STATE OF KERALA Vs. COCHIN SHIPYARD LTD.

JUDGEMENT

(1.) A classic case in which an overzealous action by the Intelligence Department to take penalty proceedings has ended in separate penalty and assessment proceedings having come to be agitated by the assessee before the statutory authorities. We say this because oftener than ever we have been deprecating the practise of Intelligence Officers carrying out penalty proceedings, without reference to the Assessing Officers especially when the offence detected during the course of an assessment year could as well be taken up in assessment.

(2.) The assessee, a public sector undertaking, wholly owned by the Union of India, had applied under global tenders and obtained purchase orders for supply of five numbers of "Rolls Royce UT755-L Platform Supply Vessels". An agreement of contract was entered into between the Sea Tankers Management Co.Ltd., a company existing under the Laws of Cyprus and the assessee, to build, launch, equip, complete, sell and deliver the ships to the foreign buyer. There is a novation of agreement to one Deep Sea Supply ASA, Norwegia. The Deep Sea Supply ASA obtained delivery of the goods from the Cochin Shipyard, the assessee, and exported them out of India.

(3.) A news report appeared in Malayala Manorama dated 31.05.2008, which led to the Deputy Commissioner (Intelligence), Ernakulam, verifying the months returns filed by the Company. The Company had claimed exemption on the sale of the above Deep Sea Vessels, being export sales in the returns filed. The documents regarding the construction and supply of Vessels were called for by office notice dated 31.01.2009 in the very same assessment year in which the sale was carried out. Penalty proceedings were initiated and it ended in levy of double the amount of tax sought to be evaded finding the sale to be not covered under Section 5(1) of the Central Sales Tax Act, 1956 (for short 'CST Act'). The First Appellate Authority rejected the appeal and the assessee was in second appeal. The second appeal stood allowed in favour of the assessee as per Annexure C order of the Tribunal. The State is in revision.