IMPORTANT POINT
The main legal point established in the judgment is the validity of the Commissioner's exercise of revisional powers under Section 58 of the KVAT Act and the principles governing input tax credit and penalty imposition.

JUDGMENT :

Syam Kumar V.M., J.

This appeal is filed by the appellant assessee seeking to set aside Annexure C Order dated 30.10.2018 issued by the respondent Commissioner of State Taxes. The following questions of law are seen raised for consideration:

“(a) Whether the Commissioner has statutory mandate to exercise powers under Section 58 of the KVAT Act and to pass order impugned herein, post 01.04.2017 considering the fact that Annexure B order become appealable under Section 60 of the Act and the revision become a deemed appeal as per the amendment brought in Section 55 by FA, 2017?

b) Whether on law and in the circumstances of the case, the Commissioner is justified in holding that the finding of the first revisional authority that the tax sought to be evaded by the appellant was only on the value addition was incorrect ?

c) Whether on facts and law and in the circumstances of the case, the Commissioner is justified in setting aside the order of the first revisional authority and restoring the penalty order of the Intelligence Officer ?

d) Whether on facts and in circumstances of the case, a penalty at the quantum as decided by the Commissioner is warranted?”

2. The brief facts relevant for consideration of this appeal are as follows :

The appellant is a registered dealer in timber. He had effected sale of imported teak logs to another registered dealer for an amount of Rs.9,04,050/-vide bill No.10 dated 07.05.2013. The said sale was not reflected in the returns filed by the appellant for the assessment year 2013-14. This was noted by the revenue from the inputs received from the purchaser and the appellant was consequently served with a notice under Section 67(1) of the Kerala Value Added Tax Act, 2003 (hereinafter referred to as the 'KVAT Act, 2003') calling upon him to respond to the said anomaly. The turnover suppression and tax sought to be evaded by the appellant were stated in the said notice as follows:

The said notice, following the mandates of Section 67 of the KVAT Act, 2003, proposed to impose on the appellant a penalty of Rs.3,14,610/-ie., twice the amount of the tax sought to be evaded by him.

3. Upon receipt of the notice, the appellant assessee submitted a reply admitting the omission on his part in uploading the impugned purchase in his purchase list. He sought to avoid the penalty by reasoning that the said omission was neither willful nor deliberate and was only an oversight from the part of his employee. In the reply, the principal objection taken by the appellant assessee was regarding the computation of gross profit in the notice which was estimated at 20%. He termed the same as arbitrary and illegal and contended that it ought to have been at 12.15% that was declared by him. He further contended that, at any rate, he ought to have been given the benefit of input tax claim, which he would have got had it been an accounted purchase.

4. The contention of the appellant assessee that the gross profit should be fixed at 12.15% was accepted by the Intelligence Officer and Annexure A Order dated 31.10.2015 was rendered. However, in the said order, the attempted tax suppression was computed at Rs.1,47,014/-on the whole sale turnover of Rs.10,13,892/-and not on the value addition of Rs.1,09,842/-alone. Computing thus, the penalty was confirmed by the Intelligence Officer in Annexure A Order at double the tax due on the turnover i.e., at Rs.2,94,029/-.

5. Annexure A Order of the Intelligence Officer was challenged by the appellant assessee by filing a revision application under Section 57 of the KVAT Act, 2003. The revisional authority after affording the appellant assessee an opportunity of being heard, modified the quantum of penalty from Rs.2,94,029/-to Rs.15,927/-vide Annexure B Order dated 30.06.