Penalty under Kerala VAT law sustained where computation was based on agreement, invoices and audited figures, not estimation.

Penalty proceedings under Section 67 of the Kerala Value Added Tax Act were examined on whether an Intelligence Officer had impermissibly resorted to best judgment estimation of taxable turnover. The materials showed that the computation was derived from the agreement, invoices, and audited figures, rather than from conjecture or approximate reckoning. On that basis, the analysis accepted that the officer had not exceeded jurisdiction by treating the receipts as liable to tax without making a separate estimation exercise. The challenge to the penalty order therefore did not succeed, and no interference under Article 226 was warranted.

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Issues: Whether penalty proceedings under Section 67 of the Kerala Value Added Tax Act, 2003 could be sustained on the basis of actual calculation from the agreement and invoices, and whether the Intelligence Officer had exceeded jurisdiction by treating the receipts as liable to tax without resort to estimation.

Analysis: The dispute turned on the character of the penalty order and whether it rested on impermissible guess work or estimation. The reasoning accepted that an Intelligence Officer cannot, in penalty proceedings, undertake best judgment estimation of taxable turnover in the manner reserved for the Assessing Officer. However, on a close reading of the materials relied on in the penalty order, the determination was found to be based on the agreement, invoices, and audited figures, and not on conjecture or approximate reckoning. Since the computation was treated as an actual calculation of the tax evasion on the available record, the case was held to fall outside the rule excluding estimation by the Intelligence Officer.

Conclusion: The challenge to the penalty order failed, and the writ petition was not entitled to interference under Article 226 of the Constitution of India.

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