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2009 Supreme(Online)(KER) 36033
HIGH COURT OF KERALA
C.K. ABDUL REHIM, J
C.HANEEFA – Appellant
Versus
INTELLIGENCE OFFICER (IB),PALAKKAD & ORS – Respondent
WP(C)/35637/2009
SRI.HARISANKAR V. MENON
Court underscored that penalty conditions must be justified in light of the appellant's circumstances and intent.
Headnote:
Taxation - KGST Act & KVAT Act - Sections 45 A & 67 - The court deemed that the imposition of 50% penalty payment was excessive without adequate justification; it modified the order, allowing a reduced penalty payment reflecting fair consideration of appeals.
Fact of the Case:
The petitioner challenged interim orders imposing a 50% payment condition for stay on penalties for not remitting tax on timber supplied to a State Government agency, claiming a bona fide belief in tax exemption.
Finding of the Court:
The court found that while penalties were justifiable, the condition of 50% payment was imposed mechanically and without proper merits analysis. The petitioner was instructed to pay the owed tax and a reduced penalty.
Issues: Whether the imposition of a 50% payment condition during appeal processes was justified and reasonable under the circumstances.
Ratio Decidendi: The court emphasized fair consideration in penalty imposition and stressed that conditions set in appellate procedures need to reflect the circumstances surrounding the alleged liability.
Final Decision: The court modified the 50% payment condition, directing the petitioner to pay the owed tax and 25% of the penalty.
J U D G M E N T
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1. Challenge in this writ petition is against Ext.P9 and P10 interim orders issued by the 2nd respondent, on the stay petitions filed along with Ext.P5 to P8 appeals. The petitioner is aggrieved by the condition imposed while granting stay, for payment of 50% of the amount of penalty imposed. Penalties under Section 45 A of the KGST Act and Section 67 of the KVAT Act were imposed on the petitioner through Ext.P1 to P4 orders with respect to the period from 2004-05 to 2007-08. Penalties were imposed based on the allegation that the petitioner had supplied timber to M/s.Nirmithi Kendra, without taking registration and without remitting tax due thereon. According to the petitioner it was only under a bonafide belief that transaction with M/s. Nirmithi Kendra is liable for exemption from payment of tax, the same being an organisation of the State Government, that tax was not paid. However it is conceded that the petitioner is ready and willing to pay the entire tax amount due under the transaction, along with interest if any liable.
2. Regarding imposition of penalty the main ground W.P.(C).35637/09-Y 2 raised in the appeals are that the default was not due to any purposeful suppression committed with a view to evade payment of tax. There is no element of mens rea attributable with respect to failure in payment of tax. Therefore it is contended that the imposition of the maximum penalty is totally unwarranted.
3. On going through contents of Ext.P9 and P10 orders it is noticed that the appellate authority had adverted to the contentions raised in the appeals. The appellate authority observed that the only aspect which goes to a certain extent in favour of the appellant is that the Intelligence Officer has imposed maximum penalty, which could have been avoided. On the other hand the appellate authority found that the petitioner has not paid tax due to the Government, even after filing of the appeals. However, after adverting to the contentions in the appeal, the appellate authority had granted stay imposing condition for payment of 50%, without mentioning any reasons thereof. It seems that the condition was imposed in quite mechanical manner without proper consideration of the merits of the contentions. According to the petitioner the amount imposed as penalty will work out to a huge amount and payment of 50%
will cause severe financial strain to the petitioner.
4. Having considered facts and circumstances of the W.P.(C).35637/09-Y 3 case, I am of the opinion that the petitioner can be directed to make payment of the entire tax amount due and that the 2nd respondent can be directed to consider and pass orders on the appeals on an early date, in modification of the condition imposed, with a lesser burden.
5. Accordingly the writ petition is disposed of directing the 2nd respondent to consider and pass orders on Ext.P5 and P8 appeals, after affording an opportunity of hearing to the petitioner, as early as possible, at any rate within a period of two months from the date of receipt of a copy of this judgment.
6. Ext.P9 and P10 orders are modified to the extent it imposes condition for payment of 50%, on directing the petitioner to make payment of the tax amount due along with interest if any liable, and also to make payment of 25% of the amount of penalty imposed through Ext.P1 to Ext.P4, within a period of one month from today.
C.K.ABDUL REHIM, JUDGE.
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