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2016 Supreme(Online)(KER) 32723
HIGH COURT OF KERALA
ANTONY DOMINIC, DAMA SESHADRI NAIDU, JJ
M/S GLADES ENGINEERING – Appellant
Versus
STATE OF KERALA – Respondent
OTHER TAX REVISION (VAT) 160/2016
The court emphasizes the principle that penalties must be proportionate to the offense committed under tax laws.
Headnote:
Penalty - KVAT - Section 67(1) - The court upheld the initiation of penalty proceedings under Section 67(1) of the KVAT Act for non-filing of returns but found the imposed penalty excessive, modifying it to a more proportional amount.
Fact of the Case:
The petitioner challenged a penalty order for alleged tax evasion after failing to file returns or present books of accounts; the penalty of ₹44,28,172 was contested amidst the proceedings.
Finding of the Court:
The court concluded that the petitioner committed an offense warranting penalty under Section 67(1) but deemed the penalty excessive and disproportionate to the offense, modifying it to ₹10 lakhs.
Issues: Whether the penalty imposed under Section 67(1) of the KVAT Act was appropriate in light of the petitioner's circumstances.
Ratio Decidendi: The court held that while an offense was committed justifying a penalty, the amount imposed should reflect a proportionate response to the offense rather than the maximum penalty permissible.
Final Decision: The penalty was modified to ₹10 lakhs.
ORDER
Antony Dominic, J.
1. aHeard the learned counsel for the petitioner and the learned Senior Government Pleader.
2. The assessee has filed this revision aggrieved by Annexure-D order of the Commissioner of Commercial Taxes whereby an order of penalty which was upheld by the first revisional authority was confirmed.
3. Proceedings for levy of penalty under Section 67(1)
KVAT were initiated against the petitioner by notice dated 29.08.2013 whereby it was proposed to levy a penalty of ₹44,28,172/-, being double the amount of tax which was alleged to be evaded. That resulted in Annexure-A order whereby the proposal was confirmed and penalty was levied. This order was upheld by the Deputy Commissioner, the first revisional authority, as per Annexure-B order.
Aggrieved by the penalty thus levied, the petitioner filed a further revision before the Commissioner. By Annexure-D order, the penalty was confirmed and the revision was dismissed.
4. A reading of the orders impugned before us show that the petitioner had not filed his returns nor did he produce the books of accounts in response to the summons issued. It was in such circumstances, that based on the bank transactions and the balance taxable turnover conceded the penalty proceedings were initiated which ultimately came to be confirmed. The fact that the above conduct of the petitioner discloses an offence which attracts penalty under Section 67 of the KVAT Act cannot be disputed and has been rightly so found in the impugned proceedings.
5. However, we find that subsequent to levy of penalty, the petitioner had filed his returns. These returns were rejected and assessment was completed under Section 25 of the KVAT Act as per Annexure-C order. This order shows that the total tax due was quantified at ₹19,01,395/-
and the balance amount payable by the petitioner has been quantified at ₹7,76,977/-.
6. As we have already stated, although an offence has been committed by the petitioner, to our mind, the penalty now confirmed to ₹44,28,172/-, is too disproportionate to the offence found against the petitioner. Further, maximum penalty has been levied without assigning any reason for such levy. According to us, for the offence proved against the petitioner, levy of penalty of consolidated amount of ₹10 lakhs would be commensurate with the gravity of the offence proved. On that basis we modify the orders impugned.
The revision stands disposed of accordingly.
ANTONY DOMINIC JUDGE
