Wrong declaration for concessional sales tax justified penalty, and the maximum quantum was upheld as reasoned and non-arbitrary.

Furnishing Form 18 to obtain concessional sales tax under section 5(7) was held to attract penalty where the finished goods were later transferred outside the State without liability under the Kerala General Sales Tax Act or the Central Sales Tax Act. The declaration operated as a statutory representation, and breach of the production-and-taxability condition justified penal action against the purchasing dealer despite the selling dealer's duty to collect tax. The maximum penalty under section 45A(1)(g) was also sustained because the revisional authority had considered the wrong declaration, repeated transactions, revenue loss and lack of bona fides, showing proper application of mind rather than arbitrariness.

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Issues: (i) Whether the petitioner was liable to penalty for furnishing a declaration in form 18 to obtain concessional tax under section 5(7) of the Kerala General Sales Tax Act, 1963, though part of the finished products was transferred outside the State without being liable to tax under the Act or the Central Sales Tax Act, 1956. (ii) Whether the imposition of maximum penalty under section 45A(1)(g) of the Kerala General Sales Tax Act, 1963 suffered from non-application of mind or arbitrariness.

Issue (i): Whether the petitioner was liable to penalty for furnishing a declaration in form 18 to obtain concessional tax under section 5(7) of the Kerala General Sales Tax Act, 1963, though part of the finished products was transferred outside the State without being liable to tax under the Act or the Central Sales Tax Act, 1956.

Analysis: The concessional rate under section 5(7) was available only when the industrial raw materials were used in the production of finished products inside the State for sale and the finished products were liable to tax under the Act or the Central Sales Tax Act, 1956. The declaration in form 18 was treated as a statutory representation on which the selling dealer acted and collected tax at the concessional rate. Once a substantial portion of the finished goods was removed by branch transfer without liability to tax under either enactment, the condition in the declaration stood violated and the petitioner could not retain the benefit of the concession. The fact that the statutory liability to collect tax rested on the selling dealer did not exclude penalty against the purchasing dealer who made the incorrect declaration and thereby caused loss to revenue.

Conclusion: The petitioner was liable to penalty and the challenge on the basis that no contravention was made out failed.

Issue (ii): Whether the imposition of maximum penalty under section 45A(1)(g) of the Kerala General Sales Tax Act, 1963 suffered from non-application of mind or arbitrariness.

Analysis: Penalty under section 45A is penal in nature and its quantum has to be determined on a judicial assessment of the circumstances. The revisional order expressly examined the material, the repeated nature of the transactions, the wrong declaration, the revenue loss, and the absence of bona fides. The authority concluded that the facts justified the highest permissible penalty. As the order showed consideration of the gravity of the default and the relevant materials, the quantum was not shown to be mechanical, arbitrary, or without application of mind.

Conclusion: The maximum penalty was upheld and the challenge to the quantum failed.

Final Conclusion: The orders imposing and sustaining penalty were affirmed, and no ground was made out for interference in writ jurisdiction.

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