Deputy Commissioner has No Power to remand Penalty Order in Appeal: Kerala HC set aside Penalty order for Violation of Principles of Natural Justice [Read Order]

The Kerala High while setting aside the penalty order for violation of principles of natural justice held that the Deputy Commissioner has no power to remand the penalty order on appeal.

The dealer, P.T.Johnson  is engaged in the business of rearing Broiler Chicken Birds and its sale. The inspection of dealer’s books, by the Revenue, disclosed that the dealer had undervalued the chicken for the purpose of account books and paid VAT thereon. In other words, suppression of actual sale value of chicken was resorted to resulting in evasion of tax.

The Revenue has found out similar systematic undervaluation of chicken for the purpose of books and paying or evading payment of tax under the Act by five dealers. The five dealers are alleged to be the close relatives of P.T Johnson/dealer herein.

The Revenue argues that the First Appellate Authority/Deputy Commissioner (Appeals) upon recording the finding that the order of the primary authority is vitiated on account of denial of reasonable opportunities, such as cross-examination of witnesses whose statements are relied on; violation of principles of natural justice in any form; ought to have completed the assessment in accordance with subsection (5)(a) which provides for confirming, reducing, enhancing or annulling the assessment or the penalty or both as the case may be.

The division bench of Justice S.V.Bhatti and Justice Basant Balaji held that there is a violation of principles of natural justice and denial of a reasonable opportunity to the dealer, thus warranting setting aside the penalty order in Annexure-A, and, as a corollary to the above finding, the Appellate Authority has rightly, within its powers and jurisdiction, remitted the matter to the Primary Authority for consideration and decision afresh. The power of remand is available and no exception to the findings recorded by the Tribunal and the Appellate Authority on the remand is warranted.

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