Raiza K.R. V. Assistant Commissioner, Commercial Taxes, Special Circle-II, Kozhikode and Deputy Commissioner, Department of Commercial Taxes, Kozhikode and Commissioner of Commercial Taxes, Thiruvananthapuram and State of Kerala, represented by Secretary to Government, Taxes Department

WP(C)/5911/2012

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The case revolves around a writ petition filed by Raiza K.R., a dentist seeking to establish a business in reclaimed rubber manufacturing, challenging the demand for a security deposit of Rs. 7 lakhs for registration under the KVAT Act and CST Act. The petitioner argued that the demand was excessive and not in line with statutory provisions, specifically citing a circular that capped the security at Rs. 15,000. The respondents justified the high security demand based on the petitioner's family's tax evasion history and the petitioner's lack of immovable property. The court had previously directed the finalization of the registration application without detaining the petitioner's machinery. After considering new evidence, including a Solvency Certificate, the court found merit in the petitioner's challenge and directed a reassessment of the security requirement.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 799155 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 07-06-2012
• Assessment Year: misc
• Other Referred Cases: WPC 3826/2012, W.P. (C).No.123/2006
• Laws Referred To: KVAT Act, CST Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: GOVERNMENT PLEADER
• Assessee Lawyers: HARISANKAR MENON; MEERA MENON; MAHESH MENON
• Keywords: Commercial Taxes; Registration; Security Demand; Solvency certificate
• Section: 15; 17

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON THURSDAY, THE 7TH DAY OF JUNE 2012/17TH JYAISHTA 1934 WP(C).No. 5911 of 2012 (L) -------------------------- PETITIONER(S): ------------- RAIZA.K.R, PROPRIETOR, M/S.K.A.RECLAIMS, INDUSTRIAL ESTATE, WEST HILL, KOZHIKODE-673 005. BY ADVS.SRI.HARISANKAR V. MENON SMT.MEERA V.MENON SRI.MAHESH V.MENON RESPONDENT(S): -------------- 1. ASSISTANT COMMISSIONER, COMMERCIAL TAXES, SPECIAL CIRCLE-II, KOZHIKODE-673 001. 2. DEPUTY COMMISSIONER, DEPARTMENT OF COMMERCIAL TAXES, KOZHIKODE-673 001. 3. COMMISSIONER OF COMMERCIAL TAXES, THIRUVANANTHAPURAM-695 001. 4. STATE OF KERALA, REPRESENTED BY SECRETARY TO GOVERNMENT, TAXES DEPARTMENT, KERALA GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM-695 001. BY ADV. GOVERNMENT PLEADER BY GOVERNMENT PLEADER THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 07-06-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).No. 5911 of 2012 (L) APPENDIX PETITIONER(S) EXHIBITS: EXHIBIT-P1. COPY OF APPLICATION FOR REGISTRATION FILED BY THE PETITIONER BEFORE THE 1ST RESPONDENT DTD.12.01.2012. EXHIBIT-P2. COPY OF NOTICE ISSUED BY THE 1ST RESPONDENT DTD.18.01.2012. EXHIBIT-P3. COPY OF SHOP INSPECTION RESPORT ISSUED BY THE 1ST RESPONDENT DTD.28.01.2012. EXHIBIT-P4. COPY OF JUDGMENT OF THIS HON'BLE COURT IN WPC 3826/2012 DTD.23.02.2012. EXHIBIT-P5. COPY OF NOTICE ISSUED BY THE 1ST RESPONDENT DTD.18.03.2012. EXHIBIT-P6. COPY OF CIRCULAR NO.10/2006 DATED 28.2.2006. EXHIBIT-P7. COPY OF SOLVENCY CERTIFICATE. EXHIBIT-P8. COPY OF LETTER SUBMITTED BY THE PETITIONER BEFORE THE EXECUTIVE COUNCIL, DENTAL COUNCIL OF INDIA. RESPONDENTS' EXHIBITS - NIL //TRUE COPY// P.A TO JUDGE DG P.R. RAMACHANDRA MENON, J. --------------------------------------- W.P.(C). No.5911 of 2012 ---------------------------------------- Dated this the 7th day of June, 2012 JUDGMENT Security demanded to an extent of Rs. 7 lakhs vide Ext.P5 notice so as to grant registration to the petitioner, sought for vide Ext.P1 application under the KVAT Act and CST Act, is under challenge in this writ petition. 2. The petitioner is a professional dentist, who wants to reap fortunes in business by setting up an industry for manufacturing and sale of reclaimed rubber. It was accordingly, that Ext.P1 application for registration was submitted before the first respondent. After considering the said application, the first respondent issued Ext.P2 notice calling for certain particulars, which is stated as satisfied. Ext.P3 is the Shop Inspection Report, pursuant to the inspection conducted on 28.01.2012. Still nothing turned in positive, when the petitioner was constrained to approach this Court by filing W.P.(C). No.3826/2012 for finalizing Ext.P1 application for registration and also for a direction to the authorities of the check post not to W.P.C. No. 5911 of 2012 -2- detain the machinery being brought forth by the petitioner for setting up the unit for want of registration. After hearing both the sides, the writ petition was disposed of by this Court as per Ext.P4 judgment, directing to finalize the application for registration as specified; simultaneously, making it clear that the machinery/equipments brought by the petitioner shall not be detained solely for want of any registration number. 3. The case of the petitioner is that, the petitioner has now been served with Ext.P5 notice dated 18.03.2012 demanding security to the tune of Rs. 7 lakhs, which according to the petitioner is not in conformity with the statutory prescriptions, particularly Section 15 of the KVAT Act, r/w Section 17 and relevant Rules. Reliance is also sought to be placed on Ext.P6 Circular issued by the third respondent, wherein the maximum security for registration in respect of persons like the petitioner can only be Rs. 15,000/-(Rupees fifteen thousand); whereas the petitioner has already satisfied security to the tune of Rs.25,000/-(Rupees twenty five thousand). Interference of this Court is sought for in the said circumstances, to set aside Ext.P5 W.P.C. No. 5911 of 2012 -3- and to direct the first respondent to grant registration as sought for. 4. A statement has been filed on behalf of respondents 1 to 3, wherein various adverse circumstances are pointed out, justifying the extent of security demanded vide Ext.P5. It is stated that the parents of the petitioner are not having a good track record and that they are chronic defaulters with regard to the payment of tax and have evaded tax to substantial extent. Even according to the petitioner, as given in the application form, the expected purchase and sales turn over for the business during the year are Rs.(1,00,00,000/-(one crore) and Rs.1,10,00,000/-(one crore and ten lakhs) respectively, while the income as revealed from the income tax returns is only Rs.1,50,000/-(Rupees one lakh and fifty thousand). On seeking approval, the Dy. Commissioner, Kozhikode directed further enquiry; which was completed and the file was returned with necessary notings. It was after considering the entire facts and figures as above, that adequate security, to safe guard the interest of revenue, was demanded vide Ext.P5, which hence is W.P.C. No. 5911 of 2012 -4- stated as in tune with the relevant provisions of law and not assailable under any circumstances. It is also stated that the petitioner is a Dental Surgeon by profession and is permanently staying in Bangalore along with her husband who is pursuing his business there and that there is every reason for the respondents to doubt that the registration sought for by the petitioner is a 'benami' one, on behalf of the father. It is also pointed out that the petitioner is not having any immovable properties of her own. 5. The petitioner has filed a reply affidavit rebutting the averments as aforesaid and contending that the insinuation made against her father is quite wrong and unfounded. Reliance is also sought to be placed on the judgment passed by this Court in W.P. (C).No.123/2006 preferred by her father in this regard, who is running three different establishments under the name and style as M/s. K.A. Latex (P) Ltd., M/s. Nilambur Treads (P) Ltd., and M/s. Nilambur Traders. 6. During the pendency of the above proceedings, the petitioner has come out with an I.A.No.6575/2012 producing Ext.P7 copy of Solvency Certificate dated 15.5.2012, wherein W.P.C. No. 5911 of 2012 -5- solvency to an extent of Rs.7,50,000/-(Rupees seven lakhs fifty thousand) has been certified by the concerned Tahsildar. Obviously, the said certificate has been issued in the name of the mother of the petitioner, the petitioner herself and her younger sister by name Raseena. The learned counsel for the petitioner submits that the parties do not have any objection in producing necessary solvency and pledging the same by way of security for obtaining the registration. 7. In response of the query made by this Court during the course of hearing, as to whether the petitioner, being a professional Dentist, governed by the norms of Dental Council of India, would be in a position to carry on any trade or business while pursuing the profession as a Dentist, an affidavit dated 5.06.2012 has been sworn to by the petitioner conceding that she is a Dentist at Bangalore, and that to her knowledge, there is no bar. It is also stated that, she has already informed the position to the Dental council of India, Bangalore as to the setting up of the business unit vide letter dated 1.06.2012, a copy of which is produced as Ext.P8. W.P.C. No. 5911 of 2012 -6- 8. After hearing both the sides, this Court finds that in view of the subsequent developments, particularly, the Solvency Certificate produced by the petitioner vide Ext.P7, the matter requires to be reconsidered by the first respondent with reference to the same as well. Accordingly, the first respondent is directed to reconsider Ext.P1 application on the strength of security amount already deposited by the petitioner and also Ext.P7 Solvency Certificate to the tune of Rs.7,50,000/-(seven lakhs fifty thousand) causing the same to be pledged with the first respondent in connection with the registration. Taking note of the submission made by the learned counsel for the petitioner that the sister of the petitioner is presently abroad, it is open for the petitioner to get the relevant proceedings duly attested through the Consulate or otherwise in accordance with law and to have it produced before the first respondent. The petitioner is given one months' time to complete the proceedings in this regard and Ext.P1 application shall be kept alive during such time. Ext.P5 notice shall stand modified to the said extent and the matter shall be considered afresh and appropriate orders W.P.C. No. 5911 of 2012 -7- shall be passed on Ext.P1 application for registration within one month thereafter. Writ petition is disposed of. P.R. RAMACHANDRA MENON, JUDGE. Kp/- "