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Judgment
R. Gururajan, J.-The petitioner-M/s. Ivory Soap Private Limited is before us, aggrieved by the order passed by the Additional Commissioner of Commercial Taxes, Zone-II, Gandhinagar, Bangalore, dated 26-7-2004 in this appeal.
Facts in brief are as under:
The appellant is a company incorporated under the Companies Act, 1956 having its place of business at Nasik. The appellant is engaged in the manufacture and sale of dettol liquid soaps and other products having its place of business in Bangalore. It is a dealer registered under the Karnataka Sales Tax Act, 1957 and Central Sales Tax Act, 1956. It is one of the customers of the appellant. The said company also operates place of business in Gurgoan and is a dealer registered under Sales Tax Acts in the State of Haryana. Registration Certificate granted to M/s. Reckitt Benckiser (India) Limited, under KST Act, 1957 is assigned No. 00700253 and under CST Act, 1956 is assigned No. 00750256 with validity from 15-12-1972. The Assessing Authority for M/s. Reckitt Benckiser (India) Limited is Deputy Commissioner of Commercial Taxes, Bangalore. The appellant sold 575 cases of dettol liquid soaps to M/s. Reckitt Benckiser (India) Limited, Bangalore and dispatched the goods from Nasik to Bangalore to goods vehicle No. AAA 536 accompanied by delivery challan as well as bill of sale with details. The goods vehicle on its way from Nasik to Bangalore called at the Sales Tax Check-post, Shirdon in Bijapur District on 13-1-2003. The Commercial Tax Officer held that the Bill of Sale No. 456, dated 12-1-2003 was not completed with the correct address of the consignee inasmuch as the address of the purchaser at Gurgoan was entered and only place of destination was shown as Bangalore. According to the Check-post Officer, there was contravention of Section 28-A(2) of the Act. The Check-post Officer issued a notice under Section 28-A(4) proposing to levy penalty of Rs. 1,78,898/-. The petitioner submitted a reply. The Check-post Officer did not accept the reply/objection and confirmed the demand. Objections were overruled and penalty was confirmed. Aggrieved by the same, the appellant filed an appeal before the Deputy Commissioner of Commercial Taxes (Appeals and Audit), Bangalore City in Appeal No. 260 of 2002-03. The Appellate Authority by a detailed order has chosen to set aside the order of penalty and instead, he has chosen to levy a penalty of Rs. 5,000/- in terms of an order dated 26-3-2003. Thereafter, the Revisional Authority purporting to exercise power under Section 28-A(4) of the Karnataka Sales Tax Act, 1957 issued a notice and called for reply. Thereafter, after hearing the petitioner, the Revisional Authority set aside the order of the First Appellate Authority and restored the order of the Check-post Officer, dated 25-1-2003 in terms of the order dated 26-3-2003. The appellant aggrieved by the said order is before us in this appeal raising the following questions of law.-
Whether the facts and circumstances of the case of the appellant where the appellate order passed by the First Appellate Authority did not involve any error in approach or error in applying the relevant law or facts or error in applying the principle to the fact situation, the Additional Commissioner of Commercial Taxes, Zone II was justified in having passed the impugned revisional order setting aside the order of the First Appellate Authority and restoring the penalty order passed by the Check-post Officer?
Whether in the facts and circumstances of the case of the appellant where the transportation of the consignment of dettol liquid soaps did not involve any attempt to evade payment of tax, the Additional Commissioner of Commercial Taxes was right and justified in having restored the order passed by the Check-post Officer, Shirdon levying the penalty of Rs. 1,78,898?
Heard Sri Rabinathan, learned Counsel appearing for the appellant. Learned Counsel invites our attention to the material facts to show that there exists no material evidencing the evasion of tax in the case on hand. Learned Counsel explains that the only mistake committed by the appellant, if at all is, the non-mentioning of KST and CST numbers. Thereafter, details were furnished and the same has been accepted by the Appellate Authority in terms of the findings of the Appellate Authority. Learned Counsel says that in these circumstances, the Revisional Authority ought not to have exercised power under Section 28-A, particularly in the absence of any material available on record with regard to evasion of tax in terms of Section 28-A(4) of the Act. He strongly relies on two judgments of this Court in support of his submission.
4.Per contra, Smt. Sujatha, learned Government Advocate invites our attention to the material on record to say that the appellant did not produce the necessary documents in terms of the findings of the Check-post Officer. She says that the Act is made for protection of the revenue and no leniency is possible/permissible in the given circumstances, particularly in the absence of relevant document, at the time of check in terms of the order passed by the Check-post Officer. Learned Government Advocate further says that the Appellate Authority has committed an error in reducing the penalty to Rs. 5,000/-. She therefore says that the Revisional Authority is fully justified in the case on hand in restoring the order of the Check-post Officer. She supports the order of the Revisional Authority.
After hearing, we have carefully considered the material on record. It is seen from the material in record that the vehicle in question was inspected at Check-post, Shirdon by the Check-post Officer. He notices after verification that the bill submitted by the petitioner did not contain the name and address to whom the goods are to be delivered at Bangalore and the bill does not contain KST and CST numbers. It was in those circumstances, he initiated proceedings. Thereafter, reply was submitted and along with the reply, bills were produced and also the details in terms of the averments made by the petitioner by way of reply. The Check-post Officer in his order notices the submission of the bills and also the details but however, he says that the subsequent filing is no answer and hence, he confirmed the demand in terms of the order dated 25-1-2003. When this order was challenged in appeal, the Appellate Authority by a detailed order has reduced the penalty to Rs. 5,000/-. The Appellate Authority comes to a conclusion on facts that there exists no material on record evidencing evasion of tax in terms of Section 28-A(4) of the Act. The Appellate Authority has come to a conclusion that the appellant is only guilty of a technical plea of non-mentioning of KST and CST numbers which were subsequently made available in terms of the findings. The Revisional Authority in the impugned order, after referring to the material on record says that the two time penalty is call for in the case on hand. He has also noticed the two judgments of the jurisdiction of the High Court and thereafter, he says that those judgments are not applicable to the facts of this case.
After careful perusal of the appellate order and the Revisional Authority we are of the view that the Revisional Authority has committed a serious error of law in not noticing the material on record in a manner known to law and in accordance with law. Section 28-A(4) provides for levy of penalty in the event of contravention or non-compliance in the matter of levy of tax. Section 28-A(4) provides for sufficient cause in terms of the very provision itself. In the case on hand, admitted facts reveal that the petitioner subsequent to the notice has placed material on record to support the transaction by way of bills as we see from the order of the authority. Unfortunately, without noticing that there exists no material with regard to evasion of tax, the Check-post Officer in a mechanical manner has chosen to confirm the levy of penalty. When the same was challenged before the Appellate Authority, the Appellate Authority came to a conclusion that there existed no material in the matter of evasion of tax. Even otherwise, the Appellate Authority rightly ruled that there is sufficient cause in the case on hand. Unfortunately, while dealing with the matter, the Revisional Authority has not bestowed its attention with regard to sufficient cause in terms of Section 28-A(4) of the Act. The material facts would show that there exists sufficient cause in terms of the material already available on record by way of reply along with documents. In these circumstances, it cannot be said that Section 28-A(4) is attracted in the matter of levy of penalty in the case on hand. The Revisional Authority in our view could not have invoked his revisional power in the absence of any material available on record with regard to prejudicial to revenue under Section 28-A(4) of the Act.
This Court in the case of Larsen and Toubro Limited, Bangalore v Additional Commissioner of Commercial Taxes, Zone-I, Bangalore, 2001(51) Kar. L.J. 216 (HC) (DB), has dealt in detail with regard to scope of Section 28-A(4) of the Act. This Court notices the object of the Act in para 8 and thereafter, in para 9, this Court has ruled as under:
"The last aspect of the case which we need to deal with is the submission canvassed by the appellant''s learned Counsel that as the law then stood, there was no minimum penalty prescribed and that what the officer has done is that he has calculated the prevalent rate of the tax on the goods and equated that sum with the penalty. The learned Counsel submitted that this procedure adopted is thoroughly unjustified and even if one accepts the position that the penalty should not be totally set aside as per law, that it should be reasonable and the present quantum is unjustified. The learned Government Advocate was quick to submit that the amount in question is modest and that no interference is called for, but we are unable to accept this last submission. We do agree with the appellants'' learned Counsel that in any situation where the appellants have satisfied the authority that there is no evasion of tax and that no loss would occur to the exchequer, if the penalty is still to be equated to the normal tax payable that the methodology of computation would be faulty. Under these circumstances, we are of the view that the penalty amount imposed on the appellants on the facts of the present case would require to be scaled down. Taking into consideration of the relevant facts, we are of the view that a penalty in a sum of Rs. 10,000/- in each of the cases would meet the ends of justice".
There is another Division Bench judgment of this Court. The subsequent recent judgment of this Court in the case of Manish D. Shah v State of Karnataka, 2004(57) Kar. L.J. 157 (HC) (DB), has ruled in para 6 reading as under:
"The very object of establishment of check-post or barrier and inspection of goods vehicle in transit, as sub-section (2) of Section 28-A shows is with a view to prevent or check evasion of tax under the Karnataka Sales Tax Act. Before levying penalty under the Act a reasonable opportunity of being heard has to be afforded to the person in charge of goods vehicle or carrier. If the explanation given by such person is plausible and satisfactory, the question of imposing penalty does not arise. Imposition of penalty in such circumstances that is even after satisfactory explanation may take place only if the authority concerned comes to the conclusion that there are materials to indicate that there is evasion of tax. In the present case, the First Appellate Authority had accepted the explanation of the petitioner with regard to the non-production of the documents before the checking authority and the production of the documents before the mobile squad and therefore, there was no reason to impose penalty or continue a part of the penalty. The whole of the penalty ought to have been set aside".
In the subsequent judgment, this Court notices the subsequent production of documents for setting aside the penalty in the said case. These two cases are squarely applicable to the facts of this case. In these circumstances, accepting the arguments of the petitioner, we deem it proper to allow this appeal and set aside the order of the Revisional Authority. In the light of our findings, the penalty amount in terms of the order of the First Appellate Authority with regard to levy of Rs. 5,000/- is to be refunded to the appellant in the light of the judgment of this Court in Manish D. Shah''s case. But the present set of circumstances, would show that the petitioner is fairly a rich assessee and Rs. 5,000/- is nothing for it but however, in the light of our quashing of the order, we deem it proper to direct the respondent to send this money to the Chief Minister''s Flood Relief Fund.
Ordered accordingly. No costs.