IN THE HIGH COURT OF KERALA AT ERNAKULAM
WA.No. 2000 of 2008()
1. M/S.J&J TIMBERS, 23/418, MAIN ROAD,
... Petitioner
Vs
1. THE INTELLIGENCE OFFICER(IB)
... Respondent
2. THE ASSISTANT COMMISSIONER(ASSMT.)
3. THE COMMISSIONER OF COMMERCIAL TAXES,
For Petitioner :SRI.M.CHANDRASEKHARAN (SENIOR)
For Respondent : No Appearance
The Hon'ble the Chief Justice MR.H.L.DATTU
The Hon'ble MR. Justice THOMAS P.JOSEPH
Dated :06/10/2008
O R D E R
H.L.DATTU, C.J. & THOMAS P.JOSEPH, J.
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W.A.No.2000 of 2008
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Dated, this the 6th day of October, 2008
JUDGMENT
H.L.Dattu, C.J.
This writ appeal is directed against the orders passed by the
learned Single Judge in W.P.(C) No.26857/2008 dated 16th September,
2008. By the impugned order the learned Single Judge has rejected the
writ petition.
2. In the writ petition filed, the petitioner has called in
question Exts.P4 and P7 notices issued by the first respondent,
Intelligence Officer (IB), Investigation Branch, Department of
Commercial Taxes, Kollam, in exercise of the powers under Section
45A of the Kerala General Sales Tax Act, 1963 (for brevity and
convenience, hereinafter referred to as “Act of 1963”).
3. The subject matter of Ext.P4 notice is evasion of tax by
the petitioner by making bogus claim of sale of timber at concessional
rate without any actual sale of timber to the form 18 suppliers – M/s.J and
J Timbers, Chalakudy and the penalty proposed for the years 2001-02 to
2004-05. In the lengthy notice issued, the Intelligence Officer has
narrated in detail the reasons and his tentative opinion for initiating
penalty proceedings and then has directed the assessee to offer its
explanation, if any.
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4. After receipt of the notice, the assessee has filed its
objection, denying the accusation made in the notice and further has
requested to drop the proposed proceedings.
5. The Intelligence Officer after receipt of the reply and
after considering the same, by reiterating his earlier proposal made, has
issued Ext.P7 notice and further has granted an opportunity to produce
evidence, if any, to the petitioner in support of his defence/explanation in
the reply filed to Ext.P4 notice.
6. It is the legality or otherwise of the show cause notice is
called in question by the assessee by filing the writ petition. As we have
already noticed, the learned Single Judge has rejected the writ petition.
It is the correctness or otherwise of the said order is the subject matter of
this writ appeal.
7. Sri.Chandrasekharan, learned Senior Counsel would
contend, that, the appellant is an assessee on the files of Assistant
Commissioner (Asst.), Special Circle, Thrissur, who is an officer higher
grade than the officer who has initiated penalty proceedings under
Section 45A of the KGST Act and the assessments for the assessment
years 2000-2001 to 2004-05 are pending before the assessing authority
and the assessing authority alone can make assessment and impose
W.A.2000/2008 -3-
penalty, if any. Secondly, the learned counsel would contend, even
before the final assessment could be completed, his power of assessment
cannot be usurped by the Intelligence Officer who has initiated
proceedings under Section 45A of the Act, by taking decision on the
correctness or otherwise of Form 18 declarations. These are the only two
submissions of the learned Senior Counsel at the time of hearing the
appeal for “admission”, though several other grounds are taken in the
memorandum of writ appeal filed.
8. Chapter V of the Act provides for assessment, collection
and penalty of tax under the Act. Chapter VII of the Act deals with
offences and penalties. It is settled law in so far as KGST provisions are
concerned, that, the proceedings under Chapter V and proceedings under
Chapter VII of the Act are different and distinct. It would be useful now
to refer to Section 45A of the Act which falls within Chapter VII. The
said provision is as under:
“45A. Imposition of penalty by officers and
authorities (1) Notwithstanding anything contained in
section 46 if the assessing authority or the Appellate
Assistant Commissioner is satisfied that any person,
(a) being a person required to register himself
as dealer under this Act, did not get himself
registered; or
W.A.2000/2008 -4-
(b) has failed to keep true and complete
accounts; or
(c) has failed to submit any return as required
by the provisions of this Act or the rule made
thereunder; or
(d) has submitted an untrue or incorrect return;
or
(e) has failed to comply with all or any of the
terms of any notice or summons issued to him by or
under the provisions of this Act or the rules made
thereunder; or
(f) after purchasing any goods in respect of
which he has made a declaration under proviso to
sub-section (3) of Section 5, has failed to make use of
the goods for the declared purpose; or
(g) has acted in contravention of any of the
provisions of this Act or any rule made thereunder,
for the contravention of which no expression
provision for payment of penalty or for punishment is
made by this Act;
(h) or has abetted the commission of any of the
above offences,
such authority or officer may direct that such
person shall pay, by way of penalty, an amount not
exceeding twice the amount of Sales Tax or other
amount evaded or sought to be evaded, where it is
practicable to quantify the evasion or an amount not
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exceeding ten thousand rupees in any other case.
Explanation I: The burden of proving that any
person is not liable to the penalty under this Section
shall be on such person.
Explanation II: Fort he purposes of this
sub-section the expression “assessing authority”
includes any officer not below the rank of a Sales Tax
Officer specified by the Government in this behalf by
notification in the gazette.
(2) No order under sub-section (1) shall be
passed unless the person on whom the penalty is
proposed to be imposed is given an opportunity of
being heard in the matter.”
9. The Section commences with a non-obstante clause. It
says, that notwithstanding anything contained in Section 46 of the Act,
the assessing authority or the Appellate Assistant Commissioner, if he is
satisfied that any person who has committed any offences specified
under clauses (a) to (h), may direct such person to pay penalty not
exceeding twice the amount of sales tax or other amount evaded or
sought to be evaded, where it is practicable to quantify the evasion of tax
or an amount not exceeding ten thousand rupees in every other case.
10. Explanation I appended to Section casts the burden on
the dealer that he is not liable to the penalty under Section 45A of the
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Act.
11. Explanation II appended to the Section defines the
meaning of expression “assessing authority”. It is an inclusive
definition. In view of this explanation, “assessing authority” includes
any officer not below the sales tax officer specified by the Government
in this behalf by issuing a notification in the official gazette. It is not in
dispute nor it can be disputed that the Intelligence Officer is also treated
as an “assessing officer” for the purpose of Section 45A of the Act.
12. While interpreting taxing statutes, it is often said, the
courts should always keep in mind the purpose of the Act and the object
of particular section. The courts should always seek to find out the
intention of the legislature and this can be done by referring to the
language used in the statute itself.
13. Section 45A of the Act, provides for imposition of
penalty by officers and authorities under the Act, if those authorities are
satisfied that any person, being a person required to register himself as a
dealer under the Act, but has not registered himself, has failed to keep
true and complete accounts, has failed to submit any returns as required
under the Act or the Rules framed thereunder, etc. may impose a penalty.
Since penalty proceedings are quasi criminal proceedings, the imposition
W.A.2000/2008 -7-
of penalty can be done only after a show cause notice to the assessee and
after affording an opportunity of hearing. The proceeding contemplated
by Section 45A has nothing to do with the jurisdiction of the assessing
authority. Merely because the assessment proceedings are pending for
several years, it does not preclude the Intelligence Officer of the
Department to initiate proceedings under Section 45A of the Act. These
proceedings in our view, need not have to wait till the regular assessment
proceedings are completed by the assessing officer. The proceedings
under Section 45A can be initiated and continued by an officer who has
been authorised by the Government in this behalf by notification in the
Gazette. Therefore, it cannot be said that the Intelligence Officer has no
jurisdiction to initiate 45A proceedings during the pendency of regular
assessment proceedings before the assessing officer, since penalty is
imposed on a person on account of the commission of wrongful act and
secondly, penalty proceedings are distinct and different from assessment
proceedings and thirdly, findings in the assessment proceedings are not
conclusive and the findings therein would only be a piece of evidence
and the authority authorised to impose penalty should consider the entire
material afresh before imposing penalty.
14. We sum it up by observing that the penalty
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proceedings is an independent proceedings and is initiated to punish the
violation of the statutory provision by a person and merely because the
assessment proceedings are pending before a superior officer, it is not a
bar for the intelligence officer, who has been authorised by the
Government by issuing a notification in the Gazette to initiate and
complete the proceedings under Section 45A of the Act.
15. We are only at the stage of show cause notices issued
by the first respondent. In our opinion, the writ court can entertain a
petition, if for any reason, the authority who has issued the notice has no
competence to issue such notice or the notice issued is contrary to the
statutory provisions etc,. These grounds are neither urged nor argued
by the writ petitioner. Under the rule requiring exhaustion of remedies
provided under the Act, prior to judicial review by this court, a party may
not ask a court to rule on an adverse decision of a statutory authority
until he has availed himself of all possible remedies provided under the
statute itself. The major purpose of exhaustion doctrine is to prevent
the courts from interfering with the administrative process by statutory
authorities until they have reached a conclusion.
16. The Supreme Court has stated the reasons why it is
desirable to the writ court not to disturb statutory proceedings. Because
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taxing statutes often vest with the statutory authorities with exclusive
procedures, it is that statutory authority which is initially responsible for
interpreting and applying its own statute. Failure to exhaust statutory
remedies deprives the court the benefit of the statutory authorities
experience in exercising administrative discretion as well as a factual
record to review. The authorities under the Act are created for the
purpose of applying the statute in the first instance. Accordingly, it is
normally desirable to let all statutory authorities develop the necessary
factual background upon which decision should be based. And since the
decision of the statutory authorities frequently require expertise, the
authorities should be given the first chance to exercise their discretion
and further apply their expertise. Apart from this, the statutory
authorities are created as a separate entity and is vested with certain
powers and duties, the courts ordinarily should not interfere with the
action of the statutory authorities until it has completed its own action or
else has clearly exceeded its jurisdiction. We hasten to add, the
exhaustion doctrine is not inflexible and when the reasons supporting the
doctrine are found inapplicable, the doctrine should not be blindly
applied.
17. In view of the above, the learned Single Judge has not
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committed any error, whatsoever, which would call for our interference.
Accordingly, the writ appeal requires to be rejected and it is rejected,
without reference to the respondents.
Ordered accordingly.
(H.L.DATTU)
CHIEF JUSTICE
(THOMAS P.JOSEPH)
JUDGE
MS/dk