Penalty proceedings cannot be used to estimate taxable turnover; turnover estimation belongs to assessment, not the Intelligence Officer.

Section 67 of the Kerala Value Added Tax Act does not authorise the Intelligence Officer, in penalty proceedings, to make a best judgment estimate of taxable turnover from electricity consumption, LPG consumption, vehicle capacity, or similar surrounding materials. Penalty may follow where evasion is clearly established from materials recovered on inspection, but where the amount allegedly evaded cannot be quantified on the available record, the officer is confined to the statutory penalty mechanism. Estimation of turnover remains a function of assessment proceedings and belongs to the Assessing Officer. Earlier Division Bench decisions were treated as fact-specific and not as displacing the binding precedent on this point.

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Issues: (i) Whether, in penalty proceedings under Section 67 of the Kerala Value Added Tax Act, 2003, the Intelligence Officer could estimate taxable turnover on the basis of electricity consumption and similar materials; (ii) whether the earlier Division Bench decisions permitting such estimation displaced the rule stated in the binding precedent relied on by the Court.

Issue (i): Whether, in penalty proceedings under Section 67 of the Kerala Value Added Tax Act, 2003, the Intelligence Officer could estimate taxable turnover on the basis of electricity consumption and similar materials.

Analysis: Section 67 contemplates penalty for proved offences and does not confer power to undertake a best judgment estimation of turnover. Where the evasion can be clearly gathered from the materials recovered on inspection, penalty may follow. Where the amount sought to be evaded cannot be quantified on the available materials, the statutory course is limited to the prescribed penalty. Estimation on the basis of electricity consumption, LPG consumption, or other surrounding factors belongs to assessment proceedings and to the Assessing Officer, not to the Intelligence Officer acting under the penalty provision.

Conclusion: The Intelligence Officer had no authority to estimate turnover in penalty proceedings; the issue is answered against the Revenue and in favour of the assessee.

Issue (ii): Whether the earlier Division Bench decisions permitting such estimation displaced the rule stated in the binding precedent relied on by the Court.

Analysis: The earlier cases dealing with estimates based on recovered sale bills, gas consumption, vehicle capacity, or similar materials were distinguished on facts and did not decide the precise question whether Section 67 conferred power to estimate turnover in penalty proceedings. The later decision relied on by the Court expressly answered that question against the Revenue, and judicial propriety required following it. The Court therefore declined to treat the subsequent decisions as overruling that rule.

Conclusion: The binding precedent governed the field, and the contrary line of cases did not alter the position; this issue is also answered against the Revenue and in favour of the assessee.

Final Conclusion: The revisions failed because the penalty authority could not usurp the assessment function by estimating turnover; only the Assessing Officer could make a best judgment assessment on the relevant materials.

Ratio Decidendi: In penalty proceedings under Section 67 of the Kerala Value Added Tax Act, 2003, the Intelligence Officer may impose penalty only on proof of the offence from available materials and cannot make a best judgment estimation of taxable turnover, which is a function reserved to assessment proceedings.

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