Penalty for alleged local sale failed where direct inter-State dispatch showed no suppression of turnover or tax evasion.

Penalty under Section 45A of the Kerala General Sales Tax Act was held unsustainable where the goods were dispatched directly by a Pondicherry dealer to buyers in Kerala pursuant to orders procured by the petitioner. On those facts, the petitioner was not treated as the purchaser or as having effected a local sale within Kerala. The court noted that penalty required clear evidence of suppression of turnover and tax evasion, which was not established, and the sale definitions under the KGST Act and the Central Sales Tax Act supported the conclusion that the transaction was not a local sale by the petitioner.

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Issues: Whether penalty under Section 45A of the Kerala General Sales Tax Act was sustainable when the transactions were found to be inter-State sales and the petitioner was not shown to have purchased and resold the goods within the State.

Analysis: The goods were despatched directly by the Pondicherry dealer to the buyers in Kerala and delivered to them in pursuance of the orders procured by the petitioner. On those facts, the petitioner could not be treated as the purchaser of the goods or as having effected a local sale within Kerala. Penalty under Section 45A required clear evidence of suppression of turnover and evasion of tax, which was not established. The definition of sale under the KGST Act and the Central Sales Tax Act also supported the conclusion that the transaction was not a local sale by the petitioner.

Conclusion: The penalty was not sustainable and the order restoring the penalty was rightly set aside.

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