V.K.G.Group Holiday Hotel vs. The State Tax Officer (Intelligence)

Held

The Court held that the impugned penalty order dated December 16, 2019, was passed in flagrant violation of the elementary principles of natural justice and fairness, and was therefore illegal and ultra vires. The Court noted that the respondents, through the Government Pleader, conceded that no reasonable opportunity was granted to the petitioner to produce requisite materials or to be heard. Consequently, the Court set aside and rescinded the impugned penalty order. The matter was remitted to the 1st respondent (State Tax Officer) for fresh consideration and decision pursuant to the notice issued under Section 45A. The 1st respondent was directed to immediately permit the petitioner to produce relevant materials and documents, along with detailed written submissions, and thereafter afford a reasonable opportunity of being heard before rendering a considered decision. The decision was to be rendered preferably within three months from the date of production of the certified copy of the judgment.

Facts

The petitioner, V.K.G. Group Holiday Hotel, is challenging a penalty order dated December 16, 2019, issued by the State Tax Officer (Intelligence), Ernakulam. The order was passed under Section 45A of the Kerala General Sales Tax Act, 1963. The petitioner contends that the Intelligence Officer exceeded the scope of Section 45A by estimating turnover based solely on a low declared gross profit, which they argue is beyond the authority's jurisdiction. Furthermore, the petitioner asserts that the order was passed in violation of natural justice principles, as they were not granted a reasonable opportunity to file a detailed reply with supporting materials, despite a specific request. An inspection report (Ext. P1) was prepared on July 6, 2019, followed by a notice for production of accounts on August 17, 2019, and the impugned penalty notice (Ext. P2) on October 30, 2019.

Key Issues

1. Whether the penalty imposed under Section 45A of the Kerala General Sales Tax Act, 1963, is without jurisdiction because the Intelligence Officer estimated turnover solely on the ground of low gross profit, without any evidence of sales or purchase suppression or stock difference, and thus traveled beyond the scope of the said section? The petitioner argued that there was no sales suppression, purchase suppression, or stock difference, and all bills were accounted for. They contended that imposing a penalty merely for low gross profit, without other irregularities, is beyond the scope of Section 45A and without jurisdiction. The revenue did not record any specific argument on this point in the judgment. 2. Whether the impugned penalty order was passed in violation of the principles of natural justice by not granting the petitioner a reasonable opportunity to produce relevant materials and submit a detailed reply, despite a specific request? The petitioner argued that they had requested an opportunity to produce relevant materials along with a detailed reply, but the authority passed the order without granting this opportunity.