SREE RAMA ROLLER FLOUR MILLS Vs. ASSISTANT COMMISSIONER

JUDGEMENT

(1.) PETITIONER is questioning exhibit P6 order passed by the Member, Board of Revenue in a suo motu revision setting aside the first revisional authority's order and confirming the order imposing penalty by the assessing authority. Facts are not disputed in this case as can be seen from the averments in the original petition and counter-affidavit. PETITIONER is engaged in the business of roller flour mills at Kanjikode, Palakkad and it is a registered small-scale industrial unit. PETITIONER is manufacturing wheat products, such as atta, maida and sooji from wheat in its factory at Kanjikode. During the year 1992-93 petitioner filed tax returns claiming exemption for the entire turnover being sales turnover of wheat products. PETITIONER, being the first seller of wheat product in the State, according to the sales tax authorities he has to pay tax at the rate of 4 per cent. The Karnataka High Court in New Swastik Flour Mill v. State of Karnataka [1992] 84 STC 49 as well as the Patna High Court in Dhanbad Flour Mills v. State of Bihar [1989] 75 STC 47 held that atta, maida and sooji are products made out of wheat though were different in form but wheat in substance and that tax is leviable only at first stage by virtue of section 15 of the Central Sales Tax Act, 1956. It is also held that once tax is paid on the purchase of wheat locally, no tax is payable on the turnover of wheat products. Same view was also expressed by the Madras High Court. When no tax was collected from the customers in nearby States of Karnataka and Tamil Nadu, to face competition, petitioner also claimed exemption. Therefore, petitioner claimed exemption in the returns filed from 1991 June onwards and was not paying the tax subsequently for the wheat products. Tax was also not collected from the customers, like their counter-parts in Karnataka and Madras, so that there was uniformity of price. PETITIONER also got a stay order from this Court in O. P. No. 6500 of 1991. In the above writ petition, in an interim order this Court directed the assessing authority not to collect sales tax from the petitioner in excess of 1 per cent on the sale of wheat and wheat products. PETITIONER, even though disclosed the entire turnover, claimed exemption based on the decision of the Karnataka High Court in the returns for the years 1991-92 and 1992-93.

(2.) SUPREME Court overruling the judgments of the High Court, referred above, in the decision reported in Rajasthan Roller Flour Mills Association v. State of Rajasthan [1993] 91 STC 408 held that wheat and wheat products are different commodities and tax has to be paid separately. Therefore, for subsequent years petitioner has filed correct returns. The stay obtained by the petitioner was vacated in 1994. Petitioner paid the entire amount of tax due in instalments. After payment of the entire amount, assessment was made by exhibits P7 and P8. Thereafter Deputy Commissioner issued notice regarding imposition of penalty in view of the filing of the incorrect returns under section 45a of the Kerala General Sales Tax Act, 1963. Section 45a (1) (d) of the Act is as follows : " 45a. Imposition of penalty by officers and authorities.- (1) If the assessing authority or the Appellate Assistant Commissioner is satisfied that any person, - (a) to (c ). . . . . . . . . . . . . . . . . . . . (d) has submitted an untrue or incorrect return; or (e) to (g ). . . . . . . . . . . . . . . . . . . . . such authority or officer may direct that such person shall pay, by way of penalty, an amount not exceeding twice the amount of sales tax or other amount evaded or sought to be evaded where it is practicable to quantify the evasion or an amount not exceeding ten thousand rupees in any other case. "

(3.) ACCORDING to the department, petitioner could have filed a revised return. Provisions regarding filing of revised returns are incorporated in the Act by rule 18 (2a) and (2b) with effect from June 5, 1998. Before that, there was no enabling provision to file a revised return. Even otherwise, not filing a revised return is not a ground to impose penalty under section 45a (1) (d ). Imposing of penalty being a penal provision has to be strictly interpreted. In Associated Cement Co. Ltd. v. Commercial Tax Officer [1981] 48 STC 466 Supreme Court held that when the assessee files true return disclosing the entire turnover and claims exemption, penalty cannot be imposed. In the abovesaid case, the company engaged in the manufacture and sale of cement in the return filed did not include freight charges in the taxable turnover on the contention that it was under the bona fide belief that the freight charges were not liable to be included in the taxable turnover, in view of the decision of the Supreme Court in Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh [1969] 24 STC 487. Subsequently the Supreme Court in Hindustan Sugar Mills Ltd. v. State of Rajasthan [1979] 43 STC 13 reversed the earlier view. It was held that when the return was filed bona fide at the time of filing the return, no penalty can be imposed. Mens rea is a part of imposing penalty and when the assessee bona fide filed a return, no penalty can be imposed as per decision in Hindustan Steel Ltd. v. State of Orissa [1970] 25 STC 211 (SC ). In the counter-affidavit also the only contention raised regarding the justification of payment of penalty is as follows : " The order of the second respondent is erroneous in law, facts and material evidence of the case. Penalty proceedings were initiated by the assessing authority after the disposal of the original petition and the petitioner failed to file the revised return and pay tax even after the disposal of the original petition. The petitioner has to file true and complete return of his business transaction as per the provisions of the Kerala General Sales Tax Act, 1963. The returns already filed being incorrect and incomplete with the passing of the judgment in Rajasthan Roller Flour Mills Association v. State of Rajasthan [1993] 91 STC 408 (SC), the failure of file correct return is with ulterior motive in order to evade payment of tax. " In this case penalty was not imposed for not filing a revised return as can be seen from the show cause notice or the original authority's order. Further at the time of filing the return, they disclosed the entire turnover in the return. Exemption claimed was also bona fide. Even if exemption claimed is not allowable, if the assessee disclosed the entire turnover, it is for the assessing authority to reject the claim for exemption and make provisional or final assessment as the case may be. When entire particulars are disclosed in the return correctly and when an exemption is claimed bona fide, it is for the assessing authority to make assessment according to law. Parties can duly file appeals, if they are not satisfied. But in such cases, where all particulars are revealed, in the return, no penalty can be levied as held in Surface Coats v. State of Kerala [1991] 83 STC 300 (Ker); (1991) 1 KLT 443. The assessing authority could have also made demand for paying the tax after the Supreme Court decision on the point. Assessing authority failed to make assessment in time at least when the Supreme Court further decided the matter. Here tax was paid before assessment and before demand even there tax was not collected from customers. In any event they paid the tax before the assessment and before issuance of penalty notice and it is not a case where a penal provision can be invoked against the assessee. Petitioner did not file an untrue or incorrect return.