TaxTMI 
TaxTMI 
2009 (8) TMI 1113
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....hedule I from the rate specified in column (3) to the rate specified in column (4) thereof, against each; (2) by persons specified in column (2) of Schedule II on the turnover of goods specified in column (3) to the rate specified in column (4) subject to the conditions specified in column (5) against each; (3) on the turnover of sale to the persons or organisations mentioned in column (2) of Schedule III of goods specified in column (3) thereof to the rate mentioned in column (4) on the seller producing a certificate in duplicate in the form in the annexure I obtained from the purchaser; . . ." Schedule III, to the extent it is relevant, is extracted below for reference: "SCHEDULE III Persons or organisations, the rate of tax on the sale of goods to whom is reduced under sub-clause (3) of clause I Sl. No. Description of person/organisation Description of goods Reduced rate of tax (per cent) (1) (2) (3) (4) 1 Administrator, Union Territory of Lakshadweep, Laccadive Co-operative Marketing Federation, Kozhikode and the Lakshadweep Harbour Works and any dealer recognised by the Administrator, Union Territory of Lakshadweep subject to the condi....
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....m June 15, 2004 which may be extended by the company. (clause 1) (ii) the area of operation of the BDA will be the State of Andhra Pradesh, Karnataka, Tamil Nadu and Kerala. (clause 2) (iii) the company shall be at liberty to terminate the appointment at any time without notice if the services are found to be unsatisfactory. (clause 7) (iv) the appointment shall be deemed to have been terminated in case the BDA do not receive any letter from the petitioner extending the appointment for a further period. (clause 8) (v) that the product availability of the company, in so far as it is relevant is at MRPL, Mangalore, and Cochin and supplies will be effected at ex-storage points and transportation arrangements shall be made by the customers. (clauses 1 and 3 of general information) (vi) all supplies will be on cash and carrying basis. (clause 6) (vii) the BDA shall canvass the business from customers for their own consumption only. (clause 15 of role of BDA) (viii) that certain customers may be entitled to exemption from certain levies and the BDA shall in such cases furnish necessary supporting documents to the company. (clause 23 of role of BDA). (ix) that BDA ....
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....n.) 5.. It is also stated that on the strength of the aforesaid documents, payments by demand drafts and cheques were received and HSD was sold to respondents 5 and 6, availing of the concessional rate of tax four per cent. as provided under exhibit P1. According to the petitioner, delivery of HSD was given from HHA Tank Terminal and Konkan Storage System, Cochin and purchasing dealers arranged tankers for its transportation. Exhibits P3 and P3(a) are the specimen invoices produced by the petitioner to prove sale to the dealers and that receipt has been acknowledged by the representatives of the customers. It is stated that accordingly returns under the Act were filed and tax at four per cent. was paid. Subsequently, the petitioner was called upon to produce evidence to prove movement of goods from Kerala to Lakshadweep, and thereupon, copies of export bills filed by respondents 5 and 6 at the Ports at Beypore Port, Kozhikode and Mangalore were obtained and were furnished to the Department. It is stated that the first respondent conducted certain investigation and finally issued exhibit P10 show-cause notice dated June 20, 2006 with the following allegations: "It....
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....bna Enterprises, Agathi during 2004-05. In other words you have wrongly availed of the concessional rate of four per cent. KGST. As per the stipulation under entry 1 of Schedule III to S.R.O. No. 1091/99 the concessional rate of four per cent. would only apply subject to the condition that a dealer recognised by the Administrator, Union Territory of Lakshadweep utilises the concession only in respect of goods used in the Union Territory of Lakshadweep. The condition contemplated under the Government notification has not been fulfilled or violated wherefore the certificates in annexure I filed lose their significance and become infructuous. Undisputedly HSD carried rate of 24 per cent. KGST under section 5 of the KGST Act read with Schedule I. As such the concessional rate irregularly availed of by you resulted in evasion of tax to the tune of Rs. 2,52,39,582.22 as shown below: Total KGST due Rs. 3,02,87,499.00 Less: Concessional rate availed Rs. 50,47,916.00 Balance tax due Rs. 2,52,39,583.00" On the above allegations, it has proposed to impose penalty amounting to Rs. 5,04,79,164, being twice the amount of tax evaded and the petitioner was called ....
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...., as required by him, copies of the export bills were obtained from the purchasers during January and February 2006 and that the petitioner had no reason to believe that anything was amiss. It is also stated that the petitioner had not received copies of the so called fake export bills and that when they tried to contact the purchasers, they were not able to secure their co-operation. On this basis the petitioner requested that the penalty proceedings against them be dropped. Considering exhibits P11 and P12 replies and after hearing the petitioner, the first respondent passed exhibit P13 order dated December 28, 2006, imposing penalty of Rs. 5,04,79,164 on the petitioner, for the assessment year 2004-05 for evasion of tax to the tune of Rs. 2,52,39,583. In this order, although the first respondent, accepted that the petitioner had obtained necessary licences, permits, etc., authorising respondents 5 and 6 to deal with petroleum products, he has found fault with the petitioner for not informing the seventh respondent about the supply of HSD to respondents 5 and 6 and requesting them to monitor its actual utilisation. Further the petitioner is also faulted for not alerting the....
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....hat such undertaking is applicable only when goods intended for manufacture were not actually utilised for that purpose. Further it is also held that the liability to pay tax in respect of HSD is on the first seller in Kerala and that it is an undisputed fact that the petitioner has effected the first sale of HSD and therefore the statute does not empower anybody to shift the point of levy. On this basis, overruling the contentions raised, penalty as proposed in exhibit P10 notice was levied. The petitioner filed revision under section 45A(3) of the Act before the second respondent, who by exhibit P14 order, dismissed the revision. Further revision under section 45A(5) was filed before the third respondent which was also dismissed by exhibit P15 order. It is in these circumstances, the writ petition is filed. Counter-affidavit has been filed by respondents 1 to 4. It is stated that the materials disclosed in the investigation showed that the HSD allegedly sold to respondents 5 and 6 have not been taken to Lakshadweep and that the differential tax benefit has been swindled by tax evaders. It is stated that the statutory liability to pay tax is on the seller and that the ....
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....to Agathi this respondent made enquires to my son-in-law about the permit, but he was giving evasive replies. Suspecting some foul play I had applied to cancel this permit on December 27, 2006 and it was cancelled on January 30, 2007. Now this respondent suspects that dealership certificate might have reached the petitioner-company through his son-in-law who is a friend of one Mr. M. Haris the husband of P.P. Shahida, proprietrix of M/s. Nizy Enterprises, FP 15/48 Petta, Feroke, Kozhikode which as stated in para 4 of the writ petition is the Business Development Associate of the petitionercompany. All the intends for supply of the oil as admitted by the company, was placed by the aforesaid Nizy Enterprises without knowledge or authorisation from me. There is absolutely no consent, contract or even any correspondence directly between the oil-company and the dealer. As such M/s. Ifan Enterprises, Agathi, is a proprietary concern and this complainant is the sole proprietor. Nobody can act for and on behalf of the concern without authorisation or power of attorney given on that behalf. The complainant has not given power of attorney or authorisation to anybody to enter into any cont....
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....the petitioner-company has suffered judgment in the appeal, revision as well as in the writ petition filed before the High Court of Kerala. The honourable High Court in its judgment dated 3rd April, 2007 in W.P. (C) 7803 of 2007 has recorded this fact." On behalf of the seventh respondent, counter-affidavit has been filed and they confirm that exhibits P2 and P2(a) certificates were issued. They also submit that the Department of Explosives have issued exhibits P8 and P8(a) to respondents 5 and 6. It is stated that coming to know of the serious malpractices committed in connection with the sale of petroleum products by availing of concessional rate of tax, the seventh respondent had issued exhibits R7(a) and R7(b) dated February 20, 2008 cancelling exhibits P2 and P2(a) certificates. The petitioner has filed separate reply affidavits disputing the averments in the counter-affidavits. Along with the reply to the counter-affidavit filed by respondents 1 to 4, the petitioner has also produced exhibit P18 complaint made to the Commissioner of Police, Kochi City against the partners and proprietor of respondents 5 and 6, alleging that they have committed offences under sections 42....
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....tained by the dealer, under the various provisions of the Petroleum Act and the Rules. He also contended that although in the show-cause notice the provision of section 45A which was violated by the petitioner was not indicated, a reading of exhibit P10 showcause notice would show that the case against the petitioner was that it has wrongly availed of concessional rate of tax and therefore it was evident that provisions of section 45A(1), (d) and (g) are the provisions that are applicable. Regarding the documents that are relied on by the petitioner in exhibit P11 reply, reference was made to exhibit P2 certificate allegedly produced by the fifth respondent and pointed out that the same was not issued with reference to exhibit P1 and it was contended that the sale effected by the petitioner was not on the strength of certificate required under exhibit P1. Referring to exhibit P3 invoice, counsel pointed out that the product receipt location indicated was Lakshadweep and therefore the story that goods were delivered ex-cochin is now canvassed only to avoid the liability for penalty. He referred to exhibits P9 and P9(a), the certificates allegedly furnished by the dealers and cont....
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....refore there is no substance in the contention that the Department should have initiated proceedings against respondents 5 and 6. I have considered the submissions made by both sides. Section 45A of the Act provides for imposition of penalty. As per this section, notwithstanding section 46, if any of the authorities specified therein is satisfied that any person has committed any of the acts specified in clauses (a) to (h) of sub section (1), such authority may direct that such person shall pay, by way of penalty, an amount not exceeding twice the amount of sales tax or other amount evaded or sought to be evaded, where it is practicable to quantify the evasion or an amount not exceeding ten thousand rupees in any other case. Explanation I provides that the burden of proving that any person is not liable to penalty under section 45A of the Act shall be on such person. As held by this court in the case of M.R.F. Limited v. Assistant Commissioner (Assmt)-II, Sales Tax Special Circle, Kottayam [2000] 117 STC 23 under section 45A any person can be imposed penalty and it need not be on the selling dealer alone or the dealer who is liable to pay tax directly to the Government. Si....
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....genuine one and that in all bona fides, they had acted upon the certificates and other documents given by the purchasers and that it was the purchasers who misconducted themselves later, the consequence may have fallen upon the purchasers. Such contentions have been upheld by this court in the judgment in the M.R.F. Limited [2000] 117 STC 23 and Apollo Tyres [2004] 138 STC 249. There is total dearth of proof in this respect and therefore, respondents 1 to 4 cannot be faulted for initiating proceeding under section 45A of the KGST Act against the petitioners. While considering the genuineness of sale, it is to be noticed; 1.. that the sale of 5,904 kilo litres of HSD sold by the petitioner, out of 8,316 kilo litres supplied to Lakshadweep during 2004-05, was the business canvassed by its BDA who was appointed as per exhibit P4. 2.. First of all, appointment of the BDA was for a period of three months from June 15, 2004 and unless extended, it automatically expires. The petitioner has no case that the period of appointment was extended and if that be so, it is for the petitioner to explain under what authority the BDA canvassed the business during the period subsequent to the e....
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...., the burden of proving that any person is not liable to penalty shall be on such person and the question is whether the petitioner has discharged this burden. With the materials available, it is proved that the concession availed of by the petitioner was irregular and that the returns filed by them, at any rate, are incorrect. If so, the petitioner is liable for penalty under section 45A. In such a situation, in view of Explanation 1 to section 45A, the burden is entirely on the petitioner to prove that they are not liable for penalty. While examining whether the petitioner has discharged the burden cast on it, necessarily, reference will have to be made to the documents produced by the petitioner. These documents are exhibits P2, P2(a), P6 and P7, P8 and P8(a) and P9 and P9(a). Although it is true that these documents have been obtained and produced, the fundamental question is whether the goods have reached its destination which alone will entitle the petitioner to claim the benefit of exhibit P1 notification. Admittedly the goods have not reached, and in fact going by the pleadings in this writ petition, the petitioner also has no such case. The burden could have discharged by ....
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....ples of natural justice. The learned Government Pleader submitted that there was no investigation report as contended. If so, this complaint has no substance. In so far as the other documents relied on against the petitioner, including the export bills, bank records of Sri. P.V. Babu are concerned, learned Government Pleader referred me to the finding in exhibit P13 order, where it is stated that Sri Tomy Varghese, the authorised representative of the company, appeared before the first respondent on July 31, 2006, perused the documents causing the issuance of notice under section 45A and that he was exhaustively heard. It is also stated in exhibit P13 that Sri. Tomy Varghese had also filed a further objection to the show-cause notice vide his letter dated July 31, 2006. Nowhere in the writ petition, has the petitioner pleaded that the aforesaid statement in exhibit P13 is factually incorrect. Even if it is true that copies of the documents were not furnished to the petitioner, if documents relied on were allowed to be perused, the petitioner cannot contend that natural justice has been violated or that any prejudice has been caused to them. Pointing out that documents at Sl. ....
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.... exhibit P13, learned counsel contended that there was no basis for the finding that the petitioner should have informed the seventh respondent about the supplies or that they should have alerted the port authorities. Counsel contended that in view of the provisions contained in exhibit P1 notification, they had no such responsibilities. It was also contended that as a seller, they were free to accept payment from anybody who offers it and that the fact that payments were accepted from Sri. Babu, can be of no consequence. Further much was attempted to be made out of the statement in exhibit P13 that the petitioner had colluded with the purchasers. As far as the finding of collusion is concerned, I feel that if the order is read in its totality, the finding of collusion can be seen to be only an inference drawn by the first respondent and therefore the fact that this allegation was not made in the show-cause notice, cannot be fatal to the proceedings. That apart, even if the finding of collusion is eschewed, still the other findings against the petitioner are sufficient to hold the petitioner liable to penalty. True, going by exhibit P1 notification, it may not be the responsibil....