Mathew M. Thomas vs Sales Tax Officer

K.S. Paripoornan J.

The petitioner is the managing partner of a firm. The respondent is the assessing authority under the Kerala Tax on Luxuries in Hotels and Lodging Houses Act, 1976. By Ext. P1 dated 19-11-1986 the respondent served a notice on the petitioner proposing to levy a penalty of Rs. 1,000/-. for each month from January 1979 to October 1986 for contravention or violation of Section 5 of the Act. The petitioner filed objections thereto. Rejecting the objections, the respondent by Ext. P3 levied a penalty of Rs 1,000/- per mensem from January 1979 to October 1986. By Ext. P4 notice dated 30-1-1987 the petitioner has been directed to pay the penalty levied under Ext. P3. In this Original Petition the challenge is against Ext. P1 notice, Ext! P3, order levying the penalty and Ext. P4 notice directing the petitioner to remit the said amount. I heard the counsel for the petitioner, Mr. Mathews P. Mathew as also the Government Pleader, Mr. Divakaran Pillai. u/s 5 of the Act (Act 32 of 1976) the petitioner-proprietor of a hotel is liable to pay luxury tax- The petitioner-proprietor of a hotel is liable to submit a return for payment of. luxury tax. Section 5 provides for assessment and collection of tax. u/s 6 (1) on receipt- of a return u/s 5, the assessing authority shall asses the luxury tax payable in respect of the period to which the return relates. Section 6(2) enables the assessing authority to pass a best judgment assessment, if the proprietor fails to submit the return u/s 5 in due time or if the return submitted by him appears to the assessing authority to be incorrect or incomplete. Before doing so, the assessee should be given an opportunity of being heard. Section 6 (3) enables the assessing authority to levy a penalty equivalent to a sum not exceeding the amount of the luxury tax payable under the Act, if the luxury tax is not paid within the prescribed period. Section 17 provides for penalties to be levied. Section 17 of the Act is as follows:. "17. Penalties.-(l) Any person who-

(a) knowingly submits an untrue return or fails to submit a return'' as required by this Act or the rules made thereunder; or

(b) wilfully acts in contravention of any of the provisions of this Act or the rules made thereunder for the contravention of which no express provision for punishment is made by this Act.

shall be punishable with fine which may extend to one thousand rupees.

(2) Any person who-

(a) prevents or obstructs inspection, entry, search or seizure by the assessing authority; or

(b) fraudulently evades the payment of luxury tax or other amount due from him under this Act,

shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both.

(3) A person shall not be proceeded against under, this section except at the instance of the assessing authority".

Counsel for the petitioner submitted that Ext. P3 order leaving the penalty is totally unauthorised and illegal. It was argued that the petitioner prayed for an opportunity before the levy of penalty as per Ext. P2. According to the petitioner, he was not liable to pay the tax under the Act. In order to substantiate the said plea, petitioner prayed for an opportunity in Ext. P2 No such opportunity was gives before the penalty was levied as per Ext. P3 order. On this short ground Ext. P3 should be 1 annulled. Secondly, it was argued that a look at Section 17 will show that it is only a "court which can levy the fine specified in Section 17 and the respondent has absolutely no jurisdiction to pass Ext. P3 order. On this ground Ext. P3 is totally unauthorised and without jurisdiction. Finally, it was argued that Section 17 is a penal provision and before "fine" specified in Section 17 is imposed, it is the duty of the Revenue to allege and prove mens rea. Admittedly, it has not been done in the instant case; On this ground as well, Ext. P3 deserves to be nullified.

Learned Government Pleader sought to sustain Ext. P3 on the merits as well as on the plea regarding jurisdiction. I am of the view that all the pleas raised by the petitioner are well-founded. The respondent acted illegally in passing Ext. P3 order without affording an opportunity to the petitioner to substantiate the objections raised in Ext. P2. This is unfair and is violative of the principles of natural justice. On this short ground, Ext. P3 should go. Secondly, a look at Section 17 of the Act will show that for the contravention of the provisions specified in Section 17 (1) (a) and (d) a person shall be punishable with fine. Section 17 (3) of the Act provides that a person shall not be proceeded against under this section except at the instance of the assessing authority. Emphasis was laid oh the expression "fine", occurring in Section 17 of the Act. It was argued that "fine" can be imposed only by a court and it is not open to an assessing authority to levy the fine. It was also stated that there is indication in the Act that the assessing authority himself cannot levy the "fine" u/s 17 (1) (a) of the Act. It is provided in Section 17 (3) that a person shall not be proceeded against under the section, except at the instance of the assessing authority. That includes the imposition of the fine by the assessing authority. It can be imposed at his instance and not by him. Moreover, what is imposed is fine. It is ordinarily levied by a court. These aspects were highlighted to show that only a court, (other than the assessing authority) can impose the fine. This plea appears to be. tenable, in view of Section 17 (I) (a) of the Act read with Section 17(3). I am of the vitw that Ext. P3 deserves to be annulled on that ground as well. I hereby do so.

Lastly, it was argued that Section 17 is a penal provision. It is open to the appropriate authority to "punish" a person with fine for the contumacious conduct specified in Section 17 of the Act. It is for an "offence", committed. Every default does not automatically and mechanically attract the levy of "fine". It is only for a contumacious act, a fine can be imposed, The authority should act judicially and reasonably. Mens rea is an essential ingredient for the offence. Section 17(1) (a) provides that a person who "knowingly" submits an untrue return or fails to submit a return as required by the Act shall be punishable with fine.

Section 17 (l)(b) provides that a person who."wilfully" acts in contravention -of any of the provisions of the Act shall be punishable with fine. these provisions indicate-that it is not for every default that a fine can be imposed-It is only if a person has acted in defiance of law deliberately, or knowingly or wilfully, an imposition of fine is called for u/s 17 of the. Act. The decision of the Supreme Court in Hindustan Steel Ltd. v. State of Orism., (25 S. T, C211) affords sufficient guidance in the matter. Ext. P3 totally ignores the above aspects. On this ground as well, Ext. P3 deserves to be annulled. -I do so. It should also be stated that the fiae of; Rs. 1,000/-that could be imposed is the maximum and not the minimum. The quantum of fine to be imposed depends upon the gravity of the offence in the particular cass. The levy should be proportionate and not fanciful or arbitrary (R v. Barnsley(1976 (3) All E L R 452)). The imposition of the. maximum fine, without due to the gravity of the, offence committed, will" -show the non-application of the mind and acting mechanically. It is unreasonable. In this case, the imposition of the maximum, mechanically, is also open to attack, as unfair, illegal and irrational, and. so lacks jurisdiction. Since Ext. P3 is totally unauthorised and without Jurisdictiot I quash Ext. P3 and the consequential order Ext. P4. It was brought to my notice that in pursuance to the direction of this Court in C. M. P. 6391 of 1987 the petitioner has remitted a sum of Rs. 25,000/-. If the said amount was so remitted, the respondent shall return the same within ten days from today.

The Original Petition is allowed with costs, including advocate''s'' fee Rs 1,000/-,