Challenge in this writ petition is against Ext.P4 order issued by the 2nd respondent imposing penalty under Section 47 (6) of the Kerala Value Added Tax Act, 2003 (KVAT Act). Brief history of the case is that, the petitioner who is a resident of Dharmapuram Taluk in Tirupur District of Tamilnadu State, had attempted transport of an Excavator Loader (JCB) through the Commercial Tax Check post at Gopalapuram at the border of the State of Kerala, and it was detained by the 1st respondent, invoking Section 47(2) of the KVAT Act, on issuing Ext.P2 notice. The reason for detention mentioned in the notice is as follows:-
"On verification of the records (RC Book of the excavator) it is found that the excavator is manufactured in 2004 and the same is newly painted. Hence it is suspected that it is for sale or contract work within the State. The registration number of the vehicle is also not displayed. Hence, the SD and cess demanded."
2. According to the petitioner, the Excavator was purchased from a person at Pondicherry, by virtue of a document styled as "Sale Deed" (Ext.P1). The Excavator was bearing Regn.No:PY01/Y-9607. It is the further case that, after the purchase, complete re-painting of the vehicle was done for the purpose of re-registration at Tamilnadu and in that process the registration number written on the vehicle was erased, with a view to paint the new number, after re-registration. But, in the meanwhile, the petitioner got a job work at 'Meenakshipuram' in Tamilnadu State and the vehicle was taken from 'Dharmapuram' to 'Meenakshipuram'. It is the contention of the petitioner that, the vehicle was wrongly driven to the Kerala border, since the driver had committed a mistake in following proper route. Instead of turning the vehicle towards 'Meenakshipuram', at a junction which is only about 50 Mtrs away from the border check post, the driver took the vehicle directly to the Kerala border. According to the petitioner, the vehicle was never intended to be taken into the State of Kerala, and the 2nd respondent while intercepting the vehicle has not allowed the driver to take back the vehicle to 'Meenakshipuram'. It is contended that, under the above mentioned circumstances the transport was not accompanied by any documents and there was absolutely no attempt to bring the vehicle into the State of Kerala with any intention to evade payment of tax due to the state.
3. Pursuant to the detention and issuance of Ext.P2 notice, the petitioner had approached this court by filing WP(C). No.27027/2011. This court, through Ext.P3 interim order directed the 2nd respondent to hand over the detained goods along with relevant documents to the competent authority having jurisdiction under Section 47(5) and (6) of the KVAT Act, in order to finalise the enquiry. The competent authority was directed to conduct enquiry and to finalise the matter, after affording an opportunity of hearing to the petitioner. Ext.P4 order is issued in compliance with the directions contained in Ext.P3 interim order.
4. It is stated that, pursuant to a notice issued by the Enquiry Officer (2nd respondent) the petitioner had appeared for a personal hearing and submitted a hearing note. It is also contended that, eventhough the petitioner had produced Ext.P5 agreement relating to the job work undertaken at 'Meenakshipuram', the 2nd respondent had not received such document nor had adverted to the contents thereof.
5. Specific case of the petitioner is that, the Excavator in question was not intended to be transported to the State of Kerala and it happened to reach the border check post only because of a mistake in the route committed by the driver. It is the specific case put forth by the petitioner that, from the moment of interception onwards the petitioner/the person in charge of the vehicle was requesting for permission to take back the Excavator to 'Meenakshipuram', which the authorities have not acceded to. Hence it is contended that the detention itself was illegal. However, Ext.P4 order is challenged on the specific ground that the Enquiry Officer had not arrived at any conclusive findings to the effect that there was any attempt with respect to evasion of tax due under the KVAT Act. Therefore the petitioner seeks to quash Ext.P4.
6. A preliminary objection was raised on behalf of the respondents regarding maintainability of the writ petition, based on availability of alternative remedy. Of course, Ext.P4 is an order appealable under the provisions of the KVAT Act, before the statutory authority. But the challenge in this writ petition is on the allegation of illegality in the very proceedings initiated, under Section 47 of the KVAT Act. The case stands on a different footing in par with the normal detentions effected under Section 47(2), wherein transport of goods to the State are being intercepted alleging non-accompanying of required documents or alleging reasons to suspect attempt at evasion of payment of tax due under the KVAT Act. The petitioner is challenging the imposition of penalty on the ground that it was issued without arriving at any finding regarding existence of the ingredients warranting such imposition. It is settled law by this time that, availability of an alternative remedy is not an absolute bar in entertaining writ petitions under Article 226, when patent illegality is alleged or when there is allegation of lack of jurisdiction, or when the impugned order is assailed as totally unsustainable in the eye of law. Hence I am of the view that the legality and correctness of the order of penalty can be examined by adjudicating this writ petition.
7. For a proper evaluation of sustainability of Ext.P4 order, it will be beneficial to have an appraisal of the relevant provisions. Section 47(2) of the KVAT Act empowers the authority concerned to detain the goods demanding security deposit to the tune of double the amount of tax likely to be evaded, as may be estimated by such officer, if he has reason to suspect that the person transporting the goods is attempting to evade payment of tax due under the KVAT Act or if the goods are not covered by proper and genuine documents (in case where such documents are necessary). Under Section 47(5) of the Act, it is obligatory on the part of the detaining officer to submit the proceedings along with the connected records to an officer not below the rank of Commercial Tax Officer, authorised on that behalf, for conducting inquiry, in the manner prescribed. Sub-section (6) of Section 47 contemplates an inquiry to be conducted by the authorised officer with notice to the owner of the goods and after being given an opportunity of hearing. Penalty can be imposed on conclusion of the inquiry, only if the officer finds that there has been an attempt to evade tax due under the Act.
8. The crucial difference between the provisions contained under Section 47(2) and 47(6) is that, the detaining authority is authorised to intercept and demand security deposit if he has reason to suspect that the person transporting the goods is attempting to evade payment of tax or the goods are not covered by proper and genuine documents (in case where such documents are necessary). (emphasis supplied). But under Section 47(6) the authorised officer conducting the enquiry is empowered to impose penalty only if such officer finds that there has been an attempt to evade the tax due under the Act. (emphasis supplied). From the scheme of the statute it is clear and evident that, if any detention is made on the basis of a reasonable suspicion regarding attempt to evade payment of tax or on the basis of lack of proper and genuine documents, it shall be succeeded by an enquiry by another officer of higher rank. The culmination of such enquiry should result in an adjudication as to whether there was actual attempt to evade payment of tax due under the Act. Hence it is evident that, even if there existed a reasonable suspicion regarding attempt of evasion of tax, penalty can be imposed after completing the enquiry, only if the officer arrives at conclusive finding that, such attempt was actually there in existence. So also, even if the transport was not accompanied by proper and genuine documents, in case where such documents are necessary, penalty could not be imposed unless the enquiry officer arrives at conclusive finding that the non-availability of proper and genuine documents was with an intention to evade payment of tax. Therefore it is evident that penalty under Section 47(6) of the Act can be imposed only if the enquiry officer arrives at a finding that there was an attempt to evade payment of tax.
9. While analysing the findings contained in Ext.P4, in view of the legal position as enumerated above, it is pertinent to note that the findings arrived by the 2nd respondent were as follows:-
"In any view of the matter, the suspicion of attempt at evasion of tax entertained by Commercial Tax Inspector, Commercial Tax Check Post, Gopalapuram, is just and reasonable. The claim of the owner of the JCB that the transportation of the goods does not involve any attempt at evasion of tax is absolutely untenable."
The further findings in Ext.P4 is as follows:-
"The explanation and evidences let in by the owner of the goods are not convincing enough to dispel the suspicion of attempt at evasion of tax. The owner of the goods having engaged in attempt to transport the goods into the State without proper records, the reasonable presumption that can be drawn is that he has attempted to evade tax due on the transport of goods."
10. On the facts of the matter, contentions raised by the petitioner regarding the missing of the route and driving of the JCB in a wrong direction, was discarded by the 2nd respondent as an incredible story. According to the 2nd respondent, the correctness of those contentions has not been proved by letting in any material evidence. The 2nd respondent found that, the alleged version of driving the vehicle to a direction beyond the territory of the Tamilnadu State and entering the border of State of Kerala due to an inadvertent error committed by the driver, cannot be believed because there are "missing links". Hence based on the fact of non-availability of records accompanying with the transport, the 2nd respondent had drawn a presumption that the owner of the goods had engaged in contumacious and blameworthy conducts warranting penal action.
11. It is pertinent to note that imposition of penalty under Section 47(6) is in the nature of penal consequence, which can be sustained only if there is clear proof available regarding guilt of the party, attempting evasion of payment of tax. In the case at hand, the specific contention of the petitioner is that the goods in question was never intended to be brought to the State of Kerala. Learned counsel appearing for the petitioner had raised a contention that, the very fact that the goods were not accompanied by any documents will only support and fortify genuineness of the fact as alleged. According to him, nobody will attempt to bring the Excavator into the State of Kerala through the border check post, without there being any document accompanied with the transport. If it was any contumacious attempt to evade payment of tax, definitely the driver would have chosen only a by-route, rather than bringing the vehicle directly to the check post. It is the further contention that, the driver as well as the petitioner was repeatedly making requests for taking back the Excavator to 'Meenakshipuram'. It is further contended that the petitioner is not in a position to adduce any negative evidence in order to substantiate the claim that the Excavator was not intended to be brought into the State of Kerala. On the other hand, contention is that there was absolutely no evidence or proof available with the enquiry officer to arrive at any conclusion that the Excavator was attempted to be brought into the State of Kerala with a view to evade payment of tax due.
12. While considering the rival contentions, it is evident that the authority had drawn a presumption from the facts and circumstances that the transport was not accompanied by any documents, to the effect that the petitioner had attempted to evade tax due on the transport of goods. Such a presumption is drawn merely by saying that the explanation put forth regarding the transport was incredible and there was "missing links". The crucial question is as to whether any conclusive finding can be arrived regarding attempt in evasion of payment of tax, by drawing such a presumption. I am of the view that the conclusive finding contemplated under Section 47(6) on the aspect of attempt to evade tax, could not be based on mere presumptions. Even though the detention and initiation of proceedings under Section 47(2) could not be termed as illegal or unsustainable, the order imposing penalty based on such presumptions or any reasonable suspicions is unsustainable. Since there is no conclusive finding arrived on the basis of any facts or materials, the order imposing penalty is unsustainable.
13. Question arises as to whether any re-enquiry need be directed in the matter. Specific request made by the petitioner all along was to permit to take back the Excavator to the State of Tamilnadu, since he was not intending to bring the goods into the State of Kerala. Learned Government Pleader submitted that, if any attempt in evasion of payment of tax is established, the party could not be let scott free, on the basis of a subsequent offer or request to take back the goods. In principle, I perfectly agree with such a contention. If in any case, it is proved that there was an attempt made in evading payment of tax, imposition of penalty could not be avoided merely on the request to permit to take back the goods to the consignor state. But, on the facts of the case at hand, it is evident that no materials were available to prove that the petitioner was attempting to bring the goods to the State of Kerala, either for sale within the territory or for usage of the same within the territory of the state, or to prove that the transport was made with an attempt to evade payment of tax. Therefore I am of the view that a direction for conduct of a further enquiry will only be a futile exercise. Hence I am inclined to permit request of the petitioner to take back the goods to the State of Tamilnadu.
14. In the result, the writ petition is allowed and Ext.P4 order is hereby quashed. The respondents are directed to release the Excavator Loader (JCB) to the petitioner for the purpose of taking back the same to the State of Tamilnadu, on production of a copy of this Judgment, without any further delay.