Indian Kanoon - Search engine for Indian Law

Kerala High Court

The State Of Kerala vs M/S. Sathyam Gold on 31 July, 2012

Author: K.Vinod Chandran

Bench: Thottathil B.Radhakrishnan, K.Vinod Chandran

       

  

  

 
 
                       IN THE HIGH COURT OF KERALA AT ERNAKULAM

                                                  PRESENT:-

         THE HONOURABLE MR.JUSTICE THOTTATHIL B.RADHAKRISHNAN
                                                         &
                   THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

             FRIDAY, THE 19TH DAY OF OCTOBER 2012/27TH ASWINA 1934

                    R.P.No.848 of 2012 in O.T.Rev.No.17/2012
                    ---------------------------------------------------------------------------

   AGAINST THE ORDER/JUDGMENT IN O.T.REV.NO.17/2012 DATED 31.07.2012
                                          --------------------------------

REVIEW PETITIONER/RESPONDENT:-
------------------------------------------------------

            THE STATE OF KERALA,
            REPRESENTED BY THE DEPUTY COMMISSIONER (LAW),
            COMMERCIAL TAXES, ERNAKULAM.

            BY SPECIAL GOVERNMENT PLEADER (TAXES) SRI.SOJAN JAMES.


RESPONDENT/REVISION PETITIONER:-
---------------------------------------------------------

            M/S. SATHYAM GOLD,
            ABLISHEK BHAVAN, AASRAMAM, KOLLAM,
            REPRESENTED BY ITS MANAGING PARTNER
            K.SATYANANDAN,
            PIN - 691 002.

            BY ADV.SRI.S.SANTHOSH KUMAR.


           THIS REVIEW PETITION HAVING COME UP FOR ADMISSION ON
19-10-2012, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:-



         Thottathil B.Radhakrishnan & K.Vinod Chandran, JJ.
         ----------------------------------------------------------------------
            R.P.No.848 of 2012 in O.T.Rev.No.17 of 2012
         ----------------------------------------------------------------------
                 Dated this, the 19th day of October, 2012

                                      ORDER

K.Vinod Chandran,J:

In the judgment sought to be reviewed, this Court disposed of a writ petition and an O.T.Revision. The proceedings initiated were the result of an interception and inspection of a vehicle and the recovery of gold ornaments weighing 5740.040 grams and three letters authorizing manufacture, repair and exchange of different quantities of gold as also one estimate bill book.

2. The revision petitioner (respondent herein), who was a registered dealer, claimed ownership of the goods and conceded to have undertaken the transportation. Proceedings were taken against the dealer for confiscation of the recovered goods under Section 47 (16) of the Kerala Value Added Tax Act, 2003, hereinafter referred to as "the Act", and separate proceedings were initiated under Section 67 of the Act. The proceedings ordering confiscation was confirmed by the two appellate authorities and the respondent herein was before this Court in revision. While admitting the revision, another Division Bench of this Court granted stay of sale of the gold  RP.848/2012 in - 2 -

ornaments seized from the revision petitioner. On the submission made by the counsel that related penalty appeal is pending before the Deputy Commissioner (Appeals), the Division Bench directed the appellate authority to hear the appeal and dispose of the same and also observed that the order in appeal can be taken up directly before this Court itself.

3. The first appellate authority having decided the penalty appeal against the assessee, a writ petition was filed challenging the said order. This Court on admitting the writ petition, granted stay for two months on payment of Rs.15,00,000/- (Rupees fifteen lakhs only). That order was complied with by the assessee. When the matter came up for hearing, noticing the valid contentions raised by the assessee against confiscation proceedings, the assessee was directed to make the payment in compliance with the penalty order, as modified by the first appellate authority. The petitioner did so and filed proof of such payment. In such circumstance, the writ petition was disposed of, confirming the order of penalty and recording the satisfaction of the penalty imposed.

4. In the O.T.Revision, the scope of Section 47(16) of the Act was considered and it was held, that, confiscation proceedings on the ground of transport of goods in the name of bogus or  RP.848/2012 in - 3 -

unidentifiable persons cannot be invoked, since the petitioner/assessee had claimed the goods and conceded to the transport. On the ground that there cannot be any automatic confiscation of goods on mere commission of an offence and on the further reasoning that the confiscation proceedings was to ensure that the State does not lose any tax on account of there being no identifiable assessee against whom proceedings for assessment or penalty can be taken; the gold seized was directed to be released.

5. The review has been filed on the ground that this Court, while considering the scope of Section 47(16) of the Act, has limited "the reference to transportation of goods in the name of bogus persons or unidentifiable person". According to the State, the latter limb of the provision relating to "bogus document" was not considered and this has resulted in a mistaken conclusion. It is also submitted that the penalty proceedings are not with respect to the gold ornaments seized and is with respect to the three letters seized from the car relating to 6550 grams, 4470 grams and 5150 grams of gold respectively and an estimate bill book. It is pertinent that the State had never raised this distinction on facts when the matter was considered by this Court earlier. However, since this distinction on facts are urged in the review, it is necessary that a brief statement of  RP.848/2012 in - 4 -

what transpired is necessary, i.e., the facts.

6. The vehicle, being a motor car, was intercepted and checked by the Intelligence Inspector, Commercial Taxes, Squad No.1, Kollam on 11.2.2011. A notice was issued on the same day under Section 47(16) of the Act, which is produced as Annexure-C in the O.T.Revision. After noticing the factum of interception, it is stated that an air bag was recovered from the luggage-hold of the vehicle. In the bag, were found gold ornaments in 7 plastic containers. The driver was said to have produced one letter issued by M/s.Sathyan Gold. According to the notice, the letter itself revealed that the dealer is registered under the Kerala Value Added Tax Act and the TIN number revealed in the letter was extracted in the notice. The letter "authorized one Sri.Joy to carry gold ornaments weighing 5535 grams from Kollam to Kayamkulam for manufacturing/sample/repairing and exchanging". The goods under transport were not supported by any document prescribed under KVAT Act and Rules thereunder. It was also specifically stated that "as per the letter above the sellers identity is M/s.Sathyan Gold, Asramam, Kollam. But buyers identity is not ascertainable from the documents produced". Finding the transport to be in the nature of commercial transaction as made out by the estimate slips recovered on verification of the  RP.848/2012 in - 5 -

vehicle, it was stated that the dealer used luxury car for "the bogus transportation". Then it was stated that "as the identity of the consignee as well as the identity of the consignor is suspicious and untraceable, the genuineness of the transportation found suspicious".

7. It is very difficult to comprehend how the latter part of the notice could find suspicion about the identity of the consignor when the recitals with respect to the verification and the documents found thereon clearly identified the dealer with his TIN number. It is not, as if, on subsequent enquiry the dealership or the registration was found to be incorrect. Obviously, such statements were made to bring the transaction within the contours of sub-section (16) of Section 47.

8. Now we look at the distinction in facts attempted to be projected on behalf of the State. The review, in fact, categorically states that the imposition of penalty against the appellant was on account of another cause of action based on incriminating records recovered during vehicle checking. We have referred to the notice issued on vehicle checking, which refers to a letter issued by the registered dealer, which was produced by the driver of the vehicle authorising one person to transport 5535 grams of gold. The State  RP.848/2012 in - 6 -

also contends that two other letters and an estimate bill book were recovered, wherein different quantities of gold were referred to. The notice found the nature of transaction as "commercial". On the basis of the three letters and estimate slips, it cannot be simply assumed that the gold recovered, the letters and the estimate slips are with respect to different transactions. If such a finding was there, on material evidence, the original authority ought to have discussed the same and specifically said so. In any event, it is very clear that the documents recovered from the vehicle totalled a higher quantity of gold than that which was actually detected on inspection. True, there were no documents accompanying the transport of goods as is required under the KVAT Act, 2003. But, that alone cannot lead to proceeding under Section 47(16). On such suspicion of evasion, proceedings are contemplated under the various provisions of the KVAT Act, inter alia, for penalty under Section 67 of the Act. That was what was initiated as per the penalty proceedings, the imposition of which was the subject of challenge in the writ petition. The penalty proceedings were with respect to the estimate slips totalling 8539.728 grams of gold as also the three letters recovered. The quantity of gold actually recovered from the vehicle is lesser than that for which penalty proceedings are initiated on the basis of documents  RP.848/2012 in - 7 -

recovered. It cannot be said that the quantity of gold recoverd is not reflected in the estimates or the letters. The distinction on facts cannot at all be countenanced, as the same is imaginary and unreal.

9. Now we come to the interpretation of Section 47(16). We extract Section 47(16) hereunder:

"(16) Notwithstanding anything contained in the foregoing provisions where any officer referred to in sub-section (1) finds on inspection of any goods under transport that such goods are transported or attempted to be transported in the name of bogus or unidentifiable person or under cover of bogus documents, such officer may after giving notice to the owner or any person in charge of the vehicle, carrier of bailee in writing and after following such procedure as may be prescribed, seize and confiscate the goods and sell the same in public auction or by public sale and the sale proceeds shall be remitted to Government".

On a plain reading of the Section, we are unable to arrive at any other interpretation different from the interpretation in the judgment which is under review. To initiate proceedings under sub-section (16) of Section 47, the transport of goods should be in the name of bogus or unidentifiable person or under cover of bogus documents. The distinction is between the absence of documents prescribed under the Act and the transport being accompanied by documents in the  RP.848/2012 in - 8 -

name of bogus or unidentifiable person as also bogus documents. Absence of documents as prescribed under the Act necessarily would lead to proceedings under the Act, including detention, imposition of penalty, assessment or reopening of assessment and so on and so forth. Under sub-section (16) of Section 47, the transport even if with documents prescribed under the Act, if it is in the name of a bogus or unidentifiable person, proceedings can be invoked. When the transport is under bogus documents, i.e., forged delivery notes not issued by the department or under departmental delivery notes issued to another dealer, then also confiscation proceedings could be invoked.

10. Here is a case where the original notice itself spoke of a letter of a registered dealer accompanying the transport. Admittedly that is not a document required under the Act. The suspicion regarding the document being bogus or the person being unidentifiable or bogus is unavailable on facts. The initial notice itself spoke of the TIN number. The registered dealer appeared in pursuance of the notice. He put forward a claim for the goods. He conceded to the transport. He was a registered dealer and his TIN number was current. Proceedings for penalty based on the document recovered from the vehicle was taken against the dealer. The gold  RP.848/2012 in - 9 -

recovered from the very same vehicle, on the very same inspection alone cannot be said to be belonging to an unidentifiable person. The documents are not bogus, since the dealer accepts it. True, they are not documents prescribed under the Act. We are at a loss to understand; what more is required to take the transaction out of the scope of sub-section (16) of Section 47. Tax evasion necessarily has to be curbed and it is to this end that the legislature has spent valuable time and effort in enacting a comprehensive legislation. In their wisdom, the law makers have provided for various proceedings to curb evasion and deter such practices. Provisions have also been made to compensate the State with double the tax evaded as penalty; also as a measure of deterrence. Confiscation has been specifically provided for only when such a proceeding proves futile for reason of there being no person identifiable to take proceedings against. Officers empowered with the power and authority to enforce the provisions of the Act cannot subvert the power conferred under the Act or exercise authority beyond what is conferred under the provisions of the Act; resulting in gross miscarriage of justice. This Court cannot shut its eyes when such miscarriage of justice occurs. Unjust enrichment is not what is contemplated by confiscation proceedings, but just compensation for revenue loss. 

RP.848/2012 in - 10 -

11. An interpretative exercise is not called for in a review under sub-section (8) of Section 63 of the KVAT Act. Surprisingly, we find that the above review has been filed under Section 114 read with Order 47 Rule 1 of the Code of Civil Procedure. In any event, this review can only be treated as one under the provisions of the KVAT Act. The contours of review has been succinctly stated in State of West Bengal v. Kamal Sengupta, (2008) 8 SCC 612. Though the said decision is with respect to the review under the Code of Civil Procedure, the reasoning can be imported in to the case of a review under sub-section (8) of Section 63 also. What is contemplated under sub-section (8) is a review, where there is some discovery of new and important facts which after the exercise of due diligence were not within the knowledge of the applicant or could not be produced by him when the order was made. There is no averment with respect to any discovery of new or important facts in the present application. The State wants to draw a distinction between materials which led to the initiation of penalty proceedings and confiscation proceedings. Both these proceedings were before this Court when the order was made. There was no such distinction pointed out on behalf of the State when the matter was disposed of earlier. To say that the facts now pointed out to the Court were not in the knowledge of the  RP.848/2012 in - 11 -

Department even after exercise of due diligence would be begging the question. The further contention that interpretation of the Section has led to a mistaken conclusion is not a matter to be considered in review.

On the above findings, we are unable to find any merit in the review petition. The review petition is, accordingly, dismissed.

Sd/-

Thottathil B.Radhakrishnan Judge Sd/-

                                           K.Vinod Chandran
vku/                                              Judge.

                             ( true copy )