Penalty for suspected tax evasion requires reasoned enquiry and evidence, not mere transit delay or unverified suspicion.

Penalty under Section 47(6) of the Kerala Value Added Tax Act, 2003 can be sustained only where the authorised officer, after proper enquiry, records a reasoned finding on acceptable materials that there was an actual attempt to evade tax. Detention based merely on suspicion of multiple transport using the same invoices, or on an unexplained transit delay, is insufficient. Where the assessee produces invoices, books of account, and other records showing the transaction in regular books, the officer must verify the relevant registers and surrounding materials before converting security into penalty. On the facts discussed, the lack of such enquiry and evidence rendered the penalty unsustainable.

---

---

Issues: Whether the penalty imposed under Section 47(6) of the Kerala Value Added Tax Act, 2003 was sustainable when the detention was founded on a suspicion of multiple transport using the same invoices and the assessee produced books of account and other records to explain the time gap in transit.

Analysis: Under Section 47(2), detention is justified only on reason to suspect an attempt to evade tax, but under Section 47(5) the authorised officer must conduct an enquiry and record a finding, on materials, that there was in fact an attempt to evade tax before converting the security into penalty under Section 47(6). The invoices and records produced by the assessee showed that the transaction was reflected in the regular books of account, and the officer did not verify the registers or other relevant materials to establish that the intercepted movement was a second transport using the same invoices. A mere suspicion arising from the absence of delivery or despatch particulars, without supporting enquiry and acceptable evidence, was insufficient to sustain a finding of evasion.

Conclusion: The penalty under Section 47(6) was unsustainable and the revision was allowed in favour of the assessee.

Ratio Decidendi: Penalty under Section 47(6) of the Kerala Value Added Tax Act, 2003 can be sustained only on a reasoned finding, reached after proper enquiry, that there was an actual attempt to evade tax on the basis of legal and acceptable materials; mere suspicion or unexplained transit delay is not enough.

---