Strict construction of tax concession denied relief for vehicle sales to defence personnel, but penalty was set aside for bona fide belief.

A concessional sales tax notification was held to apply only to sales to the Canteen Stores Department and named canteens, so purchases of motor vehicles by individual defence personnel in their own names did not qualify for the concession. The notification was construed strictly, and the surrounding documents showed no transfer of property or consideration in favour of the Department. However, penalty under section 45A of the Kerala General Sales Tax Act was found unsustainable because the claim was made under a long-standing departmental practice and a bona fide belief, without deliberate defiance, conscious disregard, or dishonest intent. The concession failed, but the penalty was set aside.

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Issues: (i) Whether the sale of motor vehicles to defence personnel could be treated as a sale to the Canteen Stores Department so as to attract the concessional rate of tax under entry 6 of Schedule III to S.R.O. No. 1091/99. (ii) Whether penalty under section 45A of the Kerala General Sales Tax Act, 1963 was justified for claiming the concessional rate and filing the return on that basis.

Issue (i): Whether the sale of motor vehicles to defence personnel could be treated as a sale to the Canteen Stores Department so as to attract the concessional rate of tax under entry 6 of Schedule III to S.R.O. No. 1091/99.

Analysis: The relevant notification was construed strictly. The entry granted concession to military, naval, air force and NCC canteens and the Canteen Stores Department, not to individual personnel purchasing vehicles in their own names. The sales invoices, sale certificates, registration records, insurance documents and financing papers all showed individual purchasers, and no transfer of property or consideration in favour of the Canteen Stores Department was established. Certificates issued by the Canteen Stores Department did not show that the vehicles were purchased by it from the assessee. On the materials available, the transactions were not sales to the Canteen Stores Department within the meaning of the notification.

Conclusion: The assessee was not entitled to the concessional rate of tax under entry 6 of Schedule III to S.R.O. No. 1091/99.

Issue (ii): Whether penalty under section 45A of the Kerala General Sales Tax Act, 1963 was justified for claiming the concessional rate and filing the return on that basis.

Analysis: Although the claim to concessional tax failed, the surrounding circumstances showed that the Canteen Stores Department had been issuing certificates for years and that the procedure under the canteen manual treated such vehicles as AFD items arranged through the department. The conduct did not indicate deliberate defiance of law, conscious disregard of obligation, or dishonest intent. The breach was treated as technical and flowing from a bona fide belief, and therefore the penal provision was not attracted.

Conclusion: Penalty under section 45A was not sustainable.

Final Conclusion: The concessional tax claim failed, but the penalty was rightly set aside; the appeals and writ petition were dismissed.

Ratio Decidendi: A concessional tax notification must be strictly construed, and where the sale is made to individual purchasers rather than to the named organisation, the concession is unavailable; however, penalty is not warranted absent deliberate defiance, contumacious conduct, or conscious disregard of statutory duty, especially where the breach is based on a bona fide belief.

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