ORDER
1. M/s Mangalore Steel and Cements are before us in STRP No. 53 of 2005. Following questions of law are raised in this petition.
1. Whether on the facts and circumstances of the petitioner’s case, the Appellate Tribunal was justified in fixing the penalty at one time the tax payable when no evidence existed to prove that the petitioner had knowingly produced a false declaration?
2. Whether on the facts and circumstances of the petitioner’s case the Appellate Tribunal was justified in disturbing the finding of the first Appellate Authority that no evidence was available on record to levy penalty when no new circumstances were placed on record before the Appellate Tribunal?
3. Whether on the facts and circumstances of the petitioner’s case, the Appellate Tribunal was justified in imposing penalty in the absence of the relevant evidences?
4. Whether on the facts and circumstances of the petitioner’s case, the Hon’ble Tribunal was right in law in not setting aside the entire penalty when it came to a finding that the department had failed to prove that the petitioner had knowingly produced the declaration to avoid the payment of tax which is a necessary ingredient to levy penalty under Section 6-A(3) of the Act?
5. Whether on the facts and circumstances of the petitioner’s case, the Hon’ble Tribunal is justified in not deleting the penalty fully?
3. The facts of the case are as follows: Petitioner is a dealer dealing in Iron and Steel and Cement. Assessment was completed for the assessment year 2001-2002 in terms of the order dated 31.12.2002. Turn over of Rs. 1,86,52,422.70 was treated as a second sale of iron and steel. Exemption was granted from the payment of tax under the Karnataka Sales Tax Act, 1957 (‘the Act’, for short). Thereafter, notice under Section 12-A of the Act was issued proposing to re-assess the petitioner and to levy penalty under Section 6-A(3) of the Act on the ground of bogus declaration. Reply was submitted. Assessing Officer did not accept the explanation. He levied the penalty. Appeal was filed. Appellate Authority set aside the order of the penalty and directed to pass a fresh order. Aggrieved by the order of the first appellate authority, in so far as confirming the levy of tax as per the re-assessment, and remanding to the assessing authority, petitioner filed a second appeal. Tribunal has set aside the penalty of Rs. 18,76,689/-and modified at Rs. 6,26,563/-. Aggrieved by the said order the assessee is before us in STRP No. 53 of 2005.
4. State has chosen to file STRP No. 58 of 2005 in the light of the reduction of penalty amount by raising the following question of law.
Whether in the facts and circumstances of the case, the KST is right in reducing the penalty amount under Section 6A(3) of the KST Act?
When the provision is mandatory after recording a finding that the assessee has produced bogus Form 31B?
5. Both the petitions are clubbed together for consideration and a common order is passed.
6. Heard Sri Shankare Gowda, learned Counsel for the assessee. He would argue that the assessee is a victim of circumstances. According to him, it was his representative who has played some mischief for which the assessee is suffering for no fault on his part. He says that the assessee is a bona fide dealer and that therefore this Court has to consider his case sympathetically.
7. Per contra, Smt. Sujatha, learned Government Advocate would argue that there is a bogus claim made by the assessee and that therefore the authority is justified in levying penalty. She would say that the facts of this case would show that a minimum penalty has been reduced by the Tribunal and such reduction is improper in law.
8. After hearing, we have carefully perused the material on record.
9. Assessment was made. Thereafter, same was reopened in terms of 12-A of the Act. Assessing Officer notices the material on record and held that the assessee has got benefit by producing bogus documents in terms of his finding. When the same was challenged before the appellate authority, appellate authority quashes the penalty order and remanded the matter to re-consider in the light of additional evidence. When the same was challenged before the Tribunal, Tribunal notices that the assessee has furnished Form 32-B declaration issued in the case on hand. He notices that on the basis of a complaint filed by the assessee authority, a Criminal case was registered against one Prakash Bhat who was the previous STP to the assessee and also against the assessee in Crime No. 112 of 2004 regarding stealing of the assessment records from the then assessing authority. He also notices that one Prakash, i.e. the previous STP of the assessee has colluded with the assessee and conspired to create non-existent entity called a dealer i.e. B. Lakshman Shenoy, M/s Shantala Enterprises at Chickmagalur to show that M/s Shantala Enterprises was the first dealer in the State. During investigation it is noticed that the Form 32-B declaration produced by the assessee was a bogus document and that it was a created document. Contention of the appellant was that his previous STP has committed a mistake and therefore he should not be punished. After noticing all these aspects of the matter, Tribunal has come to a conclusion that the assessee produced a bogus document in Form 32-B in support of his exemption and that it was rightly disallowed and taxed as first dealer. However, the Tribunal treating his case as a special case has chosen to reduce the penalty from Rs. 18,76,689/- to 6,26,563/-.
10. After going through the material on record, we are of the view that bogus transactions and bogus documents are to be discouraged, destroyed, deprecated for maintaining purity in the matter of tax adjudication. State earns income only by way of levy of tax. Tax is the main source of income for the State. Welfare schemes of the State would depend upon tax collection at the hands of tax authorities. If exemptions are allowed on the basis of such ‘bogus documents’, not only the laudable object of exemptions is defeated but also it would result in the State losing its rightful revenue in terms of the statutes. Therefore, there can be no mercy in such bogus matters, and, any mercy, if shown, would nothing but be a ‘misplaced sympathy’ as understood in law. Courts have to be strict in the larger interest of tax collection/revenue.
11. In the case on hand, it is admitted that bogus document is filed and it is created for the purpose of getting exemption. Only defence of the assessee is that it is at the instance of his representative. It cannot be forgotten that the assessee is bound by what his representative acts on his behalf in the matter. We are not prepared to believe the plea of the assessee that he is totally unaware of the creation of bogus document by his previous STP as sought to be argued before us. Assessee is fairly a big dealer having turnover of more than one crore. He is not a small trader. He is presumed to know his dealings. Hence, it is not possible for this Court to accept the plea of ignorance as sought to be pleaded before us. No acceptable materials are placed on record with regard to ignorance plea. It is also to be seen that the assessee has not chosen to take any action against his representative for the purpose of bogus documents and his inaction also would show that all is not well in the assessment proceedings. Therefore, we are of the view that the Tribunal is right in holding that the assessee has to suffer penalty on the facts of this case.
12. Having come to the conclusion that the assessee has to suffer penalty, it is un-understandable to us as to why the Tribunal has treated the case as ‘special case’. There is no specialty involved in this case. Moreover, the Act provides for minimum penalty. That minimum penalty cannot either be diluted or destroyed by an adjudicating body. Adjudicating body has to enforce law in terms of the intentment of the legislations. In the circumstances, we are of the view that Smt. Sujatha, learned Government Advocate, is right in her submission that the Tribunal ought not to have reduced the minimum penalty on the facts of this case.
13. Before concluding, we are disturbed to see that large evasion of tax is done in Mangalore area in terms of the submission of Sri Shankare Gowda in the light of paper publication. Though paper publication may not by itself be a proof but still, the material on record would show that some sort of fraud is played by certain dealers in the light of publication placed before us. Large sums of money are involved. We are sure and we do hope that the Department would take stringent action in these cases and see that rightful revenue of the State is recovered and proper punishment is awarded to those who are responsible directly or indirectly in creating or filing bogus documents in terms of the material on record.
14. With these observations, appeal filed by the State is accepted. Appeal filed by the assessee is rejected. Question of law is answered in favour of the Revenue. Ordered accordingly. No costs.