HOTEL LEELA VENTURE LTD Vs. STATE OF KERALA

JUDGEMENT

(1.) CONNECTED ST. Revision cases, one filed by the Revenue, and the other by the assessee, arise from orders in appeal issued by the Tribunal in penalty proceedings completed under Section 29A(4) of the KGST Act. The assessee is a five-star hotel, running a hotel at Kovalam. On 22/02/2007 a consignment containing 125 cartons of foreign made foreign liquor was seized by the sales tax authorities near Thiruvananthapuram Railway Station with documents, which according to the sales tax authorities, were not sufficient for transport of goods. The goods seized admittedly contained an excise permit issued by the State Excise Authorities in favour of the assessee for purchase and transport of 7923 bottles of beer, wine, foreign made foreign liquor from ITDC, Customs Bonded Warehouse, Duty Free Shop, New Delhi. However, according to the assessee, goods were purchased from M/s. Brindco Sales Ltd., S-53, Okhla Industrial Area, Phase II, New Delhi, who are authorised dealers selling foreign made foreign liquor, and goods were transported in terms of the permit by rail to Trivandrum. The case of the department is that railway receipt is not produced and therefore transport by rail is not proved. Their specific case is that the quantity for which permit was issued was much more than actual quantity brought by the assessee. We have heard senior counsel Dr. Mohammed Kutty appearing for the assessee and Special Government Pleader appearing for the Revenue.

(2.) WE do not find any justification to levy penalty under Section 29A(4) of the Act because penalty provided under the said provision is for attempt of evasion of tax due under the Act in respect of the goods under transport. Goods under transport in this case were inter-State purchase of foreign made foreign liquor which is covered by a valid excise permit issued by the State excise authorities. The fact that the goods were seized from Railway Station premises itself shows that goods were transported by rail and therefore the contention raised by the State to the contrary is not tenable. Further if the goods were transported other than by rail, it had to pass through border checkposts, where sales tax and excise authorities verify the goods under transport. Moreover, without transit permit issued by the other States Excise Authorities, assessee cannot bring the goods through road passing through other States. Therefore obviously the goods were transport by rail in terms of the permit and the contention of the revenue to the contrary are not correct. Since the transport was after purchase of goods from outside the State, it is clear that goods were inter-State purchase and from the invoices produced it is seen that CST at concessional rate is charged. The department has no case that the goods were not taken into stock by the assessee which is running a hotel at Kovalam. The case of the assess is that goods for local sales in a star hotel is admitted by the excise department and that is why they issued permit authorising purchase and transport. WE do not think any other possibility exists in this case and counsel appearing for the assessee produced details of payments of advance tax of Rs.11,97,447/-. It is for the assessing officer while considering assessment to consider whether the entire goods purchased and brought by the assessee were subjected to tax at first sale point and on failure to take appropriate action. However, since Section 29A(4) read with Rule 35A(4)(b) authorises penalty only if there is attempt of evasion of tax on the transaction, pursuant to which goods are transported, penalty cannot be levied on the transaction because it is an inter-State purchase from outside the State and transport to assessee's place of business in Kerala. WE therefore do not find any justification to sustain the order of penalty confirmed by the Tribunal. In fact, in our view, if there is co-ordination between the excise and sales tax authorities, they can ensure collection of sales tax in respect of liquor purchased, transported and stored under the permits issued by the excise authorities. The goods transported in this case are covered by permit issued by the excise authorities. WE therefore cancel the penalty confirmed by the Tribunal. Consequently revision filed by the assessee is allowed and that of the revenue is dismissed. Penalty collected if any will be adjusted towards tax liability or otherwise refunded to the assessee.