JINDAL PHOTOFILMS LTD Vs. STATE OF KERALA

JUDGEMENT

(1.) The question that arises for consideration in this appeal is as to whether for default in compliance of the provisions of R.21(7) of the Kerala General Sales Tax Rules (for short 'the Rules'), in so far as it provides for payment of not less than 90% of the tax payable on the taxable turnover for the month of March on or before the end of the month, in proceedings for imposition of penalty under S.45A of the Kerala General Sales Tax Act (for short 'the Act'), the quantum of penalty can go beyond Rs. 10,000/-

(2.) The appellant is a private limited company engaged in the sale of photographic processing equipments. It is an assessee to sales tax under the Act. Under R.21(7) of the Rules, the appellant is liable to file monthly return in Form No. 9 in respect of the taxable turnover of every month, on or before 10th of the succeeding month accompanied by proof of payment of tax due as per the return. However, so far as the tax payable for the last month of the financial year, i.e., for the month of march, the appellant is liable to pay not less than 90% of the tax payable on the taxable turnover for the month of March on or before the end of that month, in cash or through demand draft under the said rule. The appellant had remitted a sum of Rs. 3,00,000/- towards advance tax for the month of March on 25-3-2002. The appellant had effected sale of goods of the value of Rs. 57,00,000/- on 28-2-2002, on which he is liable to pay tax (both sales tax and additional tax) of Rs. 5,24,400/-. Thus the total advance tax payable for the month of March as per the provisions of R.21(7) of the Rules was Rs. 8,24,400/-. As already noted, the appellant had paid only a sum of Rs. 3,00,000/- which is very much less than 90% of the tax due. The appellant had remitted a sum of Rs. 5,24.400/- by way of sales tax and additional tax for the month of March only on 10-4-2002, as in the case of returns for the other months of the year. Since the appellant omitted to remit not less than 90% of the tax due for the month of March, 2002, before 31 - 3-2002 which amounted to contravention of the provisions of R.21(7) of the Rules, the assessing authority initiated proceedings under S.45A of the Act for imposition of penalty. The explanation of the appellant before the assessing authority was that the appellant had remitted the tax due for the month of March 2002 on 25-3-2002; that there was an unexpected sale to the extent of Rs. 57,00,000/- on 28-3-2002; that 29th was a holiday; that on 30th the Manager of the appellant was ill; that 31st was a Sunday, and therefore, the appellant could not remit the balance tax of Rs. 5,24,400/- due on the sales turnover of Rs. 57,00,000/- effected on 28-3-2002 on or before 31 - 3-2002. According to the appellant, this was only a technical default, viz., delay in remitting the tax, and therefore, even if the explanation offered by the appellant is not accepted, since there is no evasion of tax, the maximum penalty that can be imposed is only Rs. 10,000/-. The assessing authority did not accept the explanation offered by the appellant. He found that the non payment of the advance tax as provided under R.21was intentional. He accordingly levied a penalty of Rs. 5,68,957/- under S.45A(1)(g) of the Act, on the basis that the assessee had evaded the payment of tax due for the month of March. 2002. Being aggrieved by the penalty order, the appellant filed revision before the Deputy Commissioner of Sales Tax, and also moved for stay of collection of the disputed penalty. The revisional authority passed an order (Ext. P7) granting stay of collection of the penalty due as per the penalty order on condition that the petitioner pays a sum of Rs. 2,85,000/- and furnishes security for the balance till the disposal of the appeal. The appellant challenged this order in the writ petition. The learned Single Judge considered the matter on merits and held that the appellant had contravened the provisions of R.21(7) of the Rules, which attracted the provisions of S.45A(1)(g) of the Act, and further held that, the facts disclosed establish that the appellant had willfully delayed the payment. Learned Single Judge also found that the explanation offered by the appellant is not acceptable. Learned Single Judge further held that the noncompliance of the provisions of R.21(7) also attracted the provisions of S.45AA of the Act, and therefore, there is no merit in the contention that the maximum penalty that can be imposed under S.45A of the Act is only Rs. 10,000/-. It is against this judgment, the present appeal is filed.

(3.) Sri. K.I. Mayankutty Mather, learned counsel appearing for the appellant submitted that the provisions of S.45AA is not attracted in the instant case, since there was no notice of demand which is the foundation for invoking the said section, and that there are no circumstances warranting the exercise of powers under S.45A of the Act. He also submitted that penalty cannot be imposed merely upon proof of default and that the order imposing penalty for failure to carry out a statutory obligation is the result of a quasi criminal proceeding and penalty will not ordinarily be imposed unless the party's conduct is contumacious or dishonest or acted in conscious disregard of its obligation and that the quantum of penalty is a matter of discretion. The counsel has also relied on the decision of the Supreme Court in Hindustan Steel Ltd. v. The State of Orissa (1970) 25 STC 211) and of the Division Bench decision of this Court in P.D. Sudhi v. Intelligence Office, Agricultural Income Tax and Sales Tax, Mattancherry and Others ( 1992 (85) STC 337 ) and other cases.