Court rules penalty notice invalid due to lack of proper verification and hearing opportunity. Commissioner's restoration notice deemed invalid.

The court held that the notice issued under section 45A(5) of the Kerala General Sales Tax Act for imposing a penalty was unjustified as it was issued without proper verification of accounts and without affording the appellant a reasonable opportunity for a hearing. The Deputy Commissioner's order setting aside the penalty was upheld, ruling that it was not prejudicial to the interests of the Revenue. The Commissioner's notice to restore the penalty order was deemed invalid. The writ appeal was allowed, directing the Intelligence Officer to verify the accounts and provide the appellant with an opportunity to explain the seized records.

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Issues Involved:
1. Legality of the notice issued u/s 45A(5) of the Kerala General Sales Tax Act.
2. Validity of the penalty imposed without proper verification and opportunity for hearing.
3. Jurisdiction of the Commissioner of Commercial Taxes to issue notice u/s 45A(5) and whether the Deputy Commissioner's order can be considered prejudicial to the interests of the Revenue.

Summary:

1. Legality of the notice issued u/s 45A(5) of the Kerala General Sales Tax Act:
The matter arises under the Kerala General Sales Tax Act, 1963, concerning the legality of the notice issued u/s 45A(5) for imposing a penalty. The successor-in-office of the Intelligence Officer issued a notice dated May 5, 1998, proposing a penalty u/s 45A(1)(b) for failure to keep true and complete accounts for 1994-95. The appellant contended that the notice was issued without verifying the accounts and without satisfying whether the books of account maintained were true and complete.

2. Validity of the penalty imposed without proper verification and opportunity for hearing:
The appellant argued that the penalty of Rs. 12,60,450 was imposed without affording a reasonable opportunity for personal hearing and representation. The Deputy Commissioner found gross violation of the principles of natural justice and set aside the penalty order, remanding the case for fresh disposal after affording a reasonable opportunity for hearing and representation. The Commissioner of Commercial Taxes issued a notice u/s 45A(5) proposing to set aside the Deputy Commissioner's order and restore the penalty order, invoking suo motu power of revision.

3. Jurisdiction of the Commissioner of Commercial Taxes to issue notice u/s 45A(5) and whether the Deputy Commissioner's order can be considered prejudicial to the interests of the Revenue:
The appellant challenged the validity of the notice issued by the Commissioner, contending that the Deputy Commissioner's order was not prejudicial to the interests of the Revenue. The court examined whether the Commissioner had jurisdiction to issue the notice and whether the Deputy Commissioner's order could be regarded as prejudicial to the Revenue. The court held that the procedural formalities under section 17(3) of the Kerala General Sales Tax Act must apply, ensuring adequate and effective opportunity for the assessee to file objections and substantiate the case by producing evidence. The court concluded that the Deputy Commissioner's order was not prejudicial to the interests of the Revenue and that the Commissioner's notice was unjustified. The writ appeal was allowed, setting aside the order of the learned single judge, and directing the Intelligence Officer to verify the books of account and afford the appellant an opportunity to explain the seized records.

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