Penalty for tax evasion cannot stand where goods move under a valid permit and no evasion is proved.

Penalty under section 29A(4) of the Kerala General Sales Tax Act could not be sustained where foreign liquor transported under a valid excise permit was part of an inter-State purchase and the facts did not show an attempt to evade tax. The goods were accompanied by permits and invoices indicating concessional central sales tax, and their movement to the assessee's Kerala premises was not treated as unauthorised. Any issue about whether the goods were properly brought into stock or correctly assessed at the sale stage was left to the assessing authority, but that did not justify penalty on the facts proved. The penalty was therefore held not leviable.

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Issues: Whether penalty under section 29A(4) of the Kerala General Sales Tax Act, 1963 read with rule 35A(4)(b) of the Kerala General Sales Tax Rules could be sustained for transport of foreign liquor covered by an excise permit in the course of an inter-State purchase.

Analysis: Penalty under section 29A(4) is attracted only when there is an attempt to evade tax in respect of goods under transport. The goods seized were covered by a valid excise permit issued by the State excise authorities, and the circumstances showed that they had been transported by rail to the assessee's place of business in Kerala. The purchase was from outside the State, the invoices showed concessional central sales tax, and there was no basis to treat the transport as an unauthorised movement intended to evade tax. Any question whether the goods were duly brought into stock or correctly assessed at the sale stage was left to the assessing authority, but that did not justify penalty on the facts proved.

Conclusion: The penalty was not leviable and the order confirming penalty was unsustainable.

Final Conclusion: The assessee succeeded in getting the penalty cancelled, while the Revenue's challenge failed.

Ratio Decidendi: Penalty for evasion cannot be imposed under section 29A(4) where the goods are transported under a valid permit in an inter-State purchase and the facts do not establish an attempt to evade tax.

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