VYSAK INTERNATIONAL HOTELS (P) LTD. V. COMMERCIAL TAX OFFICER, PAYYANNUR

WP(C)/18011/2008

AI Insights

The case revolves around Vyasa International Hotels (P) Ltd., which faced penalties for failing to file monthly tax returns and remit due taxes for several months between 2005 and 2006. The petitioner argued that these failures were due to technical issues and financial stringency, and sought a reduction in the penalties imposed, which were initially set at double the tax amounts due. The authorities reduced the penalties to equal the tax amounts after the taxes were eventually paid. The High Court of Kerala, however, upheld the imposition of penalties at double the tax amounts, rejecting the petitioner's claims of the offenses being technical and the financial difficulties as justifications for non-compliance.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 738232 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 10-07-2014
• Assessment Year: misc
• Other Referred Cases: T.R. Ramachandran V. Sales Tax officer (1997) 106 STC 413 (Ker.), Zakir Hussain V. Additional Sales Tax officer (1993 (1) KLT 265), Commissioner of Income Tax V. Chembara Peak Estates Ltd. (1989) 183 ITR 471 (Ker.), E.K. Varghese and another V. Income Tax officer and others (1974) 96 ITR 577 (Ker.), Commissioner of Income Tax V. Raunaq & Co. (P) Ltd. (1983) 140 ITR 407 (Del.)
• Laws Referred To: Kerala General Sales Tax Act (KGST Act)
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: S SUDHEESHKUMAR
• Assessee Lawyers: T M SREEDHARAN; C K SHERIN; V P NARAYANAN
• Keywords: Financial stringency; Non-filing of return; Non-payment of tax; Penalty; Technical offence
• Section: 45A

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE C.K.ABDUL REHIM THURSDAY, THE 10TH DAY OF JULY 2014/19TH ASHADHA, 1936 WP(C).No. 18011 of 2008 (T) ---------------------------- PETITIONER: -------------------- VYSAK INTERNATIONAL HOTELS (P) LTD., GOVERNMENT HOSPITAL ROAD, PAYYANNUR, REP. BY ITS MANAGING DIRECTOR, JOSE ILLICKAL. BY ADVS.SRI.T.M.SREEDHARAN, SMT.C.K.SHERIN, SRI.V.P.NARAYANAN. RESPONDENTS: ----------------------- 1. THE COMMISSIONER OF COMMERCIAL TAXES, THIRUVANANTHAPURAM. 2. THE DEPUTY COMMISSIONER (APPEALS), COMMERCIAL TAX, KOZHIKODE. 3. COMMERCIAL TAX OFFICER, PAYYANNUR. BY SR. GOVT. PLEADER MR.S. SUDHEESHKUMAR. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 10-07-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: rs. WP(C).No. 18011 of 2008 (T) APPENDIX PETITIONER'S EXHIBITS:- EXT.P1 COPY OF THE ORDER DATED 29/04/2006. EXT.P2 COPY OF THE ORDER DATED 19/02/2007. EXT.P3 COPY OF THE ORDER DATED 28/02/2007. EXT.P4 COPY OF THE ORDER DATED 12/12/2007 IN STRP NO.74/2007. EXT.P5 COPY OF THE ORDER DATED 12/12/2007 IN STRP NO.103/2007. EXT.P6 COPY OF THE ORDER DATED 12/12/2007 IN STRP NO.104/2007. EXT.P7 COPY OF THE REVISION PETITION FILED BEFORE THE 1ST RESPONDENT. EXT.P8 COPY OF THE REVISION PETITION FILED AGAINST EXT.P5 ORDER BEFORE THE FIRST RESPONDENT. EXT.P9 COPY OF THE REVISION PETITION FILED AGAINST EXT.P6 ORDER BEFORE THE FIRST RESPONDENT. EXT.P10 COPY OF THE ORDER DATED 26/05/2005 OF THE 1ST RESPONDENT. EXT.P11 COPY OF THE CERTIFICATE DATED 20/01/2008 ISSUED BY THE 3RD RESPONDENT. EXT.P12 COPY OF THE DEMAND NOTICE DATED 10/10/2004 IS ISSUED BY THE DY. TAHSILDAR (RR), KERALA STATE FINANCIAL CORPORATION, KANNUR. EXT.P13 COPY OF THE JUDGMENT DATED 25/02/2005 IN W.A. NO. 389/2005. EXT.P14 COPY OF THE NOTICE ON 08/07/2005 ISSUED BY KFC. EXT.P15 COPY OF THE PROCEEDINGS OF THE KFC DATED 24/01/2006 GRANTING OTS TO THE PETITIONER. EXT.P16 COPY OF THE JUDGMENT DATED 21/07/2006 IN WP(C).NO.17305/2006. EXT.P17 COPY OF THE JUDGMENT DATED 25/08/2006 IN W.A. NO.1569/2006. EXT.P18 COPY OF THE ORDER DATED 21/12/2006 IN I.A. NO.1223/2006 IN W.A. NO. 1569/2006. .........2/- WP(C).No. 18011 of 2008 (T) EXT.P19 COPY OF THE INTERIM ORDER DATED 06/10/2006 IN WP(C).NO.26212/2006. EXT.P20 COPY OF THE JUDGMENT DATED 31/10/2006 IN WP(C).NO.26212/2006. EXT.P21 COPY OF THE ASSESSMENT ORDER DATED 16/07/2008 ISSUED BY THE COMMERCIAL TAX OFFICER, PAYYANNUR, FOR THE YEAR 2005-06. EXT.P22 COPY OF THE CHALLAN RECEIPT NO.85 DATED 31/07/2008. EXT.P23 COPY OF THE ASSESSMENT ORDER DATED 16/07/2008 ISSUED BY THE COMMERCIAL TAX OFFICER, PAYYANNUR FOR THE YEAR 2006-07. EXT.P24 COPY OF THE CHALLAN RECEIPT NO.86 DATED 31/07/2008. RESPONDENT'S EXHIBITS:- EXT.R1A COPY OF THE STA TEMENT SHOWING THE PAYMENT DETAILS. //TRUE COPY// P.A. TO JUDGE rs. C.K. ABDUL REHIM, J. ------------------------------------------------- W.P.(c) No. 18011 OF 2008-T ------------------------------------------------- DATED THIS THE 10th DAY OF JULY, 2014. J U D G M E N T Exhibit P1, P2 and P3 orders imposing penalty under Section 45A of the Kerala General Sales Tax Act (KGST Act) which is modified by the 1st revisional authority in Ext.P4, P5 and P6 and further confirmed by the 2nd revisional authority in Ext.P10 order, is under challenge in this writ petition. 2. The petitioner is running a Bar Hotel. The petitioner had failed to submit monthly returns and to make payment of the tax due with respect to the period from 4/2005 to 1/2006, 11/2006 and 12/2006. Accordingly penalty under Section 45A was imposed for the offences of non-filing of return and non-payment of tax due, to the tune of double the amount of tax due for the respective months. The petitioner had challenged the orders imposing penalty in revision before the 2nd respondent. It was mainly W.P.(c) No. 18011/2008 -2- contended that the non-filing of return was due to various circumstances prevailed which had prevented the petitioner from filing the return within the due dates. It was further contended that the non-filing of returns was only a technical offence for which no penalty can be imposed on the basis of the tax amount due. But the 2nd respondent found that non- filing of return and non-payment of tax was not a technical offence. Further it was found that non-payment of tax was not a single instance for any particular month, but it continued and even after issuing notice proposing penalty the petitioner had failed to file returns and to pay the tax. However, taking a lenient view on the basis that the tax due has already been remitted subsequently, the penalty was directed to be reduced to an equal amount of the tax due. 3. In the 2nd revision filed before the 1st respondent the very same grounds were agitated. It was contended that no purposeful evasion of tax for imposing penalty at double the amount of tax was warranted, since the tax amount has W.P.(c) No. 18011/2008 -3- already been remitted. The offence need be considered only as a technical one and the maximum penalty which can be imposed is only Rs10,000/-. But, repelling those contentions, the 1st respondent found that the tax due was not paid along with returns or even after issuing notice proposing imposition of penalty. Therefore it is not a technical offence, and under Section 45A the petitioner is liable to be imposed with penalty to the tune double the amount of tax. 4. Before this court it is contended that subsequently the petitioner had filed annual returns of the assessment years concerned, which was accepted by the assessing authority and the entire tax amount due has already been paid. Through additional documents produced as per Exts.P12 to P21 it is brought to notice of this court that during the relevant period the establishment was attached and taken over possession by the Kerala Financial Corporation and it was released only subsequently, on the basis of judgment passed by this court. It is contended that W.P.(c) No. 18011/2008 -4- the Bar Hotel in question remains closed for considerable period during the relevant time. According to learned counsel for the petitioner those factors only led to the situation of non-filing of returns and non-payment of tax due. Therefore it is contended that the petitioner was virtually prevented from filing returns and from paying tax. It is also contended that the petitioner was facing acute financial stringency during the relevant time which need consideration for a reduction of the quantum of penalty imposed. 5. Learned Government Pleader appearing for the respondents stoutly opposed the above submissions. It is pointed out that no such ground was raised either before the original authority or before the revisional authorities. It is further contended that, financial stringency is not a ground to evade payment of tax and the petitioner had kept custody of tax amount collected from customers without paying the same to the Department. W.P.(c) No. 18011/2008 -5- 6. The first question to be considered is as to whether the offence alleged is technical in nature. As per Section 45A, if the authority is satisfied that the assessee had failed to submit any return as required under the provisions of the Act or the Rules or and had failed to comply with provisions of the Act or the Rules to make payment of the tax amount due, a penalty not exceeding twice the amount of tax or other amount sought to be evaded can be imposed. In the case at hand the specific allegation is that the petitioner had failed in submitting monthly returns for the periods in question and failed to remit the tax due for the said periods. Non-remittance of tax due under the Act and Rules is an offence coming within the purview of Section 45A. In such case the authority is entitled to impose penalty to the tune of twice the amount of tax evaded or sought to be evaded. Therefore I am of the opinion that the view taken by the authorities that non- payment of tax due is not a technical offence and W.P.(c) No. 18011/2008 -6- imposition of penalty at twice the amount of tax is sustainable. 7. Learned counsel placed reliance on a decision of this court in T.R. Ramachandran V. Sales Tax officer (1997) 106 STC 413 (Ker.). In the said ruling this court observed that, the assessee's explanation that he was disabled from filing return and from remitting the tax due to certain specific circumstances, is not a valid excuse for not paying the collected tax. But on the facts of the case this court upheld the view taken by the authorities concerned in fixing the quantum of penalty considering the gravity of offence and other circumstances.. 8. Learned Government Pleader had placed reliance on the decision in Zakir Hussain V. Additional Sales Tax officer (1993 (1) KLT 265), wherein it is held that unauthorised retention of the collected tax payable to the State would amount to evasion as contemplated under Section 45A of the Act. Learned counsel for the petitioner W.P.(c) No. 18011/2008 -7- had further pointed out decisions of this court under the Income Tax Act, Commissioner of Income Tax V. Chembara Peak Estates Ltd. (1989) 183 ITR 471 (Ker.), E.K. Varghese and another V. Income Tax officer and others (1974) 96 ITR 577 (Ker.) and Commissioner of Income Tax V. Raunaq & Co. (P) Ltd. (1983) 140 ITR 407 (Del.). Referring to provisions contained in the Income Tax Act, it is held in those cases that, financial stringency of the assessee can be accepted as a good and sufficient reason for delayed payment of tax and such aspect can be taken as a reasonable cause while imposing penalty. But the provisions are distinct with respect to payment of tax under the KGST Act. Financial stringency cannot be pleaded as ground because the petitioner is keeping the tax amount collected from the customers without paying the same to the public exchequer. Therefore I am of the view that, contentions of the petitioner to the extent that it is technical offence as well as W.P.(c) No. 18011/2008 -8- the contention that there was no purposeful evasion, cannot be countenanced. 9. Learned counsel for the petitioner made a further appeal to this court to consider reduction in the quantum of penalty imposed, on the basis that the establishment remained closed during considerable portion of the relevant period and the petitioner was not having possession of the establishment due to the attachment effected. It is pertinent to note that the first revisional authority had already taken a lenient view and reduced the quantum of penalty to equal the amount of tax. I do not think any further reduction of the quantum is warranted. However, considering the fact that the order imposing penalty was challenged all along and also considering the fact that this writ petition was pending adjudication before this court from the year 2008 onwards, I am inclined to order waiver of penal interest on the amount of penalty finalised, if the petitioner remits the amount of penalty determined by the assessing authority W.P.(c) No. 18011/2008 -9- within a period of 3 months from the date of receipt of certified copy of this judgment. 10. Needless to say that if there is failure in remitting the amount within the time stipulated as above, the respondents will be free to proceed with recovery of the amount along with penal interest leviable under the statute by resorting to coercive steps of recovery. Sd/- C.K. ABDUL REHIM, JUDGE. AMG True copy P.A to Judge "