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Showing contexts for: KVAT in M/S.U.K.Monu Timbers vs State Of Kerala on 28 November, 2011Matching Fragments
K.Vinod Chandran,J:
Interesting questions regarding the scope and ambit of circulars issued with the purpose of plugging evasion, in deciding the question of tax liability and the invocation of powers of estimation of turnover and the resultant quantification of tax evaded for the purposes of determining penalty are raised in the above revision.
2. The facts are not in dispute and suffice it to say that the dealer, engaged in the business of purchase and sale of timber, imports the same into the State of Kerala and sells it within the State. At the entry check post, as is prescribed by Circular No.28/2008 dated 19.06.2008 of the Commissioner of Commercial Taxes, each consignment is required to be cleared after payment of advance tax at the floor rate prescribed therein for each variety of timber. The assessee having paid the same, brought it to the business premises/yards from where subsequent sales were effected within the State of Kerala, attracting tax under the Kerala Value Added Tax Act, 2003 (hereinafter referred to as "the KVAT Act").
3. The controversy in the instance case arose from an inspection conducted by the Intelligence Wing of the Commercial Taxes Department in the business premises of the assessee. The books of accounts having been verified, the Department alleged that the sale of timber being at rates lesser than that prescribed in the aforesaid circular; leads to undervaluation and consequent evasion of tax, warranting an imposition of penalty under Section 67 of the KVAT Act. That the advance tax was paid as per the circular and sales were effected at rates below the floor rate prescribed under the circular are admitted.
4. We have heard learned counsel Sri.Harisankar V.Menon for the revision petitioner and Sri.Bobby John, learned Senior Government Pleader for the State.
5. The counsel for the revision petitioner would urge before us that going by binding precedents, the circular aforementioned has been issued as has been the time honoured practise of the department; with the intention to plug evasion of tax, specifically with respect to those commodities which the Department, by experience, identifies as being evasion prone. It is equally time honoured that the same would not decide the tax liability or the rates at which the products are sold within the State. Further, it is the contention of the learned counsel that in any event the instant proceedings being under Section 67 of the KVAT Act dealing with imposition of penalty on actual or attempted evasion of tax, there can be no estimation of turnover to determine the quantum of tax sought to be evaded or actually evaded. The authority; under the said provision, suffers from an inherent lack of jurisdiction to make an attempt to estimate the turnover; which power and jurisdiction is conferred only on the officer conducting assessment proceedings. "Best judgment assessment" as is in vogue in fiscal legislations cannot be stretched or extended to penalty proceedings, is the vehement contention.
9. The multi-point levy as contemplated under the KVAT Act provides for assessment under Chapter V. Section 21 provides for self assessment by filing of a return under Section 20 in the prescribed manner and accompanied by the prescribed documents. This is in consonance with the scheme of multi-point levy providing set off of the tax paid at any prior point of sale; which is to be claimed by the assessee in its returns. However, the authorities under the KVAT Act have been conferred with powers of assessment in the event of any failure on the part of the dealer/assessee. The KVAT Act thus provides for such assessment by Sections 22, 23, 24 and 25. Sections 22(3), 23(6), 24(1) and 25 (1) all provide for 'best of judgment assessment' in the event of the contingencies specified in the respective sections. Section 67 does not provide for any best judgment of turnover to be made for arriving at the tax evaded or sought to be evaded. At the risk of repetition, we notice that what is to be determined under Section 67 is the tax actually evaded or sought to be evaded and not what according to the officer initiating proceedings under Section 67 thinks in the best of his judgment has been the assessee's attempt to evade. A Division Bench of this Court had, in the decision reported in Paisons Vs. The Intelligence Officer & Others [(1992) 1 KTR 143 (Ker)], while upholding the constitutionality of Section 45A in the Kerala General Sales Tax Act, 1963; similar to Section 67 of KVAT Act, held: