The Kerala High Court has imposed the cost of Rs. 10K on jewellers who sent jewellery to the hallmarking centre without delivery challan, which was a violation of Rule 58 (18A) of the Kerala Value Added Tax Rules (KVAT Rule).
The bench of Dr. Justice A.K.Jayasankaran Nambiar and Justice Easwaran S. has observed that the jewellery that was seized was found in the possession of one Sumesh who was standing at the hallmarking centre where he had been entrusted to take the gold ornaments by the respondent/assessee.
The intelligence wing of the commercial taxes department detained an employee of the respondent/assessee who was in possession of gold ornaments, while he was on the way to a hallmarking centre at Thiruvananthapuram on 18.1.2016. They found that the gold ornaments carried by him were accompanied by a copy of a delivery challan and a goldsmith issue slip in the name of the assessee.
However, it was found that the gold in his possession was more in quantity than what was specified in the delivery challan. The Intelligence Inspector was therefore of the view that the assessee had violated the provisions of Rule 58(18A) of the KVAT Rule by not intimating the use of own delivery challan to the assessing authority.
Rule 58 (18A) of the KVAT Rule states that where a dealer is transporting goods in small quantities from one of his shops or godown to another shop or godown in any vehicle other than a heavy vehicle within a distance of less than 25 K.M within the state and transport is not in pursuance of any sale, the dealer may, instead of using a delivery note in Form No. 15, use a delivery challan.
The suspecting the genuineness of the transactions, a security deposit was insisted and proceedings under Section 47(2) of the Kerala Value Added Tax Act were initiated against the respondent/assessee which culminated in the imposition of a penalty to the tune of Rs.16,32,040 as per order dated 28.7.2016.
Aggrieved by the order of the intelligence officer, the assessee preferred an appeal before the first appellate authority who dismissed the appeal by an order dated 31.12.2019. The assessee, therefore, preferred a further appeal before the appellate tribunal which allowed the appeal by the order.
The appellate tribunal took note of the factual position obtained with regard to the seizure of the gold ornaments from the employee of the respondent/assessee. The jewellery that was seized was found in the possession of one Sumesh who was standing at the hallmarking centre where he had been entrusted to take the gold ornaments by the respondent/assessee.
The jewellery in his possession was being taken for the sole purpose of hallmarking and thereafter returning to the store of the respondent/assessee. The department also did not have a case that the goods were meant for sale and that therefore there was a possible evasion of tax.
The respondent/assessee was paying tax on a compounded basis, based on the tax paid in the immediately preceding assessment year. In the absence of any material to suggest that the gold ornaments that were seized from the employee of the assessee were meant for sale either within the State or inter-state, and finding that the assessee was paying tax on compounded basis in which event any suppression of turnover in the present year would have no bearing on his tax liability for the year, the appellate tribunal was of the view that there was no justification for the imposition of any penalty based on the turn over computed of alleged suppressed sales.
The tribunal accordingly confirmed the penalty only to an extent of Rs.10,000/- as mandated under Section 67(1)(j) of the Kerala Value Added Tax Act.
The court held that there was no reason to interfere with the order of the appellate tribunal.
Case Details
Case Title: The State Of Kerala Versus M/S Bhima Jewellers
Case No.: OT.REV NO. 8 OF 2024
Date: 03/03/2025
Counsel For Petitioner: Resmitha Ramachandran
Counsel For Respondent: Mini G
