1993 (1) TMI 270 - HC - VAT and Sales Tax

Court upholds penalty for tax non-disclosure by cement dealer

Hema V. Kumar Versus Additional Sales Tax Officer-II, Attingal

Hema V. Kumar Versus Additional Sales Tax Officer-II, Attingal - [1993] 89 STC 154 (Ker) Issues:Levy of penalty under section 45A read with section 19(2) of the Kerala General Sales Tax Act, 1963.Analysis:The judgment concerns a dealer in cement who was subject to penalty under section 45A read with section 19(2) of the Act for an assessment year. The dispute arose when the Additional Sales Tax Officer proposed a revision to the assessment order, increasing the taxable turnover. The dealer objected, but the penalty was ultimately set at Rs. 2,50,000. The key question was whether this penalty was justified, hinging on the wilful non-disclosure of assessable turnover by the dealer. The dealer had purchased a significant amount of cement from outside the State but had not fully disclosed the sales, resulting in an escaped turnover of Rs. 21,42,550. The dealer had collected sales tax on these sales but had not remitted it to the Government as required. The Court found that the dealer was in violation of the Act and rules, justifying the penalty.The Court examined the provisions of section 19(2) which allow for a penalty if the escape from assessment is due to wilful non-disclosure of turnover. It was emphasized that the penalty should be in addition to the tax assessed and that the assessing authority must provide a reasonable opportunity for the dealer to show cause against the penalty. The Court clarified that the notice to levy the penalty should be issued within a reasonable period after the assessment order, based on the facts of each case. The judgment distinguished a previous case where the penalty notice was issued after a significant delay, indicating that in the present case, the notice was issued within a reasonable timeframe.Furthermore, the judgment discussed precedents related to the levy of penalties under tax laws. It was highlighted that the burden to prove non-disclosure of turnover lies with the dealer, and in this case, the dealer failed to discharge that burden. The Court also addressed the quantum of penalty, noting that it should not exceed twice the evaded amount. The penalty in this case was reduced to Rs. 2,50,000 from an initial Rs. 2,80,000, which was deemed reasonable and rational given the circumstances. The Court upheld the penalty amount, considering the dealer's actions and the wilful non-disclosure of turnover.In conclusion, the Court dismissed the original petition, affirming the penalty imposed under section 45A read with section 19(2) of the Act. The judgment emphasized the importance of timely disclosure and payment of taxes, underscoring the consequences of non-compliance with tax laws.