M/S SREE RAMACHANDRAN ENTERPRISES v. THE INTELLIGENCE OFFICER (IB) OFFICE OF THE INSPECTING ASSISTANT COMMISSIONER (INT.), COMMERCIAL TAXES, THIRUVANANTHAPURAM, AND OTHERS

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR.JUSTICE ANTONY DOMINIC** ## **MONDAY, THE 31ST DAY OF DECEMBER 2012/10TH POUSHA 1934** ## **WP(C).No. 24161 of 2010 (U)** **---------------------------------------** **PETITIONER:** **-------------------** ## **M/S.SREE RAMACHANDRAN ENTERPRISES, PAZHAVANGADI, EAST FORT, THIRUVANANTHAPURAM, REP.BY, J.SARAVANACHANDRAN, PARTNER.** **BY ADV. SRI.JOSE JOSEPH.** **RESPONDENTS:** **------------------------** **1. THE INTELLIGENCE OFFICER (IB), OFFICE OF THE INSPECTING ASSISTANT COMMISSIONER (INT.), COMMERCIAL TAXES, NEW `C' BLOCK, PUBLIC OFFICE BUILDINGS, THIRUVANANTHAPURAM-695 033.** **2. THE DEPUTY COMMISSIONER, COMMERCIAL TAXES, THIRUVANANTHAPURAM.** **3. THE COMMISSIONER OF COMMERCIAL TAXES, PUBLIC OFFICE BUILDINGS, THIRUVANANTHAPURAM-695 018.** **R1 TO R3 BY GOVERNMENT PLEADER SRI. T.K. SHAIJ RAJ.** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 31-12-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **Prv.** ## **W.P.(C). NO.24161/2010-U:** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** - **EXT.P.1: COPY OF THE S I R NO.21533 DTD. 09/08/2002.** - **EXT.P.2: COPY OF THE RECEIPT ISSUED BY INTELLIGENCE OFFICER, SQUAD NO.II, TRIVANDRUM DTD. 09/08/2002.** - **EXT.P.3: COPY OF THE S I R NO.81162 DTD 09/08/2002.** - **EXT.P.4: COPY OF THE NOTICE UNDER SEC. 28(8) AND 46 OF THE KGST ACT DTD. 12/08/2002.** - **EXT.P.5: COPY OF THE PETITIONER'S REPLY DTD. 04/0/2002.** - **EXT.P.6: COPY OF THE ORDER OF R1. DTD. 18/09/2002.** - **EXT.P.7: COPY OF THE ORDER OF R.2. IN R.P.NO.263/02 DTD. 04/01/2003.** - **EXT.P.8: COPY OF THE PETITIONER'S REPLY TO NOTICE OF R.1. DTD. 22/07/2006 DTD. 02/11/2006.** - **EXT.P.9: COPY OF THE ORDER OF R.1. IMPOSING PENALTY UNDER SECS. 28(8) & 45A (G) DT.D 09/11/2006.** - **EXT.P.10: COPY OF THE ORDER OF R.2. IN R.P.NO.22/07 DTD. 29/12/2009.** - **EXT.P.11: COPY OF THE REVISION BEFORE THE R.3. DTD. 16/01/2010.** - **EXT.P.12: COPY OF THE HEARING NOTE SUBMITTED BEFORE R.3.** - **EXT.P.13: COPY OF THE ORDER OF THE R.3. DTD. 26/05/2010.** ## **RESPONDENTS' EXHIBITS: NIL.** ## **//TRUE COPY//** ## **P.A. TO JUDGE** ## **Prv.** ## **ANTONY DOMINIC,J** ## **---------------------------------** ## **W.P.(C)No.24161 of 2010** **----------------------------------------Dated this the 31[st] day of December, 2012** ## **JUDGMENT** The petitioner is a dealer under the KGST Act. On 09.08.2002, an inspection was conducted at an undeclared godown of the petitioner, an employee's residence and also at a business place of the petitioner. Exts.P1 to P3 are the shop inspection reports that were prepared. On the basis of Exts.P1 to P3, Ext.P4 notice under Section 28 (8) of the KGST Act proposing penalty of 50% of the value of the undeclared stock was proposed. The petitioner filed Ext.P5 reply. Finally, Ext.P6 order was passed imposing penalty of Rs.7,72,303/-. 2. The petitioner filed a revision to the Deputy Commissioner. By Ext.P7 order, the revision was allowed with the following directions: “ _I therefore, find that the case should go back to the Intelligence Officer for fresh disposal_ W.P.(C).No.24161 of 2010 : 2 : _after affording petitioner a fair and reasonable opportunity to prove their case. If the books of accounts and other records are available with the Intelligence Officer, he should have arranged verification of the records seized by him and arrived at a clear conclusion on the position of the stock held in the undeclared godown, whether it is accounted or unaccounted. In the above circumstances, I set aside the penalty proceedings and remit the case back to the Intelligence Officer for fresh disposal in the light of my observations and findings.”_ 3. On remand, notice was issued to the petitioner, proposing penalty to which the petitioner filed Ext.P8 reply. The matter was finalised by Ext.P9 where the entire stock was treated as unaccounted and penalty imposed in Ext.P6 was again imposed. The petitioner filed revision to the Deputy Commissioner. That was rejected by Ext.P10 order. Aggrieved by Ext.P10 order, the petitioner filed second revision to the Commissioner. That revision was rejected by Ext.P13 order. It is in these circumstances, W.P.(C).No.24161 of 2010 : 3 : the writ petition is filed challenging Exts.P9, P10 and P13 orders. 4. The first contention raised by the counsel for the petitioner is that the impugned orders were passed without complying with the directions in Ext.P7, the revisional order of the Deputy Commissioner. The second contention raised is that to levy the maximum penalty of 50% of the value of the goods, no reasons have been given. To substantiate this contention, the counsel for the petitioner relied on the judgment of this Court in **St.Michael's Oil Mills v. State of Kerala[(1988)68 STC 360]** . 5. I heard the learned Government Pleader also. 6. It is true that in Ext.P7, the revisional order of the Deputy Commissioner, the matter was remanded for fresh disposal with a direction to the Intelligence Officer to verify the records seized and to arrive at a clear conclusion on the stock held in the undeclared godown, W.P.(C).No.24161 of 2010 : 4 : whether it is accounted or unaccounted. The complaint of the petitioner is that Ext.P9 order has been passed without verifying the records seized. However, this contention of the petitioner is seen answered in Ext.P10 order thus: “ _Moreover the copy of receipt recoveries now produced is not about any recoveries in connection with M/s. Sree Ramachandra Enterprises the godown were the goods stocked was TC 37/694, House No.9 Padma Nagar, Fort, Trivandrum. But the receipt of recoveries produced was a receipt for the recoveries from TC-XXXVII/183(House No.20). This receipt has no connection with the undeclared godown of M/s. Sree Ramachandran Enterprises, TC 37/694. So the contention of the counsel to verify the records has no relevance. So the contention is overruled. I had also conducted enquiries with the Intelligence Officer concerned. The Intelligence Officer had informed that the recoveries are related to the other shop Inspection Reports prepared at the time on inspection of the petitioner other shops at the same day. So I convinced that the petitioner had committed an offence under Section 28(8) of the Act,_ W.P.(C).No.24161 of 2010 : 5 : _but not proposed to settle the case departmentally. Therefore, the penalty is confirmed.”_ This finding in Ext.P10 is confirmed in Ext.P13 also. 7. Countering the finding in Ext.P10 order, the learned counsel for the petitioner invited my attention to Exts.P2 and P3, the stop inspection reports. He made particular reference to the “stock inventory as on 31.03.2002” which was recovered and mentioned in Ext.P3 and contended not only that the finding in Ext.P10 is incorrect, but also that Ext.P9 order was passed without referring to these documents. However, learned Government Pleader referred me to Exts.P1 to P3 and also Ext.P9 and his specific contention was that the documents mentioned in Ext.P3 are not in relation to the undeclared godown mentioned in Ext.P1, in respect of which alone penalty has been levied and that the documents recovered by Ext.P3 were in relation to the business place of the petitioner. W.P.(C).No.24161 of 2010 : 6 : 8. If as stated by the learned Government Pleader, the documents mentioned in Ext.P3 including what is relied on by the counsel for the petitioner are in relation to the business place of the petitioner and not undeclared godown with reference to which the penalty proceedings were initiated, the finding in Ext.P10, the first revisional order, that these documents are irrelevant, is unassailable. Therefore, one has to find out whether there is any material before this Court to conclude that the stock inventory mentioned in Ext.P3 are in relation to the undeclared godown mentioned in Ext.P1. 9. Having gone through the materials available, I must confess that there is absolutely no material connecting the documents mentioned in Ext.P3 with the stock found in the undeclared godown. If that be so, on facts, I am unable to conclude that the finding in Ext.P10, which has been extracted above is erroneous. Therefore, there is no substance in the plea of the petitioner that in W.P.(C).No.24161 of 2010 : 7 : imposing penalty for the unaccounted stock found in the undeclared godown of the petitioner, the Intelligence Officer should have verified the documents mentioned in Ext.P3. Consequently, the first contention raised by the petitioner has to be rejected and I do so. 10. The second contention raised by the counsel is that there is no reason stated in the impugned orders for levying the maximum penalty of 50% of the value of the stock. Section 28(8) of the KGST Act authorizes the officer to direct payment of the penalty not exceeding 50% of the value of the goods not accounted for as may be fixed by such officer. This provision has been explained by a Division Bench of this Court in the judgment in **St.Michael's Oil Mills v. State of Kerala [(1988)68 STC 360]** and it has been held that the officer should first be satisfied whether, on the facts and circumstances of the case, penalty is exigible and if so, what quantum should be levied. It has also been held W.P.(C).No.24161 of 2010 : 8 : that the order levying penalty should show that both these aspects were borne in mind while levying penalty. 11. In the impugned order, it has been clearly found that the stock found in the undeclared godown of the petitioner was unaccounted. If that be so, there cannot be any doubt that the penalty is found to be exigible. Insofar as the quantum is concerned, reading of the orders show that the petitioner is a habitual offender and that on previous occasions also the cases have been booked against them and offences have been compounded. It is for that reason that the officer has levied 50% of the maximum penalty. Therefore, on facts, I am satisfied that both the aspects indicated in the judgment referred to above were borne in mind by the officer while imposing penalty on the petitioner. Therefore, I do not find any merit in the writ petition. Sd/- **ANTONY DOMINIC, JUDGE** ln