Statutory penalty requires prior verification and a finding on unaccounted goods before it can be sustained.

Penalty under the Karnataka Sales Tax Act could not be sustained unless the empowered officer first called for supporting documents, examined the goods, and recorded a foundational finding that the goods were not properly accounted for and were therefore presumed to represent evaded tax. The impugned order failed to follow that statutory sequence, as it did not require the necessary verification, did not record the mandatory finding on unaccounted goods, and proceeded on unauthorized storage rather than the penal basis prescribed by the provision. The penalty order was quashed for non-compliance with Section 28(3A)(iv)(a), and liberty was reserved to proceed afresh in accordance with law.

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Issues: Whether the penalty order passed under Section 28(3A)(iv)(a) of the Karnataka Sales Tax Act, 1957 was sustainable in law when the statutory procedure for verification, calling for supporting documents, and recording a finding on unaccounted goods was not followed.

Analysis: The penalty provision was held to operate only after the empowered officer first calls upon the dealer to produce supporting documents, examines the goods and records a finding that the goods are not properly accounted for and are therefore presumed to represent evaded tax. The impugned order failed to apply this scheme. The officer did not first require production and examination of documents in the manner contemplated by the provision, did not record the necessary finding on unaccounted goods, and treated the matter as one concerning unauthorized storage rather than the statutory basis for penalty. As the order was made without compliance with the conditions built into the penal provision, the constitutional challenge did not require adjudication.

Conclusion: The penalty order was quashed for non-compliance with Section 28(3A)(iv)(a), and the writ petition was allowed in favour of the petitioner, with liberty reserved to proceed afresh in accordance with law.

Ratio Decidendi: A penalty under a statutory evasion provision cannot be sustained unless the officer follows the prescribed verification process and records the foundational finding that the goods are unaccounted and attributable to tax evasion.

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