M/S. Ozone Granites [P] LTD vs. The Intelligence Officer

Facts

The petitioner, M/s. Ozone Granites [P] Ltd, a registered dealer, sought permission to pay tax at compounded rates for the assessment year 2014-15 under Section 8(b) of the Kerala Value Added Tax Act. They installed a Vertical Shaft Impactor Machine with an output capacity of 50-100 metric tonnes per hour and offered to pay 60% of the prescribed compounded tax, which was accepted. Following an inspection on 08.10.2014, the revenue issued a notice on 07.11.2014, alleging the machine's output was 150-200 metric tonnes per hour, necessitating a higher compounded tax of Rs. 27 lakhs, and proposed a penalty of Rs. 27 lakhs under Section 67(1) for false declaration. The petitioner denied the allegation and requested a test check. Proceedings were reinitiated in 2016, and after personal hearings, a penalty order was issued on 24.06.2017, imposing Rs. 27 lakhs. The petitioner challenged this order directly before the High Court.

Held

The Court held that penalty proceedings under Section 67(1) of the Act cannot be initiated and sustained solely based on information available on the manufacturer's website. The Court reasoned that there is no legal presumption that website information regarding merchandise is correct, and such information may or may not be accurate. The Court cited the principle of caveat emptor and noted that even in American courts, judicial notice of website information is not taken without establishing authenticity and reliability. Since the impugned order was based on the presumption of the correctness of website data without positive proof of the petitioner's contravention of statutory obligations, it was considered to be issued without jurisdiction. The Court also noted that while an alternative remedy of appeal exists, it would not preclude the High Court from deciding the matter on merits when the order is found to be without jurisdiction. Consequently, the penalty order was quashed.

Key Issues

1. Whether penalty proceedings under Section 67(1) of the Kerala Value Added Tax Act can be initiated and sustained solely based on information available on the manufacturer's website regarding the output production capacity of a machine? 2. Whether the impugned penalty order, issued on the presumption of the correctness of website information, is without jurisdiction? Petitioner's Arguments: The petitioner argued that they had not made any false declaration and that the output production capacity stated by them was correct. They contended that the manufacturer's website information is not a reliable basis for penalty proceedings and that the penalty order was issued without jurisdiction. They also asserted that the revenue had not conducted any independent test to ascertain the machine's actual output. Revenue's Arguments: The revenue supported the impugned order, asserting that the correctness of the manufacturer's declaration on their official website cannot be doubted. They also pointed to previous writ petitions with similar issues that were not entertained by the Court, directing parties to pursue alternative remedies.