Kerala High Court
M/S.United Construction Co vs Intelligence Officer(Ib) on 18 September, 2008
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE C.K.ABDUL REHIM
FRIDAY, THE 20TH DAY OF JULY 2012/29TH ASHADHA 1934
WP(C).No. 38740 of 2010 (N)
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PETITIONER(S):
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M/S.UNITED CONSTRUCTION CO,V.M.C COMPLEX,
WADAKANCHERY,THRISSUR,
REPRESENTED BY ITS MANAGING PARTNER V.C.ELIAS.
BY ADVS.SRI.N.MURALEEDHARAN NAIR
SMT.K.HYMAVATHY
RESPONDENT(S):
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1. INTELLIGENCE OFFICER(IB),
DEPARTMENT OF COMMERCIAL TAXES, PANKAJ BUILDING,
WEST FORT,THRISSUR - 680 001.
2. STATE OF KERALA,REPRESENTED BY ITS SECRETARY,
TAXES DEPARTMENT, GOVT.SECRETARIAT,
THIRUVANANTHAPURAM - 695 005.
R1 & R2 BY SPL.GOVERNMENT PLEADER SRI.SOJAN JAMES
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION
ON 20-07-2012, THE COURT ON THE SAME DAY DELIVERED THE
FOLLOWING:
Kss
WPC.NKO.38740/2010 N
APPENDIX
PETITIONER'S EXHIBITS:
P1: COPY OF THE RECEIPT ISSUED BY 1ST RESPONDENT DATED 18/09/2008.
P2: COPY OF THE SUMMONS IN FORM NO.22 DATED 18/09/2008.
P3: COPY OF THE SUMMONS FORM NO.22 DATED 05/10/2009.
P4: COPY OF THE APPLICATION ISSUED BY 1ST RESPONDENT DATED
18/12/2009.
P5: COPY OF THE ORDER ISSUED BY 1ST RESPONDENT DATED 18/12/2009
FOR THE YEAR 2008-09.
RESPONDENT'S EXHIBITS: N I L
/TRUE COPY/
P.A.TO JUDGE
Kss
C.K. ABDUL REHIM, J.
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W.P.(c) No. 38740 OF 2010
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DATED THIS THE 20th DAY OF JULY, 2012
J U D G M E N T
An inspection was conducted at the business place of the petitioner by the 1st respondent on 18-09-2008 and various documents were recovered, vide Ext.P1 receipt. Through Ext.P2 notice issued on 18-09-2008, the petitioner was required to produce all Books of Accounts related to the business transactions. A further notice was issued in this regard as per Ext.P3 on 05-10-2009. In response to those notices the petitioner had produced all Books of Accounts on 18-12-2009. Exhibit P4 application was submitted on that day requesting to permit compounding of offence under Section 74 of the Kerala Value Added Tax Act, 2003, in lieu of prosecution. Considering Ext.P4, Ext. P5 proceedings was issued by the 1st respondent permitting compounding and directing the petitioner to remit an amount of Rs.4 lakhs towards compounding fee. W.P.(c) No. 38740/2010 -2-
2. In the present writ petition the petitioner is seeking a declaration to the effect that, under Section 74 of the KVAT Act the petitioner is liable to remit compounding fee only to the extent of Rs.2 lakhs. The petitioner is seeking to quash Ext.P5 and seeking a consequent direction for refund of the excess amount of Rs.2 lakhs.
3. Contention of the petitioner is that the amendment brought into Section 74 of KVAT Act, enhancing the compounding fee from Rs.2 lakhs to Rs.4 lakhs, will apply from 01-04-2009. Since the offence was detected on 18-09-2008, prior to the amendment, the petitioner is liable for payment only a sum of Rs.2 lakhs. In this regard the petitioner placed reliance on a decision of this court in Intelligence officer, AIT & ST and another V. Hotel Ambassador ((1980) 45 STC 425), in order to canvass the position that the law applicable with respect to any offence and imposition of penalty is the law which is prevalent as on the date of the offence and no amendment W.P.(c) No. 38740/2010 -3- can be made applicable with respect to any offence detected previously.
4. Heard; the Special Government Pleader (Taxes) appearing on behalf of respondents. It is contended that compounding is permitted only on the basis of an application submitted by the petitioner on 18-12-2009, i.e:, after the amendment. The compounding fee applicable and remitted by the petitioner is the enhanced rate, because the compounding was applied and permitted after the amendment. Further contention on behalf of respondents is that, even actual detection of the offence was only on 18-12- 2009, when the books of accounts were produced and verified. Hence it is contended that the declaration sought for in this writ petition, after voluntarily remitting the compounding fee cannot be sustained.
5. Sri. V.K. Shamsudeen, learned counsel appearing for the petitioner contended that, there was inordinate delay on the part of 1st respondent in finalising the matter. W.P.(c) No. 38740/2010 -4- It is pointed out that, after issuance of Ext.P2 summons the matter was kept indefinitely pending for more than a year. Therefore the delay in finalisation is attributable only to the Department and hence the petitioner cannot be penalised by imposing the compounding fee at the amended rate.
6. While considering the rival contentions I take note of the fact that Section 74 only provides a facility to the assessee to compound any offence detected, in lieu of prosecution. It is actually an option given to the assessee to get rid of the penal consequences by opting for such compounding. In the case at hand the petitioner had opted for compounding on 18-12-2009 and remitted the compounding fee at the enhanced rate. The law which was prevalent as on the date of exercise of that option is the amended provision. It is obviously clear that the petitioner was aware of the amendment and he had exercised the option by paying the enhanced rate of compounding fee. That being the position, the petitioner cannot be permitted W.P.(c) No. 38740/2010 -5- to turn around and seek declaration that the compounding fee applicable is the rate prevailing prior to the amendment. Compounding of an offence is an option exercisable by the petitioner. It is a distinct procedure from imposition of penalty. Such option is provided inorder to facilitate the assesee to get rid of the penal consequences. Therefore the law which is applicable with respect to compounding is the law which is prevalent as on the date of exercising such option. I am of the view that legal precedent upon which reliance was placed by the petitioner, is clearly distinguishable. Further, I find force in the contention that the offence was detected only on verification of Books of Accounts. The mere fact of inspection and recovery on records will not lead to detection of an offence and imposition of penalty. Only after verification of the Books of Accounts, the Intelligence officer can arrive at a conclusion that there was suppression or irregularities, which is liable to be penalised. Therefore, it is clearly evident that the W.P.(c) No. 38740/2010 -6- offence was detected on a date after the amendment.
7. For the reasons discussed above, I do not find any valid ground to uphold the contentions raised. Hence the writ petition deserves no merit and the same is accordingly dismissed.
Sd/-
C.K. ABDUL REHIM, JUDGE.
AMG True copy P.A to Judge