By Advs.sri.arikkat Vijayan Menon Sri.harisankar v. Menon Smt.meera V.menon Sri.mahesh V.menon

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON WEDNESDAY, THE 28TH DAY OF MARCH 2012/8TH CHAITHRA 1934 WP(C).No. 23728 of 2006 (Y) --------------------------- PETITIONER(S): ------------------------- KAMAKSHI SEKHAR, PROPRIETRIX, STAR DET, 583/10, ANIKODE, ARIYANKODE P.O., PALAKKAD DISTRICT. BY ADVS.SRI.ARIKKAT VIJAYAN MENON SRI.HARISANKAR V. MENON SMT.MEERA V.MENON SRI.MAHESH V.MENON RESPONDENT(S): --------------------------- 1. AGRL.INCOME TAX & COMMERCIAL TAX OFFICER, ALATHUR, PALAKKAD DISTRICT. OFFICER, ALATHUR, PALAKKAD DISTRICT. 2. STATE OF KERALA, REPRESENTED BY SECRETARY, TAXES DEPARTMENT, SECRETARY, TAXES DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM. BY GOVERNMENT PLEADER SRI.SHAIJ RAJ THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 28-03-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C)NO.23728/2006 APPENDIX PETITIONER'S EXHIBITS: P1COPY OF THE COMMON REPLY SUBMITTED BY THE PETITIONER DATED 15/03/2006.15/03/2006. P2COPY OF THE ASSESSMENT ORDER FOR APRIL 05 ISSUED BY THE FIRST RESPONDENT DATED 16/05/2006.RESPONDENT DATED 16/05/2006. P3COPY OF THE ASSESSMENT ORDER FOR MAY 05 ISSUED BY THE FIRST RESPONDENT DATED 16/05/2006.RESPONDENT DATED 16/05/2006. P4COPY OF THE ASSESSMENT ORDER FOR JUNE 05 ISSUED BY THE FIRST RESPONDENT DATED 16/05/2006.RESPONDENT DATED 16/05/2006. P5COPY OF THE ASSESSMENT ORDER FOR JULY 05 ISSUED BY THE FIRST RESPONDENT DATED 16/05/2006.RESPONDENT DATED 16/05/2006. P6COPY OF THE ASSESSMENT ORDER FOR AUGUST 05 ISSUED BY THE FIRST RESPONDENT DATED 16/05/2006.RESPONDENT DATED 16/05/2006. P7COPY OF THE ASSESSMENT ORDER FOR SEPTEMBER 05 ISSUED BY THE FIRST RESPONDENT DATED 16/05/2006.RESPONDENT DATED 16/05/2006. RESPONDENT'S EXHIBITS:NIL /TRUE COPY/ P.A.TO.JUDGE sts P.R. RAMACHANDRA MENON, J. --------------------------------------- W.P.(C). No. 23728 of 2006 ---------------------------------------- Dated this the 28[th] day of March, 2012 JUDGMENT Exts. P2 to P7 assessment orders passed by the first respondent, in respect of April 2005 to September 2005 areunder challenge in this writ petition. 2. The petitioner is engaged in the manufacturing and sale of 'hand made soaps' and is a registered dealer under the rolls ofthe first respondent. The product manufactured by the petitioneris one, which has been notified by the Khadi and VillageIndustries Commission, by virtue of which, the petitioner isentitled to have exemption as per Entry 55 (2) of the 1[st] scheduleto the Kerala Value Added Tax Act. Admittedly, the petitionerwas enjoying the said benefit and was pursuing the business. 3. While so, in September 2005, the petitioner got the unitmechanised, as a result of which, the petitioner came out fromthe purview of the exemption provided under Entry 55 (2) of the1[st] schedule. It is stated that the petitioner has been collecting W.P.C. No. 23728 of 2006 the tax accordingly and the payment was being effected to theGovernment, then and there. 4. In the meanwhile, the petitioner was served with a 3. While so, in September 2005, the petitioner got the unitmechanised, as a result of which, the petitioner came out fromthe purview of the exemption provided under Entry 55 (2) of the1[st] schedule. It is stated that the petitioner has been collecting W.P.C. No. 23728 of 2006 the tax accordingly and the payment was being effected to theGovernment, then and there. 4. In the meanwhile, the petitioner was served with a notice dated 09.01.2006, by the first respondent, pointing outsome incriminating circumstances as to the collection of taxduring the months of April to August, which period is covered bythe exemption granted to the petitioner, and as to the nonremittance of such tax collected from the customers. On receiptof the said notice, petitioner submitted Ext.P1 reply dated15.03.2006, conceding that, collection of tax during the saidperiod was only a mistake. The petitioner conceded that duringthe said period, the petitioner had collected tax of Rs. 34,800/-(Rupees thirty four thousand eight hundred) from differentcustomers and that the petitioner was ready to satisfy the saidamount with interest of Rs.2,802/-(Rupees two thousand eighthundred and two), thus making a total amount of Rs.37,602/-(Rupees thirty seven thousand six hundred and two). A chequebearing No.712972dated 15.03.2006 for the said amount, drawnon the SBI, SSI Branch at Kanjikode, Palakkad was also enclosed, W.P.C. No. 23728 of 2006 requesting to take a lenient view and to drop all furtherproceedings in the matter. Despite this, the first respondentproceeded with further steps and passed Ext.P2 to P7 assessmentorders, casting huge liability upon the petitioner, which accordingto the petitioner is totally alien to the scheme of statute andhence under challenge. 5. The respondents have filed a counter affidavit seeking to sustain the proceedings, particularly, with reference to the illegalactivities pursued by the petitioner in collecting tax from thecustomers during the period when the petitioner stood exempted.Detailed enquiry was conducted, which revealed even the minuteaspects involved leading to the impugned orders and it is statedthat the course pursued by the respondents is well within the fourwalls of law and not assailable under any circumstances. 6. The petitioner has filed a reply affidavit dated06.01.2012, asserting that no 'option' was ever submitted by thepetitioner so as to enable the first respondent to invoke thepower under Section 6(1A)(b). Reference is also made to theother relevant provisions as well, particularly, Rule 10A, which W.P.C. No. 23728 of 2006 specifies the form in which option is to be exercised, i.e., Form1F. The learned counsel for the petitioner submits that, at nopoint of time had the petitioner exercised the option and thisbeing the position, there is absolutely no rationale on the part ofthe first respondent for having effected the assessment underSection 6(1A)(b). 7. The learned counsel submits that, even if there is anyviolation on the part of the petitioner in collecting tax during theperiod of exemption, it only constitutes an offence rendering itan illegal collection, as specified under Sub section 3 of Section30. The consequence is also separately specified under Section72, whereby the department is enabled to have the said amountforfeited, besides imposing a penalty to the tune of Rs.5,000/-(Rupees five thousand). The learned counsel further submits thatthe first respondent has also proceeded with steps under Section67 of the KVAT Act, and a sum of Rs. 10,000/-(Rupees tenthousand) has been imposed as penalty, which is stated assatisfied. 8. The learned Government Pleader appearing for the W.P.C. No. 23728 of 2006 7. The learned counsel submits that, even if there is anyviolation on the part of the petitioner in collecting tax during theperiod of exemption, it only constitutes an offence rendering itan illegal collection, as specified under Sub section 3 of Section30. The consequence is also separately specified under Section72, whereby the department is enabled to have the said amountforfeited, besides imposing a penalty to the tune of Rs.5,000/-(Rupees five thousand). The learned counsel further submits thatthe first respondent has also proceeded with steps under Section67 of the KVAT Act, and a sum of Rs. 10,000/-(Rupees tenthousand) has been imposed as penalty, which is stated assatisfied. 8. The learned Government Pleader appearing for the W.P.C. No. 23728 of 2006 respondents submits that the plea of inadvertent mistake is notcorrect, as the sequence of events is discernible from Ext.P2 toP7 assessment orders passed by the concerned authority and it israther puerile. It is also stated that the petitioner did notproduce the 'books of accounts' nor did she turn up for thepersonal hearing, as observed by the assessing authority inExts.P2 to P7, which fact has not been disputed in the replyaffidavit filed by the petitioner. It is also stated that theimpugned orders have been passed in conformity with thestatutory prescription and that, no interference is called for. 9. Section 6(1A)(b) reads as follows: “(b) where the sale of any goods isexempted at the point of sale by any dealer,such dealer may, at his option, pay tax inrespect of the sale of such goods andthereupon he shall, whatever be his totalturnover, be liable to pay tax on the taxableturnover for the year.” So also, Rule 10A, is extracted below: “10A. Filing of option for collection and payment of tax:- Every dealer opting to pay tax inaccordance with the provisions of sub-section (1A) of section 6 shall file application in Form 1F before theassessing authority. The option shall be deemed tohave been accepted by the assessing authority as andwhen the assessing authority acknowledges the receiptof such application.” True, Section 6(1A)(b) refers to an 'option' to be exercised by the concerned dealer, if he wants to collect the tax in spite ofthe fact that he is granted exemption and on such an event, thetax is liable to be collected on the basis of the taxable turnoverfor the year, irrespective of the total turnover. How such anoption is to be exercised, is stipulated in Rule 10A, referring toForm 1F. The Rule provides that once the 'option' is exercisedand the Form 1F is filed, it will be deemed as accepted by theassessing authority, as and when the assessing authorityacknowledges the receipt of the said application. After hearingboth the sides, this Court finds that the reliance sought to beplaced on the non exercise of the option does not come to therescue of the petitioner in any manner. The illegal collection oftax stands conceded. The stipulation under Section 72 or themandate under Section 67 of the KVAT Act, is only in respect of W.P.C. No. 23728 of 2006 the consequence as to the offence committed by theparty/dealer. It does not specify anything regarding theassessment to be made or as to the fixation of turnover or theactual tax liability; which stands on a different pedestal. W.P.C. No. 23728 of 2006 the consequence as to the offence committed by theparty/dealer. It does not specify anything regarding theassessment to be made or as to the fixation of turnover or theactual tax liability; which stands on a different pedestal. 10. Coming to the facts, it is to be noted tat the noticedated 09.01.2006, to which the petitioner submitted Ext.P1 reply,is not produced along with the writ petition. So also, thepetitioner has not produced the order imposing penalty underSection 67, while it is stated that the said liability has alreadybeen cleared, there being no challenge in respect of the same.Exts.P2 to P7 orders reveal that the illegality was brought tolight, only in the course of verification of some declarationsreceived from the check post, which substantiated the collectionof tax by the petitioner on several instances during the period ofexemption enjoyed by her. It was only on confronting thepetitioner as to the above incriminating circumstances, that shesought to file Ext.P1 reply, pointing out the extent of taxcollected to the tune of Rs.34,800/-(Rupees thirty four thousandeight hundred) and expressing willingness to clear the said W.P.C. No. 23728 of 2006 amount with interest. What is the actual extent of tax collectedby the petitioner during the said period from April 2005 toSeptember 2005 can be ascertained only on production of booksof accounts. Though the petitioner was given notice to producethe same, as observed in Exts.P2 to P7 assessment orders, thepetitioner did not produce the 'books of accounts' or any otherevidence in support of the contentions raised in Ext.P1. So also,in spite of granting opportunity of personal hearing, the petitionerdid not make use of the same, which led to the impugned orders. 11. Even going by the mandate of Section 72, what isstated therein is that, besides the forfeiture, the offence willattract a maximum penalty of Rs.5,000/-(Rupees five thousand),when tax is collected by a dealer, contrary to the provisions ofstatute, particularly, as given under sub section 3 of Section 30,which gives rise to a cause of action to impose the saidpunishment. The respondents are not prohibited from imposingpunishment in respect of each and every offence; the collectionof tax in an illegal manner from each dealer being liable to betreated as a separate offence and to be proceeded with W.P.C. No. 23728 of 2006 accordingly. In any view of the matter, this Court does notpropose to go into such aspects for the time being, in the presentcase, as no other penalty proceedings are stated as pendingagainst the petitioner and the matter has been put to rest, byimposing a penalty of Rs.10,000/-(Rupees ten thousand) inSection 67 proceedings, which is stated as remitted. 12. It is seen from Exts.P2 to P7 that the assessment has been made by the first respondent only in respect of thetransaction for the months of April, May, June, July and August2005 and never beyond, for the obvious reason that thepetitioner got the unit mechanised in September 2005, comingout of the purview of exemption under Entry 55 (2) of the 1[st]schedule, and has been paying the necessary tax to thedepartment. Since the petitioner did not choose to produce the'books of accounts' and did not turn up for the personal hearing,there was no opportunity for the first respondent to have theaccounts verified and to ascertain the contents of Ext.P1 reply.This being the position, it is no more open for the petitioner tocontend that the first respondent ought to have accepted the W.P.C. No. 23728 of 2006 returns and should not have proceeded with the Section 6(1A)(b)assessment proceedings. There is absolutely no merit orbonafides in the said submission. More so, when the provision oflaw is not to be interpreted in favour of the wrong-doer. W.P.C. No. 23728 of 2006 returns and should not have proceeded with the Section 6(1A)(b)assessment proceedings. There is absolutely no merit orbonafides in the said submission. More so, when the provision oflaw is not to be interpreted in favour of the wrong-doer. 13. When the matter came up for consideration on01.09.2006, the petitioner was directed to satisfy the entireamount demanded as per Exts.P4 to P7, by six equal monthlyinstalments, under protest and that such payment will be subjectto further orders from this Court. Eventhough the petitioner hasfiled a reply affidavit on 06.01.2012, nothing has been statedtherein, as to the satisfaction of the said amount. This Courtfinds that the writ petition is devoid of any merit. No interferenceis warranted. It is dismissed accordingly. Kp/- P.R. RAMACHANDRA MENON, JUDGE.