VARGHESE Vs. STO

JUDGEMENT

(1.) The petitioners in all these Original Petitions are dealers under the Kerala General Sales Tax Act, hereinafter called the Act challenging constitutional validity of S.17(5A) of the Act under which penalty is levied on them for evasion of tax. S.17(5A) provides for penalty on a dealer who is originally assessed under S.17(4) of the Act, accepting final tax - return and statutory declaration filed by him in support thereof and later when escaped tax is assessed by revising the assessment originally completed under S.17(4) of the Act. The penalty provided under S.17(5A) is mandatory in nature and is at three times the differential tax, that is the difference between the tax originally assessed under S.17(4) and the tax reassessed under other provisions of the Act mainly S.19(1) which provides for assessment of escaped tax by the assessing officer. In fact, a reassessment is contemplated under the Act when the assessing officer himself detects evasion of tax in the original assessment, in exercise of his power under S.19(1) of the Act or when the Deputy Commissioner in exercise of suo motu revisional power under S.35 of the Act passes orders directing revision of assessment. Besides these two situations proviso to S.17(4) of the Act itself provides for scrutiny of assessments at random completed under S.17(4) of the Act. The scheme of S.17(5A) is levy of penalty consequent on revision of every assessment originally completed under S.17(4) and such penalty is automatic and is irrespective of the provisions of the Act under which original assessment is revised. Eventhough revision of assessment and consequent penalty after original assessment under S.17(4) are possible under three provisions referred above, in the cases of the petitioners in this Court, the revised assessments are issued by the assessing officer after detection of evasion of tax on the basis of some material or other under S.19(1) of the Act. The petitioners have also filed appeals against the revised assessments under which penalty under S.17(5A) was also levied. Therefore if the appeals are followed in part or in full, petitioners will get consequential relief in penalty levied under S.17(5A) also, because the penalty under S.17(5A) is directly proportional to the differential tax which varies with changes in reassessment orders. However, the petitioners have approached this Court challenging the constitutional validity of S.17(5A) on the ground that even if the reassessment is sustained in part or full, levy of penalty under the mandatory provisions of S.17(5A) is arbitrary and discriminatory because in all other cases of evasion of tax under the Act, penalty is discretionary and the maximum penalty provided in the cases of any evasion of tax provided under S.45A of the Act is only double the amount of tax as against the three times provided under S.17(5A). In other words, according to the petitioners, even if additional levy of tax in reassessment proceedings is sustained in appeal, the same should not lead to automatic penalty at three times such tax under S.17(5A). Therefore they are challenging the constitutional validity of S.17(5A). Of course, in the alternative, they are also challenging the penalty orders on the ground that the provisions of S.17(5A) are not attracted to the facts of their cases, assuming the Section is found valid by this Court.

(2.) In order to appreciate the scope of impugned section, I feel it is better to extract the Section in the judgment for easy reference. Therefore the impugned Section with allied provisions are extracted hereunder:

(3.) I have heard all the counsel appearing for the petitioners and also Special Government Pleader appearing for the respondents.