Self-assessment VAT penalties turn on correct returns and burden of proof; book entries alone do not defeat default.

Under the Kerala VAT self-assessment regime, the assessee remains bound to prove that no penalty is attracted where statutory default is alleged; the burden under the Explanation to Section 67 was not discharged for the cancelled issue voucher of gold, so deletion of that penalty was unsustainable. In relation to the sale of fixed assets, mere reflection of the transaction in the books of account did not cure the omission from the return or negate the incorrect return, so penalty remained payable. Later payment of tax and interest was relevant only to the quantum, and the penalty was reduced to the amount of tax sought to be evaded.

---

---

Issues: (i) Whether penalty was liable to be deleted in respect of the cancelled issue voucher of gold despite the statutory burden under Section 67 of the Kerala Value Added Tax Act, 2003. (ii) Whether penalty on the sale of fixed assets could be deleted on the ground that the transaction was reflected in the books of account under the self-assessment regime of the Kerala Value Added Tax Act, 2003.

Issue (i): Whether penalty was liable to be deleted in respect of the cancelled issue voucher of gold despite the statutory burden under Section 67 of the Kerala Value Added Tax Act, 2003.

Analysis: The Explanation to Section 67 places the burden of proving non-liability to penalty on the person proceeded against. The assessee did not seek summoning of the artisan, did not produce the stock register, and did not point out the cancelled transaction to dislodge the inference drawn from the cancelled voucher. The Tribunal was therefore not justified in shifting the burden to the Intelligence Officer.

Conclusion: The deletion of penalty on account of the cancelled voucher was unsustainable and the penalty was affirmed.

Issue (ii): Whether penalty on the sale of fixed assets could be deleted on the ground that the transaction was reflected in the books of account under the self-assessment regime of the Kerala Value Added Tax Act, 2003.

Analysis: Under Section 21, the VAT scheme is one of self-assessment subject to Sections 22, 24 and 25, and the assessee is bound to file a correct return. A disclosure in books of account does not, by itself, answer the statutory default where the return omits taxable turnover. The incorrect return and non-disclosure of the sale of fixed assets attracted penalty, though the later payment of tax and interest was relevant to the quantum.

Conclusion: Penalty was payable on the sale of fixed assets, but the quantum was reduced to the amount of tax sought to be evaded.

Final Conclusion: The questions of law were answered in favour of the Revenue on liability, but the relief was confined to modification of the penalty quantum for the fixed-asset sale.

Ratio Decidendi: Under a self-assessment VAT regime, the assessee bears the burden to disprove penalty where statutory default is alleged, and mere disclosure in books of account does not negate penalty for an incorrect return.

---