Incorrect return claiming export exemption attracted penalty, and proportionality could not reduce deliberate tax evasion penalty.

Claiming exemption on purchases made before any export contract, while reporting the entire turnover as exempt, was treated as an untrue and incorrect return because section 5(3) of the Central Sales Tax Act protects only qualifying penultimate sales linked to an export agreement. On that basis, penalty under section 45A of the Kerala General Sales Tax Act was attracted. The text also states that deliberate, systematic evasion does not justify reducing the penalty on proportionality grounds, and a fresh plea about the penalty notice could not be raised for the first time in appeal because it had been waived below.

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Issues: (i) Whether filing a return claiming exemption on purchases made without a prior export contract constituted an untrue or incorrect return so as to attract penalty under section 45A of the Kerala General Sales Tax Act, 1963; (ii) Whether the quantum of penalty could be reduced on proportionality grounds or on the basis of a new plea raised for the first time in appeal.

Issue (i): Whether filing a return claiming exemption on purchases made without a prior export contract constituted an untrue or incorrect return so as to attract penalty under section 45A of the Kerala General Sales Tax Act, 1963.

Analysis: The claimed exemption was founded on section 5(3) of the Central Sales Tax Act, 1956, which protects only penultimate sales or purchases made after an export agreement or order and for complying with it. The factual materials showed that the purchases were made before the contract relied on by the assessee. The exemption claim therefore had no legal basis. By claiming exemption on the entire turnover in the annual return, the assessee disclosed an incorrect and untrue return and withheld tax that was otherwise payable along with the returns.

Conclusion: Penalty under section 45A was rightly attracted, and the finding was against the assessee.

Issue (ii): Whether the quantum of penalty could be reduced on proportionality grounds or on the basis of a new plea raised for the first time in appeal.

Analysis: The conduct was treated as deliberate and systematic evasion from the beginning of the assessment year, leaving no scope for invoking proportionality or the Wednesbury principle to dilute the penalty. The additional contention that the notice proposed a different amount was not raised before the assessing authority, revisional authorities, or the writ court. That plea was therefore treated as waived and could not be entertained at the appellate stage.

Conclusion: The penalty as sustained below was upheld, and the contention on quantum failed.

Final Conclusion: The levy of penalty was sustained in full and the writ appeal was dismissed, leaving the revenue's action undisturbed.

Ratio Decidendi: A return claiming exemption on a turnover not covered by the statutory exemption is an untrue or incorrect return attracting penalty, and where the evasion is deliberate, proportionality cannot be invoked to reduce the penalty; a new factual or legal plea not raised before the authorities below cannot be entertained for the first time in appeal.

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