Mechanical maximum penalty rejected where wilful evasion was not found; access to seized records was also directed.

Penalty under section 45A of the Kerala General Sales Tax Act could not be imposed at the maximum level merely because unaccounted purchase and sale of cement were found; it required a finding of wilful or contumacious conduct and an attempt to evade tax. As no such finding had been recorded, the penalty was reduced to the extent warranted by the tax sought to be evaded. The assessee was also entitled to return of seized records, or photocopies at its expense, because the documents remained in custody while assessment was pending and their retention prejudiced production before the assessing authority.

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Issues: (i) Whether penalty under section 45A of the Kerala General Sales Tax Act, 1963 could be sustained at the maximum amount in the absence of findings on wilful or contumacious conduct and attempt to evade tax; (ii) whether the assessee was entitled to return of the seized records or copies thereof.

Issue (i): Whether penalty under section 45A of the Kerala General Sales Tax Act, 1963 could be sustained at the maximum amount in the absence of findings on wilful or contumacious conduct and attempt to evade tax.

Analysis: The finding that the assessee had effected unaccounted purchase and sale of cement was sustained, as it was supported by concurrent factual findings. However, penalty under section 45A required more than a mere technical default. The provision demanded proof of wilful or contumacious conduct and circumstances showing an attempt to evade tax. No authority had recorded any finding on evasion or contumacy, and the maximum penalty had been imposed mechanically without considering the quantum in light of the governing principles.

Conclusion: The penalty order was sustainable only to the extent of the tax sought to be evaded, and the maximum penalty was reduced accordingly in favour of the assessee.

Issue (ii): Whether the assessee was entitled to return of the seized records or copies thereof.

Analysis: The seized documents were still with the second respondent, while the assessment for the relevant year remained pending. The continued retention of the documents prejudiced the assessee's ability to produce them before the assessing authority. In those circumstances, a direction was warranted either to return the documents if no longer required for prosecution or to furnish photocopies at the assessee's expense.

Conclusion: The assessee was held entitled to return of the records or, alternatively, photocopies thereof.

Final Conclusion: The challenge succeeded only in part: the penalty was curtailed, and relief was granted for access to the seized documents, while the finding of unaccounted transactions was left undisturbed.

Ratio Decidendi: Penalty for tax offences under section 45A cannot be imposed at the maximum level mechanically; it requires a finding of wilful or contumacious conduct and an attempt to evade tax, with the quantum fixed on a reasoned assessment of the circumstances.

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