The imposition of penalties under tax laws requires clear evidence of tax liability, which must be established before penalties can be justified.

JUDGMENT

The petitioner challenges an order of penalty issued under the provisions of Section 67 of the Kerala Value Added Tax Act, 2003 (hereinafter referred to as ‘Act’). The petitioner is stated to be an Advertisement Agency, engaged in undertaking the display of advertisements on K.S.R.T.C. buses. According to the petitioner, his activity, if at all, would only amount to a service contract, which would attract the provisions of the Finance Act, 1994. The petitioner also states that the service tax as above is being satisfied by him with reference to the contracts entered into with his customers.

2. The petitioner is actually entering into a contract with K.S.R.T.C. for using the sides of the K.S.R.T.C. buses and thereafter purchasing vinyl sheets from within the State of Kerala and printing advertisements on the basis of the agreements entered into with its clients. Such advertisements printed on the vinyl sheets are being pasted on the sides of the K.S.R.T.C. buses. According to the petitioner, since the aforesaid activity does not attract tax under the provisions of the Act, he was not required to obtain any registration thereunder.

3. However, proceedings under Section 67 of the Act were initiated by the respondent herein with reference to the charges received by the petitioner as above from his customers, and the turnover of the printed vinyl sheets is deemed to be suppressed turnover upon which penalty under Section 67 of the Act is imposed by the impugned order. It is seeking to challenge this order that the captioned writ petition has been instituted.

4. Heard Sri. R. Ramadas, the learned counsel for the petitioner, as well as Sri. Alen Priyadarsh Dev, the learned Government Pleader for the respondent.

5. Two issues arise for consideration in this writ petition.

The first issue is as to whether the transaction in the case at hand would attract tax under the provisions of the Act. The second issue is as to whether the petitioner can be saddled with a penalty under Section 67 of the Act, if ultimately, it is found that the petitioner has liability to pay tax.

6. With reference to the first issue, a reading of the impugned order at Ext.P10 would show that there is no dispute as regards the factual situation noticed above. In the impugned order, the fact that the petitioner has been collecting advertisement charges from his customers and has been getting advertisements printed on vinyl sheets is admitted. The fact that the printed vinyl sheets so purchased and used are being pasted by the petitioner itself on the sides of the K.S.R.T.C. buses, and that the goods are not being transferred to the customers, is also recorded. The fact that the ownership of the printed vinyl sheets, in such circumstances, would remain with the petitioner is also noticed by the officer.

7. Ultimately, the respondent in the impugned order admits that “the dealer is not transferring property in goods to his customers; he is transferring goods in terms of the agreement between them”. Thus, the fact that there is no transfer of property from the petitioner to the customer is admitted by the respondent in the impugned order. However, it further states that there is a transfer of goods in terms of the agreement between the petitioner and its customers. Both these findings cannot go together. Either there is a transfer of goods, or there is no transfer of goods.

8. With reference to the factual position noticed above, I am of the opinion that there is no transfer of goods from the petitioner. The question of transfer of goods by permitting the right to use goods also does not arise in the case at hand, since the respondent has no case that the petitioner is transferring the right to use th