SURFACE COATS Vs. STATE OF KERALA

JUDGEMENT

(1.) THESE are connected cases. The common appellant in this batch of three cases is a firm manufacturing Liquid Paints and is an assessee under the Kerala General sales tax Act. It is Small Scale Industrial Unit. The Revenue is the respondent herein. The assessee claims to be eligible for exemption from Sales tax as per Government Notification No. S. R.O. 968/80. Originally.the assessee was allowed exemption by the District Industries Centre. Kottayam in the sum of Rs. 55. 231/- from 10-6-1982. The assessee made additional investments. In submitting the annual returns for the three years 1983-84. 1984-85 and 1985-86. the assessee claimed exemption from sales tax for the entire turnover conceded for the above three years. The total turnover disclosed. exemption claimed and the date of filing of returns are as follows: The Sales Tax Officer allowed exemption to the extent of 90% of the capital fixed assets on the basis of the certificate issued by the district Industries Centre. Kottayam dated 27-10-1986. The General Manager. District industries Centre. Kottayam informed the assessing authority that the certificate dated 27-10-1986 is a forged one. On this basis. the assessments for the years 1983-84. 1984-85 and 1985-86 were taken up in suo mote revision under S. 35 of the K. G. S. T. Act by the Deputy Commissioner of agricultural Income tax and Sales tax. Kottayam and the assessments were cancelled. The revisional authority ordered a remit of the matter. It is stated that the assessments are still pending. While so. the Sales tax Officer initiated penalty proceedings against the assessee under S. 45a of the KG. S. T. Act. He proposed to levy penalty. for the three years. against the assessee for filing untrue and incorrect returns. alleged to be based on forged certificate of the District Industries Centre. Kottayam. The assessee objected to the same. Even so. by various proceedings. the Sales tax Officer imposed a penalty for the year 1983-84 in the sum of rs. 59. 622/ -. for the year 1984-85 in the sum of rs. 1. 4_ ;. o and for the year 1985-86 in the sum of Rs. 1. 56. 547. 50. In the revisions filed before the Deputy Commissioner. Kottayam. the penal ties were cancelled. The Board of Revenue initiated suo mote revision under S. 37 of the KG. S. T. Act to revise the order passed In the revisions by the deputy Commissioner of Sales tax. Kottayam. Notice was given to the assessee to show-cause why the ore "of the Deputy Commissioner. Kottayam should not be cancelled. The Board of Rev- t- - stated that the assessee filed returns "claiming" exemption on the turnover supported by a forged document and the claim was baseless. since the statutory returns filed Claiming exemption. on the strength of forged documents is not permissible. Notwithstanding the objections of the assessee. the Board of Revenue. by its order dated 26-2-1990 cancelled the order passed by the Deputy Commissioner of sales tax. Kottayam in the revisions and restored the orders of penalty passed by the assessing authority for the three years. In these three appeals. the attack is against the common order passed by the Board of Revenue dated 26-2-1990 suo mote cancelling the order passed in the revisions by the Deputy Commissioner of Sales tax. Kottayam and restoring the orders passed by the assessing authority levying various penalties. The appeals are filed under S. 40 of the Act.

(2.) WE heard counsel for the appellant as also counsel for the respondents/ Revenue. Appellant's counsel raised three points. (1) The assesses did not file any incorrect or false return; if at all exemption was improperly Claimed. (2) No mens rea is alleged or proved to attract the provisions of s. 45a of the Act. (3) In the final analysis. there is no evasion of tax. So. even if penalty is exigible. the maximum penalty cannot exceed Rs. 5000/ -. Counsel for the Revenue supported the order passed by the Board of Revenue stating. that the assessee filed false and incorrect returns based on a forged certificate of the General Manager. District Industries Centre. Kottayam and so penalty is exigible. WE are of the view that the entire matter is in a narrow compass. In judging the issues involved. we should bear in mind that S. 45a of the Act is a penal provision. It should be strictly construed. Initially. the burden is on the Revenue to prove that the assessee submitted incorrect or untrue returns under s. 45a (1) (d) of the Act. That is fundamental. Has it been proved.in this case? WE are afraid. the authorities have wholly confused the issue by importing extraneous and irrelevant matters. Shortly stated. the assessee filed the returns for the year 1983-1984 on 26-4-1984. for the year 1984-85 on 30-4-1985 and for the year 1985-86 on 30-6-1986. It simply claimed exemption. No particular material was relied on or reason stated there for. then. In the revisional order. passed by the Board dated 26-2-1990. it is categorically stated that the assessee filed the certificate of the General Manager. Dist. Industries Centre. Kottayam dated 27-10-1986 at the time of assessments and claimed exemption. It was produced before the assessing authority in April. 1987. A further certificate enhancing the exemption limit. dated 8-3-1989 was also filed for the identical period. In para 9 of the order. the Board of Revenue categorically states that the return for all the three years were signed and filed by the firm before the assessing authority before 30-4-1986. It is further stated that at the time of filing of Form 8 return for the three years. the firm was not in possession of any order enhancing the exemption limit. As stated in para 13 of the said order. the firm was not in possession of the certificate nor even filed the application for getting exemption before the General Manager. District Industries Centre. Kottayam. at the time of filing of the returns. It is nearly an year after the filing of the returns. in April 1987. the assessee 1" certificate from the General manager dated 27-10-1986. A further certificate showing an enhanced entitlement dated 8-3-1989 was also filed. But.it is common ground that the assessee did not file the alleged forged certificate along with the. returns or at the time of filing of the returns. It was done only long thereafter. According to the Board of Rever'e. the firm was not in possession of the certificate. at the time when he returns were filed.

(3.) IN these circumstances. we set aside the order passed by the Board of Revenue dated 26-2-1990 for the three years (1983-84. 1984-85 and 1985-86) and restore the order passed in revisions by the Deputy Commissioner. The appeals are allowed. Appellant succeeds on point No. (1) formulated in para 2 supra. The other points are left open. Dated this the 5th day of June. 1990. . .