Agency claim must be proved with clear records; absence of evidence sustains penalty, though it may be reduced.

A dealer claiming that a transaction was an agency arrangement or an inter-State sale must prove that claim with clear agreement, correspondence, authorisation, and supporting accounts. On the facts stated, the material did not establish a genuine agency relationship or an inter-State sale, and the transaction was treated as unaccounted purchase and resale attracting penalty. However, as there was no positive case of deliberate evasion, the penalty was moderated rather than imposed at full strength. The penalty was upheld in principle but reduced to 50 per cent of the amount originally levied, with the balance carrying applicable interest.

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Issues: Whether the impugned penalty for alleged unaccounted sales was sustainable when the dealer claimed that the transaction was an agency arrangement and an inter-State sale.

Analysis: The dealer failed to produce any agreement, correspondence, authorisation, or supporting accounts to show that he acted as an agent. Under Explanation 5 to Section 2(xxi) of the Kerala General Sales Tax Act, 1963, two independent sales may be deemed to have taken place in agency situations where the statutory conditions are attracted. The materials did not establish that the transaction was a genuine agency arrangement or that it was an inter-State sale. The finding of unaccounted purchase and resale was therefore sustained, but there was no positive case of deliberate evasion warranting the full measure of penalty.

Conclusion: The penalty was upheld in principle, but it was reduced to 50 per cent of the amount originally levied, with the balance payable with applicable interest.

Ratio Decidendi: A party claiming agency must prove it with clear evidence and accounts; failing that, the transaction may be treated as a sale attracting penalty, though the penalty may be moderated in the absence of proved evasion.

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