Wilful failure to remit advance tax on time can amount to evasion, triggering the higher penalty regime under Kerala sales tax law.

Wilful failure to remit the advance tax required for March by the end of that month was treated as evasion or attempted evasion of tax, attracting the higher penalty regime under section 45A. The conduct was not regarded as a mere technical breach, because the amount allegedly evaded was ascertainable and the circumstances justified penalty beyond the nominal ceiling applicable to other contraventions. Section 45AA could not be invoked without a prior notice of demand, since that notice was a statutory precondition for its operation.

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Issues: Whether failure to remit not less than 90 per cent of the tax payable for March by the end of that month under rule 21(7) of the Kerala General Sales Tax Rules, 1963 attracted penalty under section 45A of the Kerala General Sales Tax Act, 1963; whether the default could be treated as a mere technical breach warranting only the maximum penalty of Rs. 10,000; and whether section 45AA could be invoked in the absence of a notice of demand.

Issue (i): Whether failure to remit not less than 90 per cent of the tax payable for March by the end of that month under rule 21(7) attracted penalty under section 45A of the Kerala General Sales Tax Act, 1963.

Analysis: The statutory obligation under rule 21(7) required advance payment of tax for March by the last day of the month. The assessee remitted only part of the amount before the deadline and paid the balance only later. The default was found to be deliberate and wilful, and the non-payment of the advance tax due for March was held to amount to evasion or attempted evasion of tax within the scope of section 45A.

Conclusion: Yes. The contravention of rule 21(7) attracted penalty under section 45A, and the penalty was sustainable on the footing of evasion of tax.

Issue (ii): Whether the default could be treated as a mere technical breach warranting only the maximum penalty of Rs. 10,000.

Analysis: Section 45A prescribed a higher ceiling where the contravention involved tax evasion or an attempt to evade tax, while the lesser ceiling applied to other violations. On the facts, the tax sought to be evaded was ascertainable, and the conduct was not treated as a mere technical lapse. The Court held that the circumstances justified the application of the higher penalty regime under section 45A, and the quantified penalty of Rs. 50,000 was within the permissible limit.

Conclusion: No. The case was not confined to the Rs. 10,000 ceiling, and the reduced penalty of Rs. 50,000 was upheld.

Issue (iii): Whether section 45AA could be invoked in the absence of a notice of demand.

Analysis: Section 45AA applies where there is default in payment within the time specified in a notice of demand. No such notice of demand had been issued in the case, so the statutory precondition for section 45AA was absent. The Court therefore declined to sustain the penalty under that provision.

Conclusion: No. Section 45AA was not applicable.

Final Conclusion: The penalty was upheld under section 45A of the Kerala General Sales Tax Act, 1963, the invocation of section 45AA was rejected, and the appeal failed.

Ratio Decidendi: Where a dealer wilfully fails to pay the advance tax required by rule 21(7) by the prescribed date, and the amount sought to be evaded is ascertainable, the contravention constitutes evasion or attempted evasion of tax so as to attract the higher penalty under section 45A rather than the nominal maximum for other violations; section 45AA applies only when there is default after a notice of demand.

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