TaxTMI 
TaxTMI 
2015 (11) TMI 159
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....ns 20 and 40 of the KVAT Act in not getting itself registered as a dealer under the KVAT Act and further, not filing returns and maintaining true and correct accounts as mandated under the said Act. 3. The main contention of the petitioner in the writ petition is that it is a service provider who is not engaged in the business of sale or purchase of goods. It is pointed out that it merely facilitates transactions of sale and purchase through its online portal and, after an online customer identifies a product of his choice, the seller of the particular product is notified of the choice of the customer and he, in turn, raises an invoice on the customer and makes arrangements for the delivery of the product to the customer. Further, depending on the nature of the sale transaction, whether intra-state or inter-state, the seller of the product pays tax either under the local VAT Act or under the CST Act, and the fact of payment of tax is indicated in the invoice issued to the customer. The petitioner contends that it has absolutely no role to play in the transaction of sale and purchase and hence it could not have been proceeded against under the penal provisions of the KVAT Act. It i....
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....t the petitioners had occasioned a breach of the provisions of Section 20 and Section 40 of the KVAT Act dealing with the filing of necessary returns and maintenance of true and correct accounts. 7. In the notices issued to the petitioners, proposing the imposition of a penalty, the stand of the respondents briefly stated is as follows: ■ Through the action of a customer in Kerala choosing a product of his choice on the online portal of the petitioners herein, an agreement for sale came into existence whereby the petitioners agreed to sell the product in question to the customer in Kerala for a consideration. ■ The sale in question was a local sale insofar as the product was delivered to the customer in Kerala and from an online portal whose situs could be traced to Kerala. The contention of the petitioners that the sales in question were inter-state sales could not, therefore, be accepted. ■ Even if the petitioner was not the seller of the product in question, the petitioner could nevertheless be held liable to tax in view of the provisions of Section 16(13) of the KVAT Act, because the online portal could be seen as an intangible shop and the situs of the sa....
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....ce, that I have to now consider the legality of the penalty orders that have been impugned in the writ petition. Before doing that, however, I must dwell a little on the notice that was issued to the petitioner in the instant case. A mere perusal of the said notice would indicate that rather than stating the reasons that prompted the revenue authorities to suspect an evasion of tax, and calling for the explanation of the assessee to those reasons, the notice proceeds to draw definite conclusions as regards the commission of an offence by the assessee. There is no indication in the notice as to why the revenue authorities considered the petitioner a dealer, or why the transactions in question had to be treated as local sales as against inter-state sales. The notice adopts the figure furnished by the petitioner, representing the total turnover in respect of sale transactions completed through its online portal to customers in Kerala during the relevant period, as the total sales turnover of the petitioner for the purposes of quantifying the tax liability and penalty against the petitioner. The notice does not, however, spell out how the said figure could be taken as representing the ....
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....ng of a show-cause notice a person of ordinary prudence gets the feeling that his reply to the show-cause notice will be an empty ceremony and he will merely knock his head against the impenetrable wall of prejudged opinion, such a show-cause notice does not commence a fair procedure especially when it is issued in a quasi-judicial proceeding under a statutory regulation which promises to give the person proceeded against a reasonable opportunity of defence. 32. Therefore, while issuing a show-cause notice, the authorities must take care to manifestly keep an open mind as they are to act fairly in adjudging the guilt or otherwise of the person proceeded against and specially when he has the power to take a punitive step against the person after giving him a show-cause notice. 33. The principle that justice must not only be done but it must eminently appear to be done as well is equally applicable to quasi-judicial proceeding if such a proceeding has to inspire confidence in the mind of those who are subject to it." 10. Turning now to the orders impugned in the writ petitions, I find that the said orders are more or less verbatim reproductions of the notices issued to the petitio....
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....ible for effecting majority of the sales to customers in Kerala, through the online portal of the petitioner, is registered as a dealer under the KVAT Act and, in the returns submitted by the said dealer for the relevant period, they had conceded NIL taxable turnover under the KVAT Act, on the contention that their entire sales turnover pertained to inter-state sales effected by them. Under the said circumstances and, in the absence of any material to suggest that the returns filed by the said seller were rejected by the revenue authorities, one fails to understand how the revenue authorities could proceed to levy tax, or impose penalty, on the petitioner in respect of the same turnover. The findings in the impugned orders reflect a patent non-application of mind by the authority concerned and also smack of arbitrariness. I therefore quash Exts. P11 and P12 orders, Exts. P13 and P14 Demand Notices as also Exts. P8 and P9 show-cause notices that are impugned in W.P.(C).No.5348/2015 and allow the said writ petition. W.P.(C).No.6916/2015: As regards W.P.(C).No.6916/2015, I find that the notices and orders issued to the petitioner in this writ petition are more or less identical to t....
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....sequent conduct be reflected in the penalty proceedings by way of estimation of turnover based on such inferences. This, going by the clear words of estimation of turnover based on such inferences. This, going by the clear words employed in the Statute, is within the realm of the assessment proceedings. 12. Section 67 does not confer power to make a reasonable estimate. The suppression or omission must be clearly disclosed from the materials available and there should be evidence of the amounts sought to be suppressed from the turnover In cases where the same is not discernible, the only option is to make an order of imposition of fine not exceeding Rs, 10,000/-. Any suppression detected or rather any file generated on a crime so detected and penalised necessarily gives the assessing authority the power to make estimations to compensate the State against probable omissions and suppressions. Such exercise, as is mandated by the Statute, has to be regulated by the best judgment of the individual officer which definitely is subject to the principles of reasonableness, proportionality and of course natural justice. Such estimation on best judgment would definitely have to be done with....