Incorrect VAT return and barred revised return justified penalty, though the penalty amount was reduced.

A return showing granite metal at 4% instead of the amended 12.5% rate was treated as an incorrect return attracting penalty under section 67 of the Kerala VAT Act. A later revised return filed after penalty proceedings had begun could not be accepted, because sections 22(9) and 79B barred such revision once penal action was initiated. Acceptance of settlement fee under section 22(5) did not exclude penalty, and the assessee's plea of ignorance of the amendment did not justify the misclassification. The penalty was upheld, but its quantum was reduced.

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Issues: Whether the return filed by the assessee, showing granite metal at 4% instead of 12.5%, was an incorrect return attracting penalty under section 67 of the Kerala Value Added Tax Act, 2003, and whether the penalty deserved reduction in the circumstances.

Analysis: The return disclosed a tax rate inconsistent with the amended schedule applicable from 1 April 2007, and the assessee had previously classified the goods correctly. The later filing was only a revised return made after penalty proceedings had already commenced, and sections 22(9) and 79B barred acceptance of such a revised return once penal action was initiated. Acceptance of settlement fee under section 22(5) did not prevent penalty under section 67. Although the scheme of electronic filing under rule 24D(4) and the time-limit for rejection under rule 35 reflected a duty on the assessing authority to act diligently, those provisions did not remove the assessee's obligation to file a correct return. The plea of ignorance of the amendment did not explain the misclassification.

Conclusion: The levy of penalty under section 67 was upheld, but the quantum was further reduced to Rs. 1,50,000.

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