Kerala High Court
M/S.Star Metals vs The Tahsildar on 21 March, 2012
Author: P.R.Ramachandra Menon
Bench: P.R.Ramachandra Menon
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON
WEDNESDAY, THE 21ST DAY OF MARCH 2012/1ST CHAITHRA 1934
WP(C).No. 29009 of 2009 (U)
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PETITIONER:
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M/S.STAR METALS, XIII/707A,
ELAPPULLY, KARAMKODE, TENALI,
PALAKKAD, REPRESENTED BY MANAGING PARTNER,
GEOGY P.L.
BY ADV. SRI.C.K.THANU PILLAI.
RESPONDENTS:
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1. THE TAHSILDAR, REVENUE RECOVERY,
TALUK OFFICE, PALAKKAD.
2. THE COMMERCIAL TAX OFFICER,
SECOND CIRCLE, PALAKKAD.
3. THE INTELLIGENCE OFFICER,
SQUAD NO.8, COMMERCIAL TAXES, PALAKKAD.
R1 TO R3 SR. GOVERNMENT PLEADER SRI. S. SUDHISH KUMAR.
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION
ON 21-03-2012, THE COURT ON THE SAME DAY DELIVERED THE
FOLLOWING:
W.P.(C).NO.29009/2009-U:
APPENDIX
PETITIONERS' EXHIBITS:
EXT.P.1: COPY OF THE APPLICATION FOR REGISTRATION DTD. 24/04/2008 FILED
BEFORE THE R.2.
EXT.P.2: COPY OF THE APPLICATION FOR COMPOUNDING DTD. 24/04/2008 FILED
BEFORE THE R.2.
EXT.P.3: COPY OF THE NOTICE NO.C-2435/09-10 DTD. 29/09/2009 ISSUED BY THE R.1.
EXT.P.4: COPY OF THE NOTICE NO.B5-209/28444/9 DTD. 06/10/2009 ISSUED BY THE R.1.
EXT.P.5: COPY OF THE NOTICE NO.C-2598/09-10 DT.D 29/09/2009 ISSUED BY THE R.1.
EXT.P.6: COPY OF THE SALE DEED NO.3660 DTD. 24/04/2008 OF SUB REGISTRY,
PALAKAD.
RESPONDENTS' EXHIBITS:
EXT.R3.A: COPY OF THE SHOP INSPECTION REPORT.
EXT.R3.B: COPY OF THE SUMMONS DTD. 13/06/2008.
EXT.R3.C: COPY OF THE SUMMONS DTD. 13/10/2008.
EXT.R3.D: COPY OF THE ACKNOWLEDGMENT CARD.
EXT.R3.E: COPY OF THE ACKNOWLEDGMENT CARD.
EXT.R3.F: COPY OF THE APPLICATION REQUESTING TIME ON 01/07/2008.
EXT.R3.G: COPY OF THE LETTER DTD. 17/12/2008.
EXT.R3.(H) (A): COPY OF THE PENALTY NOTICE.
EXT.R3.(H) (B): COPY OF THE PENALTY NOTICE.
EXT.R3.(H) (C): COPY OF THE PENALTY NOTICE.
EXT.R3. (I) (A): COPY OF THE PENALTY ORDER.
EXT.R3. (I) (B): COPY OF THE PENALTY ORDER.
EXT.R3. (I) (C): COPY OF THE PENALTY ORDER.
W.P.(C).NO.29009/2009-U:
EXT.R3. (I) (D): COPY OF THE DEMAND NOTICE.
EXT.R3. (I) (E): COPY OF THE DEMAND NTOICE.
EXT.R3. (I) (F): COPY OF THE DEMAND NTOICE.
EXT.R3. (I) (G): COPY OF THE POSTAL COVER.
EXT.R3. (I) (H): COPY OF THE POSTAL COVER.
EXT.R3. (J):COPY OF THE NOTICE DTD. 30/07/2008.
//TRUE COPY//
P.A. TO JUDGE.
Prv.
P.R.RAMACHANDRA MENON,J.
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W.P.(C) No.29009 of 2009
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Dated this the 21st day of March, 2012
J U D G M E N T
The petitioner is a partnership firm, who is aggrieved by the notices issued under the Revenue Recovery Act seeking for realising the amount allegedly due, by way of penalty, in respect of the assessment years 2007-08 and 2008-09.
2. The petitioner approached this Court, challenging Ext.P3 to P5 notices demanding quite exorbitant amounts stating that, the same was liable to be satisfied by the party concerned. In fact, the case of the petitioner is that, the metal crusher unit which was being run under the name and style as a proprietorship concern as 'M/s.Palakkad Granites' was purchased by the petitioner as per Ext.P6 sale deed dated 24-4-2008. On the same date, the petitioner submitted Ext.P1 application for registration under the KVAT Act and also preferred Ext.P2 option to pay the tax under the compounding scheme.
W.P.(C) No.29009 of 2009 2
3. While so, the petitioner was served with Ext.P3 to P5 notices by way of 'affixture', seeking to realise a total sum of Rs.1,76,480/- . Exts.P3 and P4 are in respect of the assessment year 2007-08, while Ext.P5 is in respect of the year 2008-09. On enquiry, the petitioner has been given to understand that there was a surprise inspection by the Intelligence wing in the premises on 16-4-2008, when some incriminating circumstances were brought to light. But the petitioner contends that the petitioner is no way liable or responsible for the deeds or misdeeds of the erstwhile institution and that the petitioner came to the arena only on 24-4-2008 by virtue of Ext.P6 sale deed. It is also the case of the petitioner that the petitioner was never served with any proposal notice before imposing the penalty and this being the position, the revenue recovery notices Ext.P3 to P5 do not have any basis at all, which hence is sought to be intercepted.
4. On serving notice, the respondents have entered appearance and filed a counter affidavit rebutting the averments and allegations raised by the petitioner. Along with the counter affidavit, various documents have been W.P.(C) No.29009 of 2009 3 produced including the notices issued and the orders passed under Section 67(1) of the KVAT Act. As per the specific pleadings raised in the counter affidavit, the notices sent to the dealer,ie, "M/s.Star Rock Products" were returned unserved, though the same was sent by registered post. It is also stated that the petitioner has admitted in Ext. R3(g), that they had received one notice; however raising a doubt,whether the notice was actually intended in their name,ie, in the name of "M/s.Star Metals". Reference is also made to the Ext.P1 application for registration preferred on 24-4-2008 and the application for permission to pay the tax at the compounded rate. This document is Ext.R3(g) dated 17-12-2008,
5. A reply affidavit has been filed from the part of the petitioner (along with which Ext.P6 sale deed has been produced) rebutting the averments made in the counter affidavit. Reliance is sought to be placed on the various provisions of the statute and also the binding judicial precedents, contending that the petitioner became the owner of the unit only on 24-4-2008 and this being the position, the adverse consequences following from the W.P.(C) No.29009 of 2009 4 inspection conducted on 16-4-2008 (ie on an earlier date) cannot cause any adverse consequence as far as business of the petitioner is concerned. More so, when the liability sought to be enforced against the petitioner is by way of 'penalty' . Penalty cannot be shifted to the transferee in the light of the ruling rendered by this Court as per the decision reported in Tata Tea Ltd. vs. Agricultural Income Tax and Sales Tax Officer (91 STC 338), which has been confirmed by the Division Bench (121 STC 210.)
6. The learned Counsel for the petitioner submits that there was absolutely no representation what so ever, on the part of the petitioner at any point of time, before the respondents, projecting their name and style of business as "Star Rock Products" and that the name of the unit was given specifically as "Star Metals". It was in the said circumstance, that Ext.R3(g) submission was preferred on 17/12/2008 which however has not been replied by the concerned respondent. It is also stated that the application for registration has not been finalised and that the matter is still pending.
7. The learned Government pleader submits on the W.P.(C) No.29009 of 2009 5 other hand, that the notices sent to the party concerned earlier were in fact accepted by them, and it was accordingly, that Ext.R3(f) submission was preferred on 1-7-2008, seeking to grant 30 days' time to produce the details (the authenticity of which is sought to be rebutted by the petitioner, stating that it does not bear the signature of the petitioner). This Court does not propose to consider the correctness or acceptability or reliability of the said documents for a different reason. It is borne out by the materials on record that Ext.P1 application preferred by the petitioner was considered by the concerned respondent, who issued Ext.R3(j) letter dated 30-07-2008, pointing out that the application preferred was defective; granting time to rectify the defects, to be in tune with the relevant Circular No.10/2006 failing which the application would be rejected. Obviously the said notice/reply has been sent in the address of the petitioner as now given in the cause title of the writ petition, ie, in the name of "M/s.Star Metals". Having accepting the Ext.P1 petition preferred by the M/s Star Metals, and having replied it vide Ext.R3(j) addressed to 'Star Metals' this Court finds it difficult to accept the W.P.(C) No.29009 of 2009 6 version of the respondents that the subsequent notices proposing the penalty, as borne by Ext.R3(a) (b) and (c) dated 14-1-2009, showing the name and address of the party as 'Star Rock Products'- formerly 'Palakkad Granites', should be reckoned as proper notice. True, the said notices issued in the said address have been returned with the postal endorsement on the registered cover, stating that the party was 'not known'. Presumably, the return of the postal article might be for non-receipt of any clarification from the department in response to Ext.R2(g) or the postman would have refused to give it to the petitioner, since the name of the petitioner was 'Star Metals ' while the addressee concerned was 'Star Rock Products'. This led to the further proceedings by way of penalty orders as borne by Exts. R3(i) (a) (b) and ( c) dated 27-2-2009. It is the said penalty, that is sought to be recovered from the petitioner as per Ext.P3 to P5 notices issued under the Revenue Recovery Act.
8. The learned Government Pleader submits that the admitted facts and figures reveal that the petitioner has been pursuing the business even without getting the W.P.(C) No.29009 of 2009 7 registration under the relevant provisions of law. It is also pointed out that, there is no case for the petitioner that Ext.R3(j) was not served to the petitioner. Even after the receipt of the said notice, the defect was not cured and hence the application was rejected, as a result of which, the petitioner is liable to be proceeded against in accordance with the relevant provisions of law.
9. There is yet another case for the petitioner, that the 'penalty', unlike tax payable by a dealer, cannot be shifted to the shoulders of a 'transferee' and that the reliance sought to be placed on Section 36 of the KVAT Act is not correct or sustainable. Exactly similar provision was there under the KGST Act as per Section 56. Both the provisions as above are extracted below for convenience of reference.
Section 36 of the KVAT Act:-
"36. Recovery of tax when business is transferred- Where the ownership of the business of a dealer liable to pay tax or other amount is transferred, any tax or other amount payable under this Act in respect of such business and remaining unpaid at the time of the transfer and any tax or other amount due up to the date of transfer, though unassessed may , without prejudice to any action that may be taken for its recovery from the transferor , be recovered from the transferee as if he were the dealer liable to pay such tax or other amount.
Provided that the recovery from the transferee of the arrears of tax due for the period prior to the date of W.P.(C) No.29009 of 2009 8 the transfer shall be limited to the value of the assets he obtained by transfer."
"Section 26 of the KGST Act:-
Recovery of tax when business is transferred- Where the ownership of the business of a dealer liable to pay tax or other amount is transferred, any tax or other amount payable under this Act in respect of such business and remaining unpaid at the time of the transfer and any tax or other amount due up to the date of transfer, though unassessed may, without prejudice to any action that may be taken for its recovery from the transferor, be recovered from the transferee as if he were the dealer liable to pay such tax or other amount.
Provided that the recovery from the transferee of the arrears of tax due for the period prior to the date of the transfer shall be limited to the value of the assets he obtained by transfer."
The issue with regard to the liability to satisfy 'penalty' in terms of Section 10(a) of the CST Act, read with Section 26 of KGST Act came up for consideration before this Court as per the decision reported in Tata Tea Limited vs. Agricultural Income-Tax & Sales Tax Officer ((1992) 91 STC 338), it was categorically answered in the 'negative', ie, in the favour of the petitioner and against the revenue . The said decision was confirmed by a Division Bench, as per the verdict reported in Agricultural Income Tax and Sales Tax Officer ((2001) 121 STC 210).
W.P.(C) No.29009 of 2009 9
10. The learned Government Pleader however submits that the present case stands on a different footing and the petitioner is doing the business admittedly in the very same premises and there is no dispute with regard to the door number or such other particulars or as to the nature and operation of the unit. Reference is also made to Section 34 of the KVAT Act which stipulates that penalty shall be deemed as the tax payable under the statute and this being the position, there is nothing wrong on the part of the department in having proceeded against the petitioner, placing reliance on Section 36. But here, the basic issue is with regard to the alleged denial of proper opportunity to defend the case with reference to the wrong address of the petitioner and the non receipt /service of notice /orders to sustain the action under Ext.P3 to Ext.P5.
11. Going by the materials on record, this Court finds that the proceedings can be pursued and finalised, only after serving proper notice to the petitioner in the address as given in Ext.R3(g) /R3(j). Reserving the rights and liberties for the respondents to proceed with further steps, by issuing proper notice and issuing proper orders in tune W.P.(C) No.29009 of 2009 10 with the relevant provisions of law and the binding judicial precedents, the proceedings impugned in this petition are set aside.
The writ petition is disposed of accordingly.
P.R.RAMACHANDRA MENON.
smm JUDGE
W.P.(C) No.29009 of 2009 11