“CR”

J. Chelameswar, C.J.

1. W.P.(C).No.5893 of 2009 and W.A.No.1946 of 2009 are filed by the same petitioner -Essar Oil Limited - a public limited Company, hereinafter in the judgment referred to as "the Company", which is a registered dealer on the files of the Assistant Commissioner (Assessment), Special Circle-II, Kochi, under the Kerala General Sales Tax Act, 1963 (hereinafter referred to as "the Act"), dealing in petroleum products.

2. W.P.(C).No.5893 of 2010 is filed challenging the legality of an assessment order dated 21.01.2010 relating to the assessment year 2004-05 under the Act passed against the petitioner. W.A.No.1946 of 2009 is filed aggrieved by the judgment in W.P. (C). No.5702 of 2008 dated 19.08.2009, wherein an order imposing a penalty under Section 45A of the Act to the tune of `5,05,79,164/- passed against the Company on 28.12.2006, which was subsequently confirmed by the two revisionary authorities successively on 21.06.2007 and 25.01.2008 respectively was challenged unsuccessfully.

3. The Company, as a part of its business, deals in High Speed Diesel (HSD). During the assessment year 2004-05, the Company effected sales of HSD to two purchasers, called "Shebna Enterprises" and "Ifan Enterprises", hereinafter referred to as "purchasing dealers 1 and 2" respectively. The quantity of the HSD sold is 3924 KL and 1980 KL respectively and the value of the goods is `8,07,45,486/- and `4,54,52,424/-respectively. While making the above mentioned sales, the Company also collected sales tax at the rate of 4% ad valorem under the provisions of the KGST Act. Admittedly, the sale of HSD is liable for 24% ad valorem tax under the provisions of the Act, but the Company collected a reduced rate of tax claiming the benefit of a notification issued by the State of Kerala in S.R.O.No.1091/99 dated 31.12.1999 (hereinafter referred to as "the exemption notification"), which was issued by the State of Kerala in exercise of the powers vested in it under Section 10 of the Act.

4. A show cause notice dated 26.06.2006 was issued by the Intelligence Officer (Investigation Branch) of the Department of Commercial Taxes, Palarivattom to the Company, proposing to impose a penalty, amounting to `5,04,79,164/- being twice the amount of tax alleged to have been evaded by the Company "by virtue of irregular availment of concessional rate" and called upon the Company to offer its explanation, if any, against the said allegation. The specific case of the Revenue is that though the exemption notification provides for the concessional rate of tax under the provisions of the Act on certain transactions of sale, the sales in question made by the Company are not eligible for the benefit of the above mentioned exemption notification. The reason being that under the relevant clauses of the exemption notification, relied upon by the Company for claiming the concessional rate of tax, only sale of goods used in the Union Territory of Lakshadweep are eligible for the concessional rate of tax subject to the fulfilment of other conditions of the said notification and as it was found by the Revenue that the goods covered by the transactions in question did not eventually reach Lakshadweep. The relevant portion of the show cause notice reads as follows:

"You are borne on the files of Assistant Commissioner (Assmt.), Commercial Taxes, Special Circle II, Ernakulam where you had filed certificates stipulated under SRO 1091/99 in Annexure-I in support of the claim of concessional rate of 4%. As further evidence to prove movement of goods from Kerala to Lakshadweep, you had furnished copies of "Export Bills" filed at Beypore Port, Kozhikode and Mangalore Port. In order to verify bona fides of the export of goods to Lakshadweep and the authenticity of the export documents filed the Investigation Branch attached to the office of the Deputy Commissioner (Intelligence) Ernakulam visited the ports of Beypore and Mangalore, perused the copies of export bi