M/S Malabar Ornaments (P) Ltd. v. Intelligence Officer (IB), Commercial Taxes, Kannur & Others

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** # **PRESENT** # **THE HONOURABLE MR.JUSTICE S.V.BHATTI** **&** **THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS** **THURSDAY, THE 3[RD] DAY OF NOVEMBER 2022 / 12TH KARTHIKA, 1944** **RP NO. 960 OF 2021** **WA NO.2365/2015 OF HIGH COURT OF KERALA** ## **REVIEW PETITIONER/ RESPONDENT :** **M/S.MALABAR ORNAMENTS (P) LTD., PRANAM BUILDINGS, A.V.K. NAIR ROAD, THALASSERY, KANNUR DISTRICT-670 101, REPRESENTED BY ITS DIRECTOR V.S.SHAREEJ** **BY ADVS. K.P.ABDUL AZEES AKHIL SURESH T.ARCHANA** ## **RESPONDENTS/ APPELLANTS :** **1 THE INTELLIGENCE OFFICER (IB), COMMERCIAL TAXES, KANNUR - 670 002** **2 THE ASSISTANT COMMISSIONER, COMMERCIAL TAXES, SPECIAL CIRCLE, KANNUR – 670 002** **3 STATE OF KERALA, REPRESENTED BY THE PRINCIPAL SECRETARY TO GOVERNMENT, TAXES DEPARTMENT, SERETARIAT, THIRUVANANTHAPURAM – 695 001** **4 INSPECTING ASSISTANT COMMISSIONER, COMMERCIAL TAXES, KANNUR – 670 002** ## **RP NO. 960 OF 2021 in W.A.No.2365 of 2015** 2 **BY SRI.MOHAMMED RAFIQ, SPECIAL GOVERNMENT PLEADER (TAXES)** **THIS REVIEW PETITION HAVING COME UP FOR ADMISSION ON 03.11.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** ## **RP NO. 960 OF 2021 in W.A.No.2365 of 2015** 3 ## **ORDER** ## _Bechu Kurian Thomas, J._ A batch of writ appeals and two writ petitions challenging the collection of differential compounded tax for the year 2011-2012 were disposed of by us by judgment dated 06.08.2021. The writ appeals filed by the State and its officers were allowed setting aside the judgment of the learned Single Judge while the writ petitions were dismissed. 2. Review petitioner was the writ petitioner in W.P.(C) No.14691 of 2013 against which W.A.No.2365 of 2015 was preferred. Though the review petitioner had challenged the judgment before the Supreme Court, the Special Leave Petition was dismissed by order dated 11.12.2021. However, with respect to a question of imposition of penalty, after noticing that this Court had not discussed the issue of levy of penalty, petitioners were given the liberty to prefer a review petition. This review petition has been filed consequent to the said observation of the Supreme Court. 3. According to the review petitioners, by Ext.P9 produced in the writ petition, they were imposed with a penalty of **RP NO. 960 OF 2021 in W.A.No.2365 of 2015** 4 Rs.70,79,640/- under Section 67 of the Kerala Value Added Tax Act, 2003 (for short, 'the Act'), for the period April, 2011 to July, 2011. The challenge raised by them in the writ petition was allowed by the learned Single Judge but when the Division Bench considered the writ appeal preferred by the State, this Court while allowing the appeal with respect to the validity of retrospective amendment, the question of penalty was not considered at all and therefore, there is an error apparent on the face of the record requiring the review of the judgment dated 06.08.2022 to the extent of the penalty. 4. Sri.Abdul Azees, the learned counsel for the review petitioners contended that a penalty could have been imposed only if there was a contumacious conduct on the part of the review petitioners. It was also argued that since the non-payment of the differential tax was solely on account of the confusion that prevailed regarding the amendment, review petitioners could not have been mulcted with the liability to pay any penalty. As an alternative, it was argued that the quantum of penalty imposed was the maximum and the same is highly excessive and exorbitant. 5. Sri.Mohammed Rafiq, the learned Special Government Pleader (Taxes), on the other hand contended that the question of review does not arise since such a contention was never raised **RP NO. 960 OF 2021 in W.A.No.2365 of 2015** 5 during arguments and therefore without putting forth any arguments at the time of hearing, it is not available to the review petitioners under law to now turn around and seek a review of the judgment. It was further submitted that the penalty imposed is legally valid as by virtue of the retrospective amendment, the tax due from the petitioner is deemed to have been imposed from 01.04.2011 and therefore the delay in payment ought to necessarily be visited with a penalty. 6. We have considered the rival contentions and have gone through the records of the case. 7. Since the Supreme Court has already directed the review to be considered on merits, the technical objection on the failure to address the arguments at the time of hearing on the question of imposition of penalty is no longer open for consideration. Therefore we proceed to consider the review on merits. 8. On the merits of the claim put forth in the review petition, we do notice that the writ petitioner had challenged the imposition of penalty and the learned Single Judge had set aside the same. However, when the judgment was reversed by us, allowing the appeal filed by the State, specific issue relating to the imposition of the penalty was not referred to. Therefore to that extent, the **RP NO. 960 OF 2021 in W.A.No.2365 of 2015** 6 judgment is liable to be reviewed. 9. Ext.P9 has imposed the maximum penalty fixed under Section 67 of the Act. It is trite law that the measure of penalty must be dependent upon the facts in each individual case. As held by the Supreme Court in _**[AIR 1980 SC 346] Cement Marketing Co.of India Ltd. v. Assistant Commissioner of Sales Tax, Indoor and Others**_ and in _**[2000] 117 STC 457 (SC)] E.I.D. Parry (I) Ltd. v. Assistant Commissioner of Commercial Taxes and Another**_ a bonafide failure to pay tax based upon principles of law cannot render the assessee subject to a penalty. 10. On an anxious consideration of the principles laid down in the above referred judgments and on an appreciation of the facts arising in the present case, we are of the view that though the amendment was brought in with retrospective effect, petitioner had delayed payment of the enhanced tax, even after amendment. Therefore it cannot be held that there was no contumacious conduct at all. If the petitioners were bonafide under a confusion, they ought not to have delayed the payment of the tax due under the amended Act and instead should have paid it immediately. Even after the amendment, there was delay in payment and hence it cannot be held that the conduct was free of any blemish at all. **RP NO. 960 OF 2021 in W.A.No.2365 of 2015** 7 Thus we hold that the circumstances warrant a levy of penalty. 11. However, while fixing the quantum of penalty, the assessing officer has clearly imposed the maximum without any consideration of the circumstances and the reason for the delayed payment. Taking into reckoning the circumstances surrounding the delay in payment of the tax, we are of the view that an amount of Rs.7,00,000/- would be a sufficient penalty. Accordingly, we hold that the review petitioner is liable to pay a penalty of Rs.7,00,000/only, as against the penalty imposed in Ext.P9. The penalty imposed in Ext.P9 shall stand modified to the above extent. The writ appeal is disposed of as above. Sd/- **S.V.BHATTI, JUDGE** Sd/- **BECHU KURIAN THOMAS, JUDGE** RKM ## **RP NO. 960 OF 2021 in W.A.No.2365 of 2015** 8 ## **APPENDIX OF RP 960/2021** ## **REVIEW PETITIONER'S ANNEXURES :** **Annexure A THE TRUE COPY OF ORDER IN SPECIAL LEAVE PETITION (C) NOS 20076-20088/2021 DATED 11/12/2021**