The Kerala High Court upheld the penalty order under the Kerala Value Added Tax Act, 2003 (KVAT Act) on failure to disclose true and correct matters.
Artech Realtors (P) Ltd, the petitioner challenged the penalty order passed by the first respondent under Section 67(1) of the KVAT Act imposing the penalty of Rs.6,06,16,380/- only being equal to double the amount of tax allegedly evaded for the financial year 2013-2014 for the offences committed, viz, turn over suppression and tax evasion. The petitioner had furnished demand drafts by way of compounding fee for Rs.8,00,000/- and tax for Rs.80,09,183/- which have been adjusted towards penalty and remitted into Government account vide challan Nos.248 and 255 dated 29th November 2014. The petitioner was directed to pay a balance penalty of Rs.5,18,07,197/-.
The Intelligence Squad No.1 had inspected the business premises of the petitioner and certain documents were recovered from the business premises which were seized for verification. Subsequently, the books of accounts were called for. The authorised representative of the dealer appeared and filed copies of monthly and annual returns and the statement showing the contract receipts and tax paid for the years 2013-2014.
No other books of account or any other documents of the claim made by the petitioner/dealer were produced for verification. The petitioner/dealer had opted to pay tax at the compounded rate for the entire contract works under Section 8 of the KVAT ACT, 2003 and remitted tax on the conceded turnover at the rate of 3%.
However, in the absence of books of accounts and other relevant documents, the documents and material recovered and data collected from the petitioner’s business premises were processed, and it was noticed that there was suppression of a huge volume of turnover and tax evasion for the year 2013-2014, and accordingly a notice under Section 67(1) of the KVAT Act proposing to impose penalty of Rs.14,61,80260/- was issued to the petitioner/dealer.
The petitioner had filed a statement which reflected total contract receipts of Rs.1114088582/- for the year 20132014. However, on verification of the annual return, it was noticed that the petitioner/dealer had conceded a contract receipt of Rs.441995458/- only for the year 2013-2014 and had claimed deductions of Rs.670808933/- for the year 2013-2014 without any supporting evidence.
It was also noticed that Rule 10(2)(b) of KVATRules required that the actual turn over in relation to a works contract, in which the transfer of the goods took place not in the form of goods but in some other form, could not be ascertained from the books of accounts of the dealer or where the dealer had not maintained any accounts, the total turnover in respect of such works contract should be computed after deducting labour and other charges at a percentage of value of the works contract and therefore, the assessing authority deducted 25% of the suppressed turn over towards labour and other charges and worked out the suppressed taxable turn over at Rs.50,40,69,843/- and tax evaded at Rs.7,30,90,130/- and imposed penalty of Rs.14,61,80,260/- being double the amount of tax evaded for the year 2013-2014.
It was noticed that a huge turn over had not been disclosed and escaped tax by wilful and deliberate non-disclosure of taxable turnover. The notice under Section 67(1) of the KVAT Act, 2003 is dated 14th October 2014 whereas the order for compounding was passed on 25th May 2013. Therefore, the said order has no relevance in respect of the notice issued in under Section 67(1) of the KVAT Act dated 14th October 2014.
The petitioner was also given an opportunity of being heard in the matter. The said notice was served on the petitioner/dealer on 14.10.2014. In response to the said notice, the petitioner requested further time for producing documentary evidence vide letter dated 27th October 2014. The Managing Director of the petitioner appeared on 27.11.2014 and produced documents as mentioned in the impugned order
The provision to pay tax at compounded rate is only in lieu of the obligation to pay tax under Section 6 of the Act. The payment of tax at compounded rate, is only an optional method which assessee may adopt for the purposes of his convenience in making the payment of tax. It
The petitioner had not filed Form No.49 declaring the details of ongoing projects as prescribed under Rule 24B, therefore, he has not been granted permission to pay tax at compounded rate. The payment of tax and penalty is of his own without any permission. The petitioner/assessee has not made true and correct disclosure, and there has been a pattern of untrue and incorrect returns for all the quarters for the year 2013-14 suppressing substantial volume of taxable contract receipts evading the tax.
A single bench of Justice Dinesh Kumar Singh held that “The petitioner’s appeal against the assessment order is already pending and therefore, if the petitioner files appeal within a period of 15 days against the impugned penalty order, the appellate authority should consider the appeal on merits, without going into the question of limitation in accordance with law.”
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
