Penalty for alleged turnover suppression reduced where tax was assessed and remitted, and maximum statutory penalty was unjustified.

Penalty under section 45A of the Kerala General Sales Tax Act for alleged suppression of works contract turnover was held excessive where the relevant turnover had already been assessed and the record did not clearly show that tax was paid only after detection of suppression. As the department had not properly examined the effect of deduction and remittance of sales tax by the awarder under rule 22A(2), the maximum penalty at twice the tax sought to be evaded was found unwarranted. The penalty was reduced to 50 per cent of the amount levied and sustained, equivalent to the tax sought to be evaded, and interest was waived on compliance with the instalment schedule.

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Issues: Whether the penalty levied under section 45A of the Kerala General Sales Tax Act, 1963 for alleged suppression of turnover in respect of works contract receipts for 1992-93 was liable to be sustained in full, and whether interest on the sustained amount was payable.

Analysis: The turnover relating to the UTI work had been assessed and the tax was stated to have been remitted by the petitioner, though the authorities had treated the omission to account the receipts in 1992-93 as attracting penalty. The materials before the authorities did not clearly establish that the tax had been paid only after detection of suppression, and the department had also not examined the relevant circumstances concerning deduction and remittance of sales tax by the awarder under rule 22A(2) of the Kerala General Sales Tax Rules, 1963. In these circumstances, the maximum penalty at twice the tax sought to be evaded was found to be unwarranted.

Conclusion: The penalty was reduced to 50 per cent of the amount levied and sustained, equivalent to the tax sought to be evaded, and the liability to pay interest was waived on compliance with the instalment schedule.

Final Conclusion: The petitioner obtained partial relief by reduction of the penalty and waiver of interest, while the penalty itself was sustained to the reduced extent.

Ratio Decidendi: Where the tax attributable to the relevant turnover has been assessed and remitted and the circumstances do not clearly establish deliberate suppression warranting the maximum statutory penalty, the penalty may be confined to the tax sought to be evaded rather than imposed at the highest rate.

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