCE), DEPARTMENT OF COMMERCIAL TAXES, PALAKKAD. 678 001. 4. DEPUTY COMMISSIONER, DEPARTMENT OF COMMERCIAL TAXES, PALAKKAD. 678 001. BY GOVERNMENT PLEADER, SRI.BOBBY JOHN PULIKKAPARAMBIL THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 19-11-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ## **Manjula Chellur, C.J. & A.M. Shaffique, J.** - - - - - - - - - - - - - - - - - - - - - - - - - - - - ## W.A. No. 1696 2013 - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 19[th] day of November, 2013 ## **JUDGMENT** ## **Manjula Chellur, C.J.** With the consent of both the parties, the matter is disposed of on merits. 2. The appellant herein, intending to conduct business in 'Edible Oil', submitted application for registration under Kerala Value Added Tax and Central Government Sales Tax Act as per Exts.P2 and P2(a), before the 1[st] respondent authority as early as on 05.02.2013. Apart from filing an affidavit in accordance with the procedure contemplated, several other supporting documents were also presented along with the application seeking registration. 3. As there was delay in issuing registration certificate and the appellant who was eager to start his business, complaining delay on the part of the Department approached this Court in a writ petition seeking writ of mandamus which came to be disposed of as per Ext.P5 judgment directing the respondent authorities to expedite the ## W.A. No. 1696 of 2013 ## -:2:- matter within one month. The demand made by the 1[st] respondent, as a consequence of the directions, according to the appellant, seems to be unreasonable so far as deposit of additional security amount demanded by the Department i.e. 10.80 lakhs. Complaining that this is illegal and arbitrary,₹ especially when the business itself was not yet commenced by the appellant, and voluntarily agreeing to offer additional security subsequent to the grant of registration, filed W.P.(C) No.17071 of 2013 challenging Ext.P10 demand order. Ext.P12 is the judgment directing the appellant to file objections treating Ext.P10 as a show cause notice. Subsequently appellant submitted detailed objections as per Ext.P13 to the proposal at Ext.P10. Ext.P14 is the outcome of the so called consideration of the objections of the appellant opining that for the failure to furnish additional security, the appellant cannot have the registration certificate. 4. According to the appellant, without referring to any of the objections raised in Ext.P13, Ext.P14 order came to be passed which would indicate there is no application of mind on W.A. No. 1696 of 2013 ## -:3:- the part of the authority concerned. Therefore it is not only illegal but arbitrary as well. Contending as stated above, the present writ petition was filed (W.P.(C) No.20114 of 2013). The learned Judge without disposing the matter on merits, opined that the appellant could seek remedy by approaching the statutory appellate authority provided under the Act. Aggrieved by the said judgment of the learned Single Judge contending that Ext.P14 is not a final order which could be entertained by the statutory appellate authority, the appellant is before us. 5. Appellant contends that in the absence of any statutory liability to furnish additional security as demanded by the authorities, there was no justification for the authority to reject the application for registration certificate by virtue of order at Ext.P14 and since no efficacious alternate remedy is available to him, he has approached this Court. He refers to paragraph 3 of the judgment reported in **126 STC 245** in the case of **P.M. Ibrahim v. Additional Sales Tax Officer, First Circle** . Paragraph 3 reads as under: ## W.A. No. 1696 of 2013 ## -:4:- “3. The learned counsel also invited my attention to Circular No.9/1991 dated August 6, 1991 and also Circular No.21/1994 dated October 1, 1994 in case of S.S.I. Units. Section 14 of the Act no doubt provides for additional security as and when required. But that stage would arise only after registration and hence the question of insisting additional security can be thought of only after making an assessment of the dealings of the petitioner. But at the same time, the respondent cannot be faulted for taking steps to ensure the interest of Revenue. The learned counsel for the petitioners also invited my attention to a recent decision of this Court reported in Leny Saju v. Sales Tax Officer (2000) 123 STC 646; (2000) 8 KTR 188 (the judgment in the said case is produced as exhibit P10 in O.P. No.24440 and exhibit P3 in the other OP). It is stated therein that the registration is only a formality and that a rational approach is always expected from the officers.” 6. The facts in the present case would reveal, the appellant has not yet commenced his business and has approached the authority for registration certificate. According to the appellant, the conditions imposed in the form of additional security by the Department virtually creates an embargo on the enthusiasm of the dealers to commence business being dreadful of the unreasonable amounts as security deposits. He further, on W.A. No. 1696 of 2013 ## -:5:- facts, submits the first invoice for edible oil is amounting to 15₹ lakhs which would invite tax liability of 15,000/- only, i.e. 1%.₹ Therefore looking at this amount of tax payable subsequent to registration certificate by the appellant demanding 10,80,000/-₹ as additional security clearly indicates the so called demand is disproportionate to the amount ultimately payable as tax by the appellant. Therefore any reasonable amount with reference to the business of the appellant would be just and proper. 7. As against this learned Government Pleader contends that the entire problem arises only in the border districts of State of Kerala as there is likelihood of evasion of payment of tax both in Tamil Nadu and also State of Kerala. According to learned Government Pleader, the Joint Commissioner(CT), Enforcement, Interstate Investigation Cell, Chennai addressed a letter to the Assistant Commissioner, State of Kerala, bringing to the notice the _modus operandi_ adopted by several dealers in the borders of State of Kerala and also in the State of Tamil Nadu to evade payment of tax by entering into the transactions 'Online' without any physical movement and if there W.A. No. 1696 of 2013 ## -:6:- is laxity at the check post the transaction would never come to the notice of the Department, thereby both the State of Tamil Nadu and Kerala would loss huge amount of revenue. 8. No doubt, the revenue has to be cautious and alert to see that there is no evasion of payment of tax. But such safety and alertness should not cause or impair the transactions of the dealers by asking unreasonable demand putting barriers on dealers not to do any business, if they are intending to do business at a place near to the border of Tamil Nadu. By adopting this method, if the intention of the Department is to reduce the dealers from conducting business, ultimately it may force the intending dealers to adopt illegal methods to conduct their business even without seeking registration. It is also possible for the Department to demand additional security once the dealer commences business after getting registration certificate depending upon the quantum of turnover he declares. Therefore, having regard to the facts of the present case, though the invoice placed on record invites only 15,000/- as tax payable₹ and before even starting the business by the dealer it is not just W.A. No. 1696 of 2013 ## -:7:- and proper on the part of the Department to demand 10.80₹ lakhs of additional security. We are of the opinion, a sum of ₹1,00,000/- would be just and proper as security having regard to the quantum of business proposed by the dealer immediately after the registration certificate. As already stated above, depending upon the future turnover which would be submitted by the appellant dealer it is open to the Department to seek additional security if facts and circumstances demand such move. With these observations, the appeal is disposed of. The appellants are directed to deposit additional security of 1,00,000/-(Rupees one lakh only) within₹ one week from today and the respondent authority shall consider the application and do the needful accordingly within next two weeks. **Manjula Chellur, Chief Justice.** **A.M. Shaffique, Judge.** ttb/19/11 W.A. No. 1696 of 2013 -:8:-