MIL Control Limited v. State of Kerala

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON FRIDAY, THE 8TH DAY OF JUNE 2018 / 18TH JYAISHTA, 1940 OT.Rev.No. 72 of 2014 ---------------------AGAINST THE ORDER/JUDGMENT IN TAVAT 1188/2012 of VALUE ADDED TAX APPELLATE TRIBUNAL,ADDL.BENCH,PKD REVISION PETITIONER(S)/PETITIONER/ APPELLANT IN TA -------------------------------------------------- M/S. MIL CONTROL LIMITED, MELADOOR, ANNAMMANADA, THRISSUR 680741, REPRESENTED BY ITS SENIOR MANAGER FINANCE & ACCOUNTS, MR. SUBHASH.S BY ADVS.SRI.M.GOPIKRISHNAN NAMBIAR SRI.P.GOPINATH SRI.P.BENNY THOMAS SRI.K.JOHN MATHAI SRI.JOSON MANAVALAN SRI.KURYAN THOMAS RESPONDENT(S)/RESPONDENT IN TA: -------------------------------- STATE OF KERALA, REPRESENTED BY THE SECRETARY TAXES DEPARTMENT, THIRUVANANTHAPRUAM 695001 BY SR. GOVERNMENT PLEADER SRI MOHAMMED RAFIQ THIS OTHER TAX REVISION (VAT) HAVING BEEN FINALLY HEARD ON 08-06-2018, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: OTRV NO. 72/2014 APPENDIX REVISION PETITIONER'S ANNEXURES: -------------------------------- ANNEXURE A: TRUE COPY OF THE PURCHASE ORDER MIL/IMP/2459+ DATED 30.10.2008 PLACED BY THE PETITIONER WITH M/S METSO AUTOMATION PVT.LTD ANNEXURE B: TRUE COPY OF THE INVOICE DT 12.11.2008 ISSUED TO THE PETITIONER BY M/S METSO AUTOMATION PVT.LTD SINGAPORE ANNEXURE C: TRUE COPY OF THE BILL OF LADING NO. 080-280135-01 DT 22.11.2008 ISSUED TO THE PETITIONER BY M/S METSO AUTOMATION PVT LTD., SINGAPORE ANNEXURE D: TRUE COPY OF THE BILL OF ENTRY DT 31.12.2008 FILEDBY THE PETITIONER BEFORE THE CUSTOMS STATION, KOCHI ANNEXURE E: TRUE COPY OF THE NOTICE DT 05.01.2009 ISSUED TO THE PETITIONER BY THE INTELLIGENCE INSPECTOR, COMMERCIAL TAXES, MATTANCHERRY ANNEXURE F: TRUE COPY OF THE BANK GUARANTEE DATED 27.11.2012 EXECUTED BETWEEN THE PETITIONER AND INTELLIGENCE INSPECTOR ANNEXURE G: TRUE COPY OF THE RELEVANT BANK PAYMENT VOUCHER AND COPY OF THE BANK BOOK SUMMARY EVIDENCING PAYMENT OF THE CONSIDERATION THROUGH BANK PRODUCED BY THE PETITIONER BEFORE THE ADJUDICATING AUTHORITY ANNEXURE H: TRUE COPY OF THE RELEVANT COPIES OF THE STORES LEDGER ANNEXRUE I: TRUE COPY OF THE MONTHLY RETURN DT 10.02.2009 ALONG WITH THE PURCHASE STATEMENT FOR THE MONTH OF JANUARY, 2009 ANNEXURE J: TRUE COPY OF THE ORDER DT 15.11.2011 ISSUED TO THE PETITIONER BY THE INTELLIGENCE OFFICER ANNEXURE K: TRUE COPY OF THE ORDER DT 31.07.2012 IN KVATA NO. 140/2012 ISSUED TO THE PETITIONER BY THE ASSISTANT COMMISSIONER (APPEALS) COMMERCIAL TAXES, THRISSUR ANNEXURE L: TRUE COPY OF THE APPEAL MEMORANDUM (WITHOUT ANNEXURES) FILED ON 26.11.2012 BY THE PETITIONER BEFORE THE APPELLATE TRIBUNAL ANNEXURE M: TRUE COPY OF THE ORDER IN TA(VAT) NO.1188/2012 DATED 28.10.2013 ISSUED TO THE PETITIONER BY THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL RESPONDENTS ANNEXURES: NIL TRUE COPY In the order dated 08/06/2018 in OTRev No.72/2014, the name of the Tribunal which is wrongly entered in the Headnote as “Value Added Tax Appellate Tribunal, Addl. Bench, Palakkad” stands corrected as “Value Added Tax Appellate Tribunal, Ernakulam”. Sd/Assistant Registrar ## K. VINOD CHANDRAN & ASHOK MENON, JJ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ## O.T. Rev. No. 72 of 2014 - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 08[th] day of June, 2018 ## O R D E R ## Vinod Chandran, J The revision by the assesee, is against the order of the Assessing Officer as affirmed by the First Appellate Authority and the Tribunal. The issue revolves around an import of three packets of “Metso Positioners” with a value declared and estimated at Rs.20,63,324/-. The assessee imported the goods and was transporting it to its factory. The assessee is engaged in the manufacture of machinery and Mesto Positioner is one of the components of a machine so manufactured and then sold by the assessee. The assessee did not file Form 8F(A) under the Kerala Value Added Tax Act 2003 (for short KVAT Act only) as OTRev.72/2014 **==> picture [20 x 10] intentionally omitted <==** provided under Section 46(3)(e) of the Act. The goods were detained and assessee produced the invoice as also the Bill of Entry. The goods were released on execution of bank guarantee which later was enforced after the penalty order was affirmed by the Tribunal. The questions of law are re-framed as follows: Whether the Tribunal was right in affirming the penalty especially when there was no tax evaded in the import of the goods and the import was evidenced by the bill of entry as also the other documents executed before the Customs Authority? Whether Tribunal was correct in confirming the penalty when the assessee had produced sufficient documents to prove that the tax in fact was paid on sale of the goods manufactured; in which the imported goods was an essential component? and OTRev.72/2014 **==> picture [20 x 10] intentionally omitted <==** Ought not the Tribunal have held that the defalcation if at all was a technical one not necessarily leading to any attempt to evade tax ? 2. Admittedly the assessee had not declared the goods before the Commercial Taxes Department under Form 8F(A) as has been provided in Section 46(3) (e) which has been extracted in the orders of the authority. The provision mandates that where goods are imported into the State, on arrival of such goods the assessee has to file a declaration before the Commercial Tax Officer having jurisdiction over the place of import. The further transport of the goods within or across the State has also to be accompanied by the declaration so submitted before the CTO and endorsed by the said officer. The measure has been introduced in the Act to ensure that there is no import made which is not disclosed in the books of account and later used; as in the present OTRev.72/2014 ::4:: case in the manufacture and/or sale within the State. 3. We are of the opinion that the argument that there is no tax effect in the import transaction is not at all relevant to consider whether there is an attempt to evade tax; which is necessary for imposition of a penalty under Section 47(3) (e). The learned Government Pleader also brought our attention to Sub section (6) of Section 47 which speaks of an attempt to evade tax due under the Act. Though the import may not be taxable by the State; the further sale of the machinery, in which the imported goods are embedded, the value of which is added to the total sale price, definitely will be taxable and on suppression of the goods so imported, the attempt to evade tax on the further sale is very glaring. 4. The learned Counsel appearing for the petitioner would rely on Sunitha Diesel Sales & Services v. State of Kerala OTRev.72/2014 **==> picture [20 x 9] intentionally omitted <==** [(1996) 102 STC 448]. Therein an interstate transport, that too a sale in transit, was detained and the petitioner who had originally raised purchase order was sought to be levied with penalty. The consignee was the purchaser-in-transit, to whom the assessee, who originally raised the purchase order, had sold the goods in transit. The defect noticed was that the delivery note was not one prescribed under the Rules and therein the value of the goods was not shown. These were found to be defects of technical nature which does not necessarily result in a presumption of attempt of evasion of tax. The original purchaser had no tax liability since the goods were sold in transit and the transport was an interstate one which again put to peril any demand of tax by the importing State. 5. It is then pointed out by the learned Counsel appearing for the petitioner that the aforesaid decision also found OTRev.72/2014 **==> picture [20 x 10] intentionally omitted <==** that the Intelligence Officer who adjudicates on the crime could very well look at the documents produced to find that there is no attempt to evade tax. Definitely that could be done; but in the present case as submitted by the learned Government Pleader, the value added tax regime has a multi point levy. Therein the Court found that the transport was one made interstate and there was also a sale in transit; which clearly indicated that there is no tax liability and hence no question arises of evasion. The delivery note being not as prescribed and the difference in value as seen from the delivery note were held to be technical defects of venial nature. 6. Herein there is a lack of declaration of imported goods used in manufacture, the value of which is added on to the sale price of the final manufactured product; which is taxable. The production of documents, evidencing subsequent sale of the OTRev.72/2014 **==> picture [20 x 9] intentionally omitted <==** machinery, in which the goods imported were embedded, cannot necessarily dispel the suspicion of attempt to evade tax, since the sale occurred subsequent to the detection of offense. The presumption regarding the evasion for reason of non-declaration of goods persists and it is this offense which is sought to be penalised. The further sale made cannot absolve the assessee from the liability for penalty especially when there could have been an attempt to evade tax if the offense was not detected. 7. The Tribunal has correctly found that without a declaration being made to the Commercial Taxes Department, the Department would not be aware of the import made. The assessee's contention that the goods were imported through a bill of entry which can easily be verified at the Customs authorities, cannot be relied on to set aside the penalty. If there was a detection of suppression of value of the imported goods and later OTRev.72/2014 **==> picture [20 x 10] intentionally omitted <==** the Commercial Taxes Department had taken action for that, on verification with the customs authority, only then evasion would have come out. There is also a possibility of the suppression not being detected at all when the existence of the bill of entry would not also be noticed by the Commercial Taxes Department. The mandate to file a declaration before the Commercial Taxes Officer having jurisdiction over the place of import is specifically to ensure that the Department has knowledge of the import of goods. In the VAT Regime there is value addition which is taxable at every point and definitely there is a possibility of evasion, insofar as the assessee selling the manufactured goods without the value of the component imported. The presumption insofar as an attempt to evade tax cannot be dispelled on mere surmises and conjectures and it has to be noticed that the burden to prove that there is no attempt to OTRev.72/2014 **==> picture [20 x 10] intentionally omitted <==** evade tax is squarely on the assessee. The burden cannot be discharged merely on the ground that subsequently it is shown that there has been no evasion of tax on the sale of the machinery, in which the imported item was embedded. 8. On the first question of law, it cannot be said that the bill of entry before the Customs authorities would by itself negative any allegation of attempt to evade tax on sale of goods after import. The mandate to file a declaration of the import before the CTO alone would be valid intimation to the department assessing the sale of goods. The first question is answered against the assessee and in favour of the Revenue. The sale of a manufactured product subsequent to the detection of an offense relating to a component in the final product, cannot efface the suspicion of evasion of tax. The defect cannot be said to be a mere technical one and raises a presumption of attempt to OTRev.72/2014 **==> picture [26 x 10] intentionally omitted <==** evade tax; which the assessee, on whom the burden is, failed to disprove or dispel in the adjudication. The only plea was that the defect was technical and the subsequent sale did suffer tax; which has been found to be grossly irrelevant and insufficient.. Questions 2 & 3 also are answered against the assessee and in favour of the Revenue. We do not find any reason to interfere with the impugned orders and we reject the revision. No order as to costs. Sd/- K. Vinod Chandran, Judge Sd/Ashok Menon, Judge jma