M/S S.B. Enterprises vs Commissioner Of Commercial Tax ...
2022 Latest Caselaw 1786 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

?Court No. - 1
 
Case :- SALES/TRADE TAX REVISION No. - 308 of 2015
 
Revisionist :- M/S S.B. Enterprises
 
Opposite Party :- Commissioner Of Commercial Tax Lko.
 
Counsel for Revisionist :- Suyash Agarwal
 
Counsel for Opposite Party :- C.S.C.
 

 
Hon'ble Piyush Agrawal,J.

Heard Shri Rakesh Ranjan Agrawal, learned Senior Counsel, assisted by Shri Mandeep Nath, holding brief of Shri Suyash Agarawal, learned counsel for the revisionist and Shri A.C. Tripathi, learned Standing Counsel for the opposite party.

The present revision has been filed against the judgement & order dated 13.02.2015 passed by the Commercial Tax Tribunal, Division-I, Allahabad in Second Appeal No. 196 of 2014 for the assessment year 2011-12 arising out of penalty proceedings initiated under section 54(1)(14) of the UP VAT Act, in which following questions of law have been framed:-

"(i) Whether the facts and circumstances of the case, the Tribunal was correct uphold the penalty u/s 54(1)(14) of UPVAT Act on the ground that books of accounts was not produced whereas the requirement of documents to be carried during transit of goods u/s 50(4) of the Act is only to carry proper and genuine documents which has not been disbelieved?

(ii) Whether the Tribunal was correct not to consider that filing of all the columns of form 38 for the purposes of section 50 of the Act was not mandatory prior to amendment made in clause (a) and clause (b) of sub-section (2) of section 50 of UPVAT Act by U.P. Ordinance No. 4 of 2014 and U.P. Ordinance No. 6 of 2014?

(iii) Whether the Tribunal was correct to uphold the maximum penalty of 40% of the value of goods ignoring that the A.O. and the Appellate Authority has based the maximum penalty on the basis of the Circular no. 0910015 dated 03.06.2009 and 0910062 dated 16.11.2009 which is contrary to section 50(4) of the Act as well as U.P. Amendment Act 2014?"

Learned Senior Counsel submits that admittedly, the goods were coming from Pune (Maharastra) in the vehicle bearing registration no. UP 78 CN 9050, in which 545 numbers of batteries were being imported. Along with the goods, all the requisite documents were accompanying and no discrepancy, whatsoever, was pointed out in the said documents, but only in column no. 3 of Form - 38, the amount was wrongly mentioned and column no. 6 was not filled. On the basis thereof, the goods were seized and thereafter, released on furnishing security. Thereafter, penalty proceedings were initiated against the dealer. He further submits that admittedly, the goods were in transit in October, 2011; whereas, section 50(2)(a) of the UP VAT Act provides that "where such goods are imported, brought or otherwise received into the State by registered dealer, he shall carry such declarations or documents as may be prescribed." The said provision was amended on 26.05.2014 and the words were being substituted as "carry duly filled such declarations or documents." He further submits that at the time of interception and seizure of goods, no such provision was there. For imposing the penalty, the necessary ingredient is to hold whether there was any intention to evade payment of tax. In the case in hand, all the documents were there and the Department was well aware after the detention that the goods have been imported and there cannot be any intention to evade payment of tax. He prays for allowing the revision.

Per contra, learned Standing Counsel supports the order passed by the Tribunal and submits that there was contravention on the part of the dealer while importing the goods and therefore, there was intention to evade payment of tax. Therefore, the penalty is justified.

After hearing learned counsel for the parties, the Court has perused the record.

Admittedly, the goods were coming from outside the State of U.P., i.e., Pune (Maharashtra), and the same were intercepted and seized. On furnishing security, the goods were released and thereafter, penalty proceedings were initiated. At the time of detention, i.e., October, 2011, the provision of section 50(2) provided that "where such goods are imported, brought or otherwise received into the State by registered dealer, he shall carry such declarations or documents as may be prescribed." There is no dispute that all the documents, as prescribed under the Act, were there. Further, The said provision was amended on 26.05.2014 and the words were being substituted as "carry duly filled such declarations or documents." At the time of detention, no such provision was available. Further, on perusal of the material on record, all documents were available and all entries have been made in the books of account of the dealer and therefore, it cannot be said that there was any intention to evade payment of tax.

Further, penalty orders have been passed on the basis of the judgement of the learned Single Judge in the case of K.M.G.S. Road Signs reported in 2009 NTN (39) 263 (Alla.); whereas, the Division Bench of this Court in M/s Rama Pulses Vs. State of U.P. & others reported in 2009 NTN (41) 189 has held as under:-

"6. Section 28-A of the U.P. Trade Tax Act was interpreted in Jain Shudh Vanaspati Ltd., Ghaziabad and ors vs. State of UP and ors 1983 U.P.T.C. 198 as follows:-

"23. The provision contained in Section 28-A as it stands after enactment of U.P. Act No. 33 of 1979 are materially different. It cannot be said that there is any assumption underlying therein that the goods to which the provision of Sectioin 28-A applies has actually been sold inside the State and the section does not authorise the sales tax authorities either to seize the said goods or to penalise the importer thereof on any such assumption. Its present basis is the attempt to evade tax. The power to detain the goods and levy penalty in respect thereof cannot be exercised merely for the reason that the said goods were not accompanied by the requisite documents or that the documents accompanying them were false. This power can be exercised only if the goods detailed are not accompanied by the requisite documents or that the documents accompanying them are false and if there is material before the detaining authority to indicate that the goods are being imported in an attempt to evade assessment or payment of tax due or likely to be due under the Act. The instant case, therefore, in our opinion, clearly falls outside the ratio of the case of Check-post Officer v. K.P. Abdulla & Bros., 27 STC 1 as decided by the Supreme Court.

27......"These provisions make it absolutely clear that the power to seize and detain the goods under sub-section (6) of Section 28-A cannot be exercised merely because the goods, when they reach the check-post, were not accompanied by the declaration form contemplated by Section 28-A (1). The real occasion to detain the goods under sub-section (6) arises only if the goods are not accompanied by the requisite documents and there is material before the check post officer on which he can reasonably record a satisfaction that the person importing the goods was attempting to evade assessment or payment of sales tax due or likely to be due under the Act. Obviously, if the authorities have been acting in the manner as alleged by the learned counsel for the petitioners, they have not been acting inconsonance with the provisions of Section 28-A of the Act......"

7. The judgment in Jain Shudh Vanaspati Ltd. (supra) has held the field for more than two decades, and that the intention to evade the tax has been found to be necessary ingredient before imposing the penalty under the Act, on the dealer or any other person.

8. In Multitex Filtration Engineering Ltd. (supra) a learned Single Judge noticed the decision in M/s K.M.G.S. Road Signs Pvt. Ltd. (supra) and held as follows:-

"22. In the case of M/s KMGS Road Signs Pvt. Ltd., New Delhi vs. Commissioner, Commercial Taxes, U.P., Lucknow (supra) this Court has upheld the seizure of the goods on the ground that column Nos. 2, 3 and 6 of the declaration form were blank. According to learned Single Judge, column Nos. 2, 3 and 6 are material columns should necessarily be filled. The learned Single Judge has relied upon the decisions of the Apex Court in the case of Suljag Industries vs. CTO (Supra) and in the case of Assistant Commercial Tax Officer vs. Bajaj Electricals Limited (supra). However, while dealing with the provision of Section 50 of the VAT Act, learned Single Judge has observed as follows:-

"The decision given in the case of Jain Shudh Vanaspati Ltd., Ghaziabad and others vs. State of UP and others (supra) should be understood in the light of the legal provision as it then stood. The legislatures have consciously amended law to plug the loophole of Section 28-A for the purposes of preventing the evasion of tax. Whatever may be the legal position earlier, law as stands today, is clear and on a plain reading of Section 50 of the VAT Act, it cannot be possible said that absence of Form 38 is immaterial."

23. Having regard to the aforesaid decisions, referred hereinabove, I am of the view that the Division Bench decision in the case of Jain Shudh Vanaspati Ltd., Ghaziabad and others vs. State of U.P. and others (supra) still holds the field and is relevant for the interpretation of Section 50 of the VAT Act. The language of Sections 28-A (6) and 50 (4) is synonymous. There is absolutely no difference in the language. Therefore, the interpretation of Section 28-A read with Section 28-A (6) given by the Division Bench of this Court in the case of M/s Jain Shudh Vanaspati (supra) is applicable to the interpretation of Section 50 read with Section 50 (4). Thus, for the detention/seizure of the goods under Section 50 read with Section 50 (4) and 50(5), a case of an attempt to evade the tax and an attempt to evade assessment or payment of tax due or likely to be due under this Act has to be made out as a condition precedent. In this view of the matter the observation of the learned Single Judge in the case of M/s KMGS Road Signs Pvt. Ltd. is not correct in entirely and is to be read in the light of the observation made above."

9. Shri S.D. Singh would submit that in para 26 of the judgment in Multitex Filtration Engineering Ltd. (supra) the Court has observed that the blank column no.6 in Form 38 i.e, non-mentioning of challan number or invoice number may lead to an inference that in case of non-checking of goods, the challan may be used for other consignment of same quality, eight, and value. The other columns may not have that importance.

10. In Multitex Filtration Engineering Ltd. (supra) the Court has clarified in paras 27 and 30, that incomplete Form 38 may be a ground of seizure, but that for imposing penalty a satisfaction has to be recorded under Section 54 after giving an opportunity to the trader and on the material placed on record that there was an intention to evade the tax. The guilty mind is necessary to be established to impose penalty, which is a punishment to be given to a dealer over and above the tax assessed against him.

11. The penalty under Section 54 (14) of the VAT Act does not provide for statutory penalty for failure to make a complete declaration, as in the case of Section 78 (5) of the Rajasthan Sales Tax Act, 1954, which provides for penalty for breach of Section 78 (2) for movement of goods without Form No. 18A/18C. Under Section 54 (14) of the VAT Act, the conditions necessary for imposing penalty is (i) import or attempt to import or to abet in the import of any goods, in contravention of the provisions under Section 50, or Section 51 with a view to intention of evading payment of sale of - (a) such goods; or (b) goods manufactured, processed or packed by using such goods; or (ii) transport, attempt to transport any taxable goods, in contravention of any provisions of this Act.

12. On the above discussion, it cannot be said that the law laid down in Jain Shudh Vanaspati Ltd. (supra) has been diluted, and that the requirement of intention to evade the tax is no longer the requirement under the Act before imposing the penalty."

The Division Bench of this Court has held that the intention to evade payment of tax has been found to be necessary ingredient before imposing the penalty under the Act.

The material on record shows that no such intention to evade payment of tax was there.

In view of the aforesaid facts & circumstances as well as the law laid down by the Division Bench of this Court, the penalty order cannot be sustained in the eyes of law. The impugned order passed by the Tribunal is set aside.

The revision is allowed. The questions of law are answered accordingly.

Order Date :- 29.4.2022

Amit Mishra