Neerolpan Valeed v. Intelligence Officer (IB) II, Kozhikode and Commercial Tax Officer, Manjeri

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE MONDAY, THE 14TH DAY OF MARCH 2016/24TH PHALGUNA, 1937 WP(C).No. 4124 of 2009 (N) --------------------------- PETITIONER(S): -------------------------- NEEROLPAN VALEED, S/O.USMAN MADANI, "HILAL MANZIL", PATHAPIRIYUM, EDAVANNA AND NOW AT THURAKKAL, NEAR MALABAR HOSPITAL, BYE-PASS ROAD, MAJERI. BY ADVS.SRI.P.RAGHUNATH SRI.PREMJIT NAGENDRAN RESPONDENTS: ----------- 1. INTELLIGENCE OFFICER (IB) II, KOZHIKODE. 2. COMMERCIAL TAX OFFICER, MANJERI. BY GOVERNMENT PLEADER SRI.BOBY JOHN PULIKKAPARAMBIL THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 14-03-2016, ALONG WITH WPC. 5725/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ## **APPENDIX TO W.P.C.No.4124 OF 2009** ## **PETITIONER'S EXHIBITS:** - P1: PHOTOCOPY STATEMENT DATED 6.3.07 GIVEN BY SRI.ALAVI. - P2: PHOTOCOPY OF AFFIDAVIT DATED 7.3.2007 OF SRI.K.ALAVI. - P3: PHOTOCOPY OF NOTICE DATED 13.3.2007. - P4: PHOTOCOPY OF NOTICE DATED 26.3.2007 FOR 2005-06. - P5: PHOTOCOPY OF REPLY DTED 18.6.2007. - P6: PHOTOCOPY OF AFFIDAVIT DATED 17.4.2007. - P7: PHOTOCOPY OF STATEMENT DT.26.7.07 GIVEN BY SRI.ALAVI. - P8: PHOTOCOPY STATEMENT DATED 26.7.2007 GIVEN BY SRI.C.T.ABDUL JABBAR. - P9: PHOTOCOPY OF STATEMENT DATED 26.7.07 GIVEN BY SRI.K.P.SUDHAKARAN NAIR. - P10: PHOTOCOPY OF NOTICE DATED 23.01.08 FOR 2003-04. - P11: PHOTOCOPY OF NOTICE DATED 23.01.08 FOR 2004-2005. - P12: PHOTOCOPY OF NOTICE DATED 23.01.08 FOR 2005-06. - P13: PHOTOCOPY OF INTERIM REPLY DT.4.2.08 FOR 03.04 AND 04.05. - P14: PHOTOCOPY OF FINAL REPLY DT.15.4.08 FOR 2004-05. - P15: PHOTOCOPY OF FINAL REPLY DT.15.4.08 FOR 2004-05. - P16: PHOTOCOPY OF INTERIM REPLY DT.4.2.08 FOR 2005-06. - P17: PHOTOCOPY OF FINAL REPLY DT.15.4.08 FOR 2005-06. - P18: PHOTOCOPY OF PENALTY ORDER FOR 2003-04 DT.27.12.08. - P19: PHOTOCOPY OF PENALTY ORDER FOR 2004-05 DT.27.12.08. - P20: PHOTOCOPY OF PENALTY ORDER FOR 2005-06 DT.27.12.08. ## **RESPONDENT'S EXHIBITS:** NIL // True Copy// PA to Judge ## **A.M.SHAFFIQUE, J * * * * * * * * * * * *** W.P.C.Nos.4124 & 5725 of 2009 ---------------------------------------Dated this the 14[th] day of March 2016 ## **J U D G M E N T** This writ petition is filed challenging the penalty orders issued by the respondent authorities invoking the provisions under Section 45A of the Kerala General Sales Tax Act as well as under Section 67(1)(b) of the Kerala Value Added Tax Act. 2. The short facts involved in the writ petition would disclose that the Intelligence Officer conducted an inspection based on certain information regarding the activities of one Alavi. It is found that several transactions had been done by the said Alavi by purchasing various materials namely glass and other products. The Intelligence Officer formed an opinion that the said Alavi is only a benami and accordingly he had taken proceedings against the petitioners under the KGST Act and KVAT Act. Pursuant to such procedure adopted by the Intelligence Officer, he passed penalty orders for the assessment years 2003-2004, 2004-2005 and 2005-2006. 3. Petitioners are persons who are served with the orders of penalty on the ground that they were also involved in the W.P.C.No.11506/2008 2 transaction by which tax was not being paid in accordance with the statutory provisions. 4. Though the writ petitions have been filed seeking various reliefs in terms with the assessment orders passed, learned Counsel appearing for the petitioners relied upon one specific aspect by which the penalty orders were to be set aside. It is argued that the Intelligence Officer has made an estimate by adding 25% of the purchase turn over taking into consideration the gross profit which cannot be done in terms with the Division Bench judgment in **U.K.Monu Timbers (M/s.) v. State of Kerala** [2012(3) KHC 111] (DB)] and also the judgment of this Court in S.T.(Rev) No.77/2012 dated 31/07/2012 in **M/s.Vyshak International Hotel (P) Ltd. v. State of Kerala** . In paragraph 8 of the judgment in **Monu Timbers** (supra), the Division Bench held as under: _“8. The question first to be considered is with respect to the estimation of the turnover made by the Intelligence Officer based on the rates prescribed in the circular. The circular if held by us to be indicative or determinative of the actual price for which the goods are sold, the_ W.P.C.No.11506/2008 3 _question posed is as to whether in penalty proceedings estimation can be adopted. The provision authorizing imposition of penalties, coming up for consideration in the instant case, is Section 67 of the KVAT Act. Clauses (a) to (l) of Section 67 enumerates the various offences that attract imposition of penalty. If any authority empowered under the Act is satisfied that any person has committed any or all of the offences enumerated in clauses (a) to (l):_ _“such authority may direct that such person shall pay, by way of penalty, an amount not exceeding twice the amount of tax or other amount evaded or sought to be evaded where it is practicable to quantify the evasion or an amount not exceeding ten thousand rupees in any other case._ _When action is initiated under Section 67 of the KVAT Act for defects/offences mentioned in clauses (a) to (l), it is to be noticed that the authority is clothed with the power to impose, by way of penalty, an amount not exceeding twice the amount of tax or other amount evaded or sought to be evaded, where it is practicable to quantify the evasion or in any other case, Rs.10,000/-. It is pertinent that in imposing_ W.P.C.No.11506/2008 4 _penalty at twice the tax evaded or sought to be evaded, it should be practically possible to determine and quantify the amount evaded or sought to be evaded. This does not contemplate any estimation, however reasonable it may be, since the same would be in the realm of “best judgment”, of, an individual-authority.”_ It is argued that the Intelligence Officer should not have imposed any penalty and the matter is liable to be re-opened and considered in accordance with law. 5. Learned counsel appearing in W.P.C.No.4124/2009 would submit that as far as the petitioner in the said case is concerned, he was not given an opportunity to cross-examine the witnesses and he was totally unaware of the proceedings that was being initiated by the concerned officer at the instance of the petitioner in W.P.C.No.5725/2009. 6. Learned Government Pleader, on the other hand, submitted that there are sufficient materials to indicate that the Intelligence Officer has taken protective assessment proceedings against the petitioners. There is also slight deviation in the facts of the case as far as the judgment in **Monu Timbers** (supra) is W.P.C.No.11506/2008 5 concerned. Still, it is argued that, if at all the matter is remitted back, the authority should be permitted to proceed with the penalty proceedings in accordance with the procedure prescribed. 7. Having heard the learned counsel on either side and having perused the records, I am of the view that the penalty order indicates an estimate being made by the Intelligence Officer which is contrary to the law laid down by this Court in **Monu Timbers (supra).** Under such circumstances, the impugned orders are liable to be set aside for that reason itself. Accordingly, the impugned orders Exts.P2, P3 and P4 in W.P.C.No.5725/2009 and Exts.P18, P19 and P20 in W.P.C.No.4124 of 2009 are set aside and the competent Officer is directed to consider the matter afresh in the light of the principles laid down in **Monu Timbers** (supra) and the parties are at liberty to take all contentions, as available under law. (sd/-) ## **(A.M.SHAFFIQUE, JUDGE)** jsr