NORTH MALABAR DISTRICT CO-OPERATIVE SUPPLY AND MARKETING SOCIETY LTD Vs. ASSISTANT COMMISSIONER ASST IV SPECIAL CIRCLE II

JUDGEMENT

(1.) THE matter arises under the Kerala General Sales Tax Act, 1963. THE petitioner is an oil miller. It is an assessee on the files of the first respondent. For the assessment year 1990-91 the first respondent completed the assessment by order dated April 5, 1995 (exhibit P1 ). During the course of the assessment proceedings the first respondent issued notice under section 45a of the Act alleging that the petitioner has submitted untrue returns which is an offence under sub-section (1) (d) of the said section and imposed a penalty of Rs. 2,11,960 evidenced by exhibit P2. THE petitioner took up the matter in revision before the Deputy Commissioner of Agricultural Income-tax and Sales Tax, Kozhikode, who by his order dated November 1, 1995 (exhibit P3) cancelled the penalty. Subsequently the Board of Revenue initiated suo motu proceedings under section 45a (5) of the Act for cancellation of exhibit P3 order. THEreafter, the Board of Revenue passed exhibit P5 order cancelling exhibit P3 revisional order and restoring exhibit P2 penalty order passed by the first respondent.

(2.) THE brief facts necessary for adjudication of the question involved in this case are as follows : As already stated, the petitioner is an oil miller. THE petitioner purchases coconut/copra locally for the manufacture of coconut oil and coconut oil cake. For the assessment year 1990-91 the petitioner purchased 2,220. 80 quintals of copra locally or Rs. 43,96,403. 86 for the oil mill section and 2,134 quintals of copra valued at Rs. 42,24,525 was used for manufacture of coconut oil. Out of the 1368. 11. 950 quintals of coconut oil produced, 1,296. 32 quintals of coconut oil was sold locally and the balance on inter-State trade. For the assessment year 1990-91 the petitioner filed return where it had declared only an amount of Rs. 2,40,302. 50 and claimed exemption on the taxable turnover in cobra amounting to Rs. 39,84,222. 50. THE petitioner had paid the tax due on the taxable turnover of copra returned and also collected and remitted tax on the taxable turnover of coconut oil and cake at 5 per cent. According to the respondents, the exemption on copra was claimed erroneously which will amount to filing of untrue or incorrect return with intend to evade tax payable on the purchase turnover of copra.

(3.) I have heard the learned counsel appearing for the petitioner and the learned Government Pleader appearing for the respondents. The learned counsel appearing for the petitioner submitted that in the instant case the petitioner bona fide believed that if the petitioner remits tax at the rate of 5 per cent. on the sales turnover of coconut oil and coconut oil cake produced out of the copra purchased, it need not pay tax on the purchase turnover of copra by virtue of the explanation to items 50 and 51 of the First Schedule to the KGST Act as it stood at the relevant time. Learned counsel submitted that it is on the basis of the said understanding of the entries that the petitioner filed its return for the year 1990-91. The learned counsel submitted that the petitioner did not show the purchase turnover of coconut/copra used for the manufacture of coconut oil and coconut oil cake and further submitted that it is a defeated by the respondent in the statement that the petitioner had claimed exemption from tax on the taxable turnover of copra amounting to Rs. 39,84,222. The learned counsel submitted that in order to attract the levy of penalty under section 45a of the KGST Act the authorities have to establish mens rea. The learned counsel submitted that in the instant case, there is no question of mens rea or contumacious conduct on the part of the petitioner since the petitioner had claimed exemption on the purchase turnover of copra used for the manufacture of coconut oil and coconut oil cake sold locally and since the petitioner had remitted tax at the rate of 5 per cent. on the sale of coconut oil and coconut oil cake. In such circumstances, the learned counsel submitted that there is no question of evasion of tax or any attempted evasion of tax warranting imposition of penalty under section 45a. The learned counsel in support of the said contention relied on the decisions of the Supreme Court in Hindustan Steel Ltd. v. State of Orissa [1970] 25 STC 211, Hindustan Sugar Mills v. State of Rajasthan [1980] 45 STC 194 and the decisions of this Court in P. D. Sudhi v. Intelligence Officer, Agricultural Income-tax and Sales Tax, Mattancherry [1992] 85 STC 337 and in Muttom Oil & Flour Mills v. State of Kerala (1991) KLJ (Tax Cases) 114. The learned counsel further submitted that, at any rate, the respondents were not justified in imposing the maximum penalty for the simple reason that the petitioner did not remit the tax due on the purchase turnover of copra inspite of demand. The learned Government Pleader appearing for the respondents, on the other hand, submitted that the failure to show the taxable turnover of copra in the return filed for the assessment year 1990-91 is wilful and that the attempt of the petitioner was to evade the payment of tax due on the said turnover. The learned Government Pleader further submitted that the petitioner had illegally collected tax at the rate of 5 per cent. on the sales turnover of coconut oil and coconut oil cake. The learned Government Pleader submitted that the fact that the petitioner had remitted the tax collected at the rate of 5 per cent. , will not exonerate the petitioner from remitting the tax due on the purchase turnover of copra. The learned Government Pleader further submitted that the Board of Revenue was perfectly justified in cancelling the appellate order, exhibit P3 and in restoring the penalty order by exhibit P5.