KVAT Act | Penalty For Non-Declaration

The Kerala High Court has upheld the Penalty For Non-Declaration in Form 8FA of Rs. 1 Lakh under Kerala Value Added Tax Act (KVAT Act).

The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. has observed that the petitioner/assessee had not covered the consignment that was brought by him from Mumbai to Cochin by a valid Form 8FA declaration as mandated under the Kerala Value Added Tax Rules, the Commercial Tax Authorities in the State were perhaps justified in assuming that but for the detection, the petitioner might have well evaded his tax liability by clandestinely selling the consignment of jewellery within the State of Kerala.

Background

The petitioner/assessee is a dealer in gold and diamond jewellery in Mumbai and registered as under the Maharashtra Value Added Tax Act and the Central Sales Tax Act. As part of promotion of its business and for the purposes of inspection and approval by customers in Thrissur, the Managing partner of the petitioner had along with his Manager carried a consignment of gold and diamond jewellery by air from Mumbai to Cochin on 13.08.2016.

On arrival at Cochin airport, the consignment was detained by the Authorities of the Commercial Tax Department, who found that the petitioner was not carrying the requisite declarations in Form 8FA as mandated by Rule 66(6) of the Kerala Value Added Tax Rules, 2005. The petitioner was therefore served with a notice under Section 47(6) of the Kerala Value Added Tax Act, proposing a penalty for attempted evasion of tax.

On being served with the said notice and before exiting from the airport, the petitioner generated the necessary Form 8FA to cover the consignment that was brought by him from Mumbai and the declaration was submitted before the Authority.

Later on, he was also served with a notice under Section 67(1) of the KVAT Act, on the same premise as noticed in the proceedings initiated against him under Section 47(6) of the KVAT Act.

In the proceedings under Section 47 of the Act, the petitioner approached this Court by filing writ petition and by the judgment dated 18.08.2016, the Court permitted him to get a release of the consignment on furnishing a bank guarantee for the penalty amount demanded.

The petitioner took back the consignment to Mumbai via Coimbatore after exiting the State of Kerala through the Walayar Check Post. It is also his case relying on Annexure IV document produced along with the O.T.Revision that the goods after release by the Intelligence Squad at Ernakulam were taken back to Mumbai after declaring at the Commercial Tax Check Post, Walayar for onward transportation to Coimbatore airport and from there to Mumbai.

The documents produced as Annexure IV clearly indicate that the goods that were originally brought by him from Mumbai were taken out of the State in their entirety and the document bears the certificate and seal of the Commercial Tax Check Post at Walayar as also the Commercial Tax Officer at Coimbatore.

Presumably, in the light of the documents, and the explanation offered by the petitioner, the proceedings under Section 47 of the VAT Act were concluded in favour of the petitioner with the First Appellate Authority allowing his Appeal against the order of the Intelligence Officer that had imposed a penalty on him.

Relevant Provisions

The provisions of Section 67 of the KVAT Act provide for imposition of penalty in an amount not exceeding twice the amount of tax or other amount evaded or sought to be evaded, where it is practicable to quantify the evasion, or an amount not exceeding Rs.10,000/- in any other case.

Conclusion – Penalty For Non-Declaration in Form 8FA

The court found that there was no sale occasioned of the jewellery items brought by the petitioner from Mumbai to Cochin within the State of Kerala.

The court noted that the petitioner not having actually sold any items within the State, and having taken the goods outside the State a lenient view in the matter of the imposition of penalty is called for.

The court set aside the order of the Appellate Tribunal and confirmed the penalty on the petitioner only in an amount of Rs.1 lakh which would be sufficient taking note of the infringements occasioned by the petitioner of the provisions of the Kerala Value Added Tax Rules.