Zakir Hussain vs Addl. Sales Tax Officer and Others

P.A. Mohammed, J.—The Petitioner is a dealer in Wet Grinders and Pump sets. He is a registered dealer under the provisions of the Kerala General Sales Tax Act. The question in this writ petition relates to the levy of penalty u/s 45-A of the Kerala General Sales Tax Act.

The assessment year concerned is 1986-137, Ext. P-1 is the order passed by the Additional Sales Tax Officer imposing penalty of Rs. 47,000. As against that, the Petitioner filed a revision before the Deputy Commissioner. Ext, P-2 is the order passed by the Deputy Commissioner reducing the penalty of Rs. 23,500. Being dissatisfied with the said order the Petitioner filed a further revision before the Board of Revenue. By Ext. P-3, Board of Revenue confirmed Ext. P-2. Ext. P-3 order is challenged in this writ petition.

Heard the Counsel for the Petitioner and also Sri T. Karnnakaran Nambiar, Counsel for the Respondents.

One of the contentions advanced is that the ''delay'' in filing the annual return will not constitute ''default'' contemplated u/s 45(1)(c) of the Act. The case is that the delay in filing the return does not attract Section 45-A as no evasion is involved. Before dealing with this question, it is primarily to be understood that this is a case where the sales tax had been collected by the Petitioner and the said tax was payable to the Government every month. That means the Petitioner was collecting tax with effect from 1st April 1988 to 31st March 1989 but all the returns showing the amount of tax ''collected, total and taxable turnover etc., for all months were together filed only on 4th August 1989, that is to say, four months after the expiry of the assessment year in question. The tax collected was Rs. 46,715. This amount was not paid till the books of accounts were verified by the officer.

The question is whether this unauthorised retention of collected tax payable to the State would amount to "evasion" contemplated u/s 45-A of the Act. u/s 22 of the Kerala General Sales Tax Act a registered dealer is legally authorised to collect the tax payable by him on the sale of any goods from the person to whom he sells the goods and pay over the same to the Government in the manner prescribed. As per the provisions contained in the Kerala General Sales Tax Rules the amount of tax so collected during a particular month shall be remitted to the Government Treasury before 20th of every succeeding month. So if the said tax is riot remitted as required under the above rules, the Assessee concerned becomes not only a ''defaulter'' but also a ''violator'' of statutory provision. The penal provisions contained in Section 45-A is invoked in the present case since the Petitioner has failed to submit the return as required by the provisions as per Clause (c) of Sub-section (1) thereof. The delay in filing returns is consistently admitted. That means the failure to submit the return within the time prescribed by law is proved. Then the delay is only a conscious ''default'' and that is, no doubt, in the present case is a concluded "evasion". The essence of the previsions contained in Section 45-A is punishment for ''evasion'' or ''attempt at evasion'', and the purpose is to prevent evasion. Any one of the defaults in Clause (a) to (g) will culminate in ''evasion'' or ''attempt at evasion'' and in both cases the levy of penalty is authorised as per the rate prescribed in the section.

The learned Counsel on behalf of the Petitioner contended that there was no ''willful default'' which attracts the levy of penalty u/s 45-A. In support of that contention the decision of the Division Bench of this Court in Sudhi v. Intelligence Officer (1992) 85 S.T.C. 337 was cited. Particular reference was made to the following paragraphs:

The use of the words ''evasion'' and the expression ''sought to be evaded'' in Section 45-A(1) of the Kerala General Sales Tax Act, 1963 makes it clear that it is not the mere default that is made the foundation for the liability to penalty, but it is the contumacious or fraudulent or other blameworthy or objectionable conduct of an Assessee in fulfilling his obligations mentioned in Section 45-A of the Act, that will attract the levy of penalty.

It is difficult to hold that in this case there is only ''mere default'' but there is something more than that, that is to say, there are positive circumstances which will establish the fraudulent and objectionable conduct of the Petitioner. In other words this is a case of ''willful default'' with a fraudulent intention attracting penal action. This is not a case where the tax payable is disputed or doubted. The Petitioner had been authorised to collect and pay over to the Government. He was all along conscious that what was collected was the tax payable to the Government. He did not file the monthly returns obviously to evade the payment of collected tax to the Government.

The proposal to levy penalty u/s 45-A was intimated to the Petitioner on 19th September 1987 and objection if any was called for. However, no objections were filed. Therefore there is no material before this Court to ascertain the true defence of the Petitioner. The earliest document in such cases would be the objection or reply statement to the proposal to levy penalty. However, an attempt has been made before this Court that the Petitioner had filed a reply pursuant to the notice. If there had been such objection or reply statement it would have been produced along with writ petition and brought to the notice of this Court. Such course of action is absolutely necessary in view of the categoric statement by the officer in Ext. P-1 penalty order that the Petitioner had not filed the objection to the notice. The Government Pleader submitted after perusing the file that no such reply statement had been filed by the Petitioner. The reply statement alleged to have been filed by the Petitioner is not forthcoming in spite of the repeated queries from the Court. Whatever that be, one thing is certain that the Petitioner had not discharged the burden that he was not liable to pay penalty, as required under Explanation (1) to Section 45-A in the absence of any plea before the officer who initiated the action u/s 45-A.

No doubt, the Petitioner can prove his case by the standard of preponderance of probabilities. But he has not urged any probabilities nor has he given any reasonable explanation before the officer when the proposal to levy penalty was made. It is for the Petitioner to point out probabilities and not for anybody else in a proceeding which is quasi-criminal in character. The documents produced in the case are the orders Exts. P-1 to P-3 issued by the departmental authorities. Not even an iota of evidence is available in the case to show that the Petitioner has made any sincere and honest, attempt to pay the tax due to Government either during the assessment year or even thereafter till the account books were scrutinised by the officer on 4th August 1987. The case that the officer had got the details of collection of tax and non-payment thereof from the account books produced by the Petitioner, will not absolve his liability since the non-payment of tax to the Government is a statutory violation. Therefore the Petitioner has acted in conscious disregard of his obligations. The Supreme Court in Hindustan Steel Ltd. v. The State of Orissa 1970 25 S.T.C. 221 observed that unless the party was guilty of conduct, contumacious or dishonest, the penalty will not be imposed. When there is conscious unauthorised retention of tax due to the Government coupled with the failure to supply the reasonable explanation as to non-payment will, according to me, amount to contumacious and dishonest conduct. Therefore the levy of penalty u/s 45-A is only to be sustained.

The next contention is that the quantum of penalty imposed is excessive. Reliance was made on the following paragraph from, the decision of this Court supra.

The plea made out was that the authorities have levied the maximum amount of penalty, without independent evaluation and appraisal and the penalty has been levied mechanically, without disclosing grounds that the situation demands the levy of the maximum penalty.

It is said that the penalty has been levied in the present case in a mechanical manner without application of the mind. The Petitioner contended that the maximum penalty leviable in the present case is only Rs. 5,000. That contention does not appear to be correct. It will apply only in cases where it is not practicable to quantify the tax involved. This is a case where it is sufficiently practicable to quantify the amount of tax involved in the evasion. In such cases, the maximum penalty prescribed is the amount equal to twice, the amount of sales tax so involved in the evasion. The tax evaded as earlier pointed out is Rs. 46,715. Then the maximum penalty leviable in the present case is Rs. 93,430. The first Respondent has fixed the penalty only at Rs. 47,000 as per Ext. P-1. The Deputy Commissioner as per Ext. P-2 reduced the penalty to Rs. 23,500. He had made independent evaluation on the question. There was application of the mind in fixing the quantum by the Deputy Commissioner. This being a case of concluded evasion no further reduction of penalty is called for even if the doctrine of ''proportionality'' or ''wednesbury'', principle is applied. The contumacious or blame-worthy conduct of the Petitioner do not in the circumstances of the case allow any interference on the quantum of penalty levied by the Deputy Commissioner. The Board of Revenue has confirmed the quantum. I am convinced that the Deputy Commissioner and the Board of Revenue had exercised the discretion fairly and, reasonably while imposing the penalty in the present case taking into consideration of all the materials before them. No further materials are placed before me to come to a different conclusion on the question of quantum. No interference is therefore called for. The Original Petition is dismissed. No order as to costs.