The imposition of penalties under VAT rules requires concrete evidence of tax evasion or improper conduct; reliance on documentary discrepancies alone is insufficient.

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR &

THE HONOURABLE MR. JUSTICE EASWARAN S.

MONDAY, THE

3RD DAY OF MARCH 2025 / 12TH PHALGUNA, 1946 OT.REV NO. 8 OF 2024 REVISION PETITIONER(S)/RESPONDENT :

THE STATE OF KERALA, REPRESENTED BY THE JOINT COMMISSIONER OF STATE TAX (LAW), DEPARTMENT OF KERALA STATE GOODS AND SERVICE TAX, ERNAKULAM, PIN - 682011 BY ADV SMT RESMITHA RAMACHANDRAN, GOVERNMENT PLEADER RESPONDENT(S)/APPELLANT :

M/S BHIMA JEWELLERS, M.G.ROAD, THIRUVANANTHAPURAM, PIN - 695001 BY ADVS.

MINI G A.KUMAR (SR.)(K/529/1992) P.J.ANILKUMAR(K/265/1988)

P.S.SREE PRASAD(K/1181/2009)

BALASUBRAMANIAM THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR HEARING ON

03.03.2025, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ORDER Dr. A.K. Jayasankaran Nambiar, J.

This O.T. Revision preferred by the State impugns the order dated

7.6.2023 of the Kerala Value Added Tax Appellate Tribunal, Additional Bench, Thiruvananthapuram in TA(VAT) No.149 of 2020.

2. The brief facts necessary for disposal of this O.T. Revision are as follows:

The intelligence wing of the commercial taxes department detained an employee of the respondent/assessee who was in possession of gold ornaments, while he was on the way to a hallmarking centre at Thiruvananthapuram on 18.1.2016. They found that the gold ornaments carried by him were accompanied by a copy of a delivery chalan and a goldsmith issue slip in the name of the assesee. However, it was found that the gold in his possession was more in quantity than what was specified in the delivery chalan. The Intelligence Inspector was therefore of the view that the assessee had violated the provisions of Rule 58(18A) of the Kerala Value Added Tax Rules (for short, ‘the KVAT Rule’) by not intimating the use of own delivery chalan to the assessing authority. Further, suspecting the genuineness of the transactions, a security deposit was insisted and proceedings under Section 47 (2) of the Kerala Value Added Tax Act were initiated against the respondent/assessee which culminated in the imposition of a penalty to the tune of Rs.16,32,040/- as per order dated 28.7.2016.

3. Aggrieved by the order of the intelligence officer, the assessee preferred an appeal before the first appellate authority who dismissed the appeal by an order dated 31.12.2019. The assessee, therefore, preferred a further appeal before the appellate tribunal which allowed the appeal by the order impugned before us by the State in this O.T.

Revision.

4. In this revision petition, the State raises the following substantial questions of law :

a) Whether on the facts and circumstances of the case, the Appellate Tribunal has erred in law in cancelling the penalty imposed u/s 47(6) of the KVAT Act, considering the fact that the documents accompanied has no connection with the gold detained and said documents are not valid documents because of variation of quantity, non declaration of the said delivery chalan before the assessing authority and non mentioning the date of transport?

b) Whether on the facts and circumstances of the case, the Appellate Tribunal has erred in relying the judgment of this Honourable Court in M/s Arafa Gold Vs. Assistant Commissioner and others in WP(C) No. 3593/2017 dated 02.08.2017 as facts of the said case are entirely different with the facts of the case considered by the Tribunal?

c) Whether on the facts and circumstances of the case, Annexure F order passed by the Appellate Tribunal is per-

verse and not in accordance with law?

5. We have heard Smt. Resmitha Ramachandran, the learned Government Pleader appearing for the State and Sri. Balasubramaniam, the learned counsel appearing for the respondent/assessee.

6. On a consideration of the rival submissions, we find that the appellate tribunal took note of the factual position obtaining with regard to the seizure of the gold ornaments from the employee of the respondent/assessee. As is apparent from a reading of the proceedings of the inte