CTR/26/2013
2022 Latest Caselaw 1926 UK

      IN THE HIGH COURT OF UTTARAKHAND
                  AT NAINITAL

         THE HON'BLE THE CHIEF JUSTICE SRI VIPIN SANGHI
                                AND
           THE HON'BLE SRI JUSTICE SANJAYA KUMAR MISHRA


           COMMERCIAL TAX REVISION NO. 26 OF 2013

                              1st JULY, 2022

Between:

M/s Brij Lal and sons                        ......          Revisionist


and

Commissioner, Commercial Tax,
Uttarakhand, Dehradun                        ......          Respondent

Counsel for the revisionist : Mr. S.K. Posti, learned Senior Counsel assisted by Mr. Hemant Pant, learned counsel

Counsel for the respondent : Mr. Mohit Maulekhi, learned Brief Holder for the State

The Court made the following:

JUDGMENT: (per Hon'ble The Chief Justice Sri Vipin Sanghi)

Present Commercial Tax Revision No. 26 of

2013 has been preferred by the revisionist-assessee

under Section 55 (1) of the Uttarakhand Value Added

Tax, 2005 in relation to the penalty imposed upon it,

for the Assessment Year 2008-09, by the Deputy

Commissioner (Assessment) - I, Commercial Tax,

Haridwar, which was confirmed by the Commercial

Tax Tribunal, Dehradun, vide its order dated

27.07.2013.

2) The case of the revisionist is that it was

carrying on the business of sale and purchase of

Gutkha in the relevant assessment year. The

revisionist imported 120 bags of Gutkha from its

manufacturer, Som Products, Delhi through Truck No.

HR 38 C 4475. The goods were accompanied with GR

of Khanna Carrying Corporation, i.e., the transporter

of the revisionist, for 120 bags of Gutkha valued Rs.

16,38,324/-. The goods were accompanied with sale

invoice Nos. 863, 864 and 865. The driver was also

having transit pass issued by Mohan Nagar Check

Post, authorising the transporter to cross border of

the State of U.P. and enter into the State of

Uttarakhand. The driver was also having discharge

certificate issued by exit check post on the border of

the State of U.P. The vehicle carrying the aforesaid

goods was stopped at Kuwan Hedi, Narsan Check Post

of the State of Uttarakhand where the driver provided

all the documents possessed by him. Unfortunately,

declaration Form 16 was not accompanied with the

goods, as by mistake, it remained with the

transporter and could not be handed over to the

driver along with other documents namely bilty, sale

invoice etc. While verifying the documents at Kuwan

Hedi, Narsan Check Post in the State of Uttarkhand,

the said deficiency in the documents, for the first

time, came to the fore. Since Form 16 did not

accompany with the goods, the Assistant

Commissioner, Commercial Tax, issued a show cause

notice to the Driver of the vehicle to show cause as to

why, the 120 bags of the Gutkha being transported

against bill Nos. 863, 864, 865, be not seized. The

show cause notice was made returnable by

25.08.2008. The revisionist-assessee submitted its

reply to the show cause notice, disclosing that it is a

registered dealer and it was having agency of Gutkha

of the manufacturer Som Products, New Delhi. The

revisionist-assessee also stated that it was regularly

importing Gutkha against Form 16. The sale is

covered by Form C of the Central Sales Tax Act, and

the revisionist is filing return every month. From April,

2008 to July, 2008 due tax was deposited by the

revisionist to the Assessing Authority. The revisionist

also stated that the goods in question, were being

transported against bill Nos. 863, 864 and 865 by

Khanna Carrying Corporation but due to oversight of

the transporter, Form 16 bearing no. UK-VAT-A 2007

No. 1807258 was not handed over by the transporter

to the driver. Along with reply to the show cause

notice, the revisionist also submitted Form 16 No.

1807258 in original issued by Commercial Tax Officer

on 18.07.2008 before the Assessing Authority, and

requested that since the said Forms are being filed, all

the goods may be released without any security.

However, the Assessing Authority passed an order of

seizure, demanding Rs. 6,62,400/- as a security for

releasing the goods. Finding itself in the aforesaid

position, the revisionist had no option but to get the

goods released, as they were perishable items. The

revisionist further states that, subsequently, Deputy

Commissioner (Assessment) - I, Commercial Tax,

Haridwar vide its order dated Nil converted the whole

amount of security into penalty, adjusting the security

amount. The said order, issued under Section 58

(XIX) of the said Act, was served upon the revisionist

on 04.06.2009.

3) Aggrieved by the order passed by the

Assessing Authority, the revisionist preferred a First

Appeal bearing No. 891 of 2009 before the Joint

Commissioner (Appeal), Commercial Tax, Dehradun.

The said appeal was partly allowed by reducing the

penalty from 40% to 20%. Consequently, the penalty

was reduced from Rs. 6,62,400 to Rs. 3,31,200/-.

While passing the said order, the Appellate Authority

observed that the original and duplicate copy of Form

16, produced by the revisionist, contained signatures

of different persons, and the trip sheet did not contain

the particulars of goods covered by the aforesaid

three bills. He also observed that upon investigation,

it was found that driver did not state that he had

forgotten to take the Form 16 from the transporter.

4) The revisionist then preferred a Second

Appeal under Section 53 of the VAT Act, assailing the

order passed by first Appellate Authority in Appeal No.

891 of 2008 dated 27.10.2010. The said appeal

bearing No. 11 / 2011 for the Assessment Year 2008-

09 under Section 58 (XIX) was dismissed by the

Commercial Tax Tribunal, Uttarakhand, Dehradun

Bench, Dehradun vide judgment dated 27.07.2013,

which is impugned in the present revision. The

operative part of the impugned order reads as

follows:

"6. In these appeals, this fact is not under dispute that the goods which were seized by the check post

authority were not found covered with any valid import declaration form XVI at the time of verification of the goods, hence it is evidence that the goods in question were being imported in contravention of the provisions of the Act and Rules made there under. The declaration in form XVI which was produced at a later stage was also not found in order, because on the original and second foil of the declaration, the signature of different persons were observed. The disputed goods were also not found entered in the trip-sheet produced before the check post authority. The learned J.C. (A) after elaborate discussion on these issues and after incorporating the proper reasoning in the impugned judgment and order dated 27.10.2010 has fixed up the penalty amount. We feel that under the facts and circumstances involved in these cases, the reduction made in the penalty amount is totally justified. Consequently, we do not find any reason to differ from the findings recorded by the learned J.C.(A) in the impugned judgment and order dated 27.10.2010 and hence the same is liable to be confirmed."

5) The submission of the learned Senior

Counsel for the revisionist is that revisionist had

produced Form 16 in respect of the goods in question,

along with its reply to the show cause notice. In this

regard, he has drawn our attention to the

communication dated 19.08.2008 addressed by

Khanna Carrying Corporation to the Assistant

Commissioner, Commercial Tax. He further submits

that this is the first instance of lapse on the part of

the revisionist, and in this background, the revisionist

could not be said to have deliberately failed to

produce Form 16 at the relevant time with a view to

evade payment of tax.

6) He has drawn our attention to Section

48(8) of the Act, which deals with the aspect of levy

of penalty. The same requires to grant opportunity to

the owner, or a person duly authorised by such

owner, or the driver or person-in-charge of a vehicle

or of goods in question, of being heard and it is only

upon satisfaction being recorded that the goods were

imported, or abetted to import in contravention with

the said provisions "in an attempt to evade

assessment or payment of tax due or likely to be due

under this Act", that an order of imposing penalty, not

exceeding forty percent of the value of such goods

involved, or three times the tax leviable on such

goods, under any of provisions of this Act, whichever

is higher, could be levied.

7) Learned Senior Counsel for the revisionist

submits that in the factual background of the case,

there was no basis to conclude that there was an

attempt to evade the assessment or payment of tax

due, or likely to be due under the Act. In support of

these submissions, he has placed reliance on the

three-Judge Bench Judgment of the Supreme Court in

the case of State of Rajasthan and another Vs.

M/s D.P. Metals, (2002) 1 SCC 279. The

Supreme Court was dealing with pari materia

provisions under the Rajasthan Sales Tax Act, nemely

Section 78(5), which provides for imposition of

penalty on person in charge of goods, for non-

compliance of Section 78(2)(a) of the said Act, or for

submission of false or forged documents or

declaration. While upholding the constitutionality of

the said provisions, the Supreme Court in paragraph

32 of the judgment observed as under:

"32. Such submission of false or forged documents or declaration at the checkpost or even thereafter can safely be presumed to have been motivated by desire to mislead the authorities. Hiding the truth and tendering falsehood would per se show existence of mens rea, even if required. Similarly where, despite opportunity having been granted under Section 78(5) if the requisite documents referred to in clause (a) of sub-section (2) are not produced, even though the same should exist, would clearly prove the guilty intent. It is not possible to agree with the counsel for the respondents that breach referred to in

Section 78(5) can be regarded as technical or venial.

Once the ingredients of Section 78(5) are established, after giving a hearing and complying with the principles of natural justice, there is no discretion not to levy or levy lesser amount of penalty. If by mistake some of the documents are not readily available at the time of checking, principles of natural justice may require some opportunity being given to produce the same. This provision cannot be read as to imply that the penalty of 30% is the maximum and lesser penalty can be levied. The legislature thought it fit to specify a fixed rate of penalty and not give any discretion in lowering the rate of penalty. The penalty so fixed is meant to be a deterrent and we do not see anything wrong in this. The quantum of penalty under the circumstances enumerated in Section 78(5) cannot, in our opinion, be regarded as illegal. The legislature in its wisdom has thought it appropriate to fix it at 30% of the value of goods and it had the competence to so fix. As held by this Court in Rai Ramakrishna & others vs. State of Bihar, (1964) 1 SCR 897, at SCR p. 910:

"The objects to be taxed so long as they happen to be within the legislative competence of the legislature can be taxed by the legislature according to the exigencies of its needs, because there can be no doubt that the State is entitled to raise revenue by taxation. The quantum of tax levied by the taxing statute, the conditions subject to which it is levied, the manner in which it is sought to be recovered, are all matters within the competence of the legislature, and in dealing with the contention raised by a citizen

that the taxing statute contravenes Article 19, courts would naturally be circumspect and cautious."

as such there cannot, in the present case, be any valid challenge to the rate of penalty provided for in Section 78(5) of the Act."

(emphasis supplied)

8) Learned Senior Counsel for the revisionist

submits that mens rea is, therefore, an essential

ingredient to attract the imposition of penalty, and

mere lapse of this kind, which has occurred in the

present case, was not sufficient to presume the

intention to evade tax on the part of the revisionist -

assessee.

9) He also places reliance on the judgment of

learned Single Judge namely Hon'ble Mr. Justice

Pankaj Mithal (as his Lordship then was) in the case

of Castrol India Limited and another Vs.

Commissioner, Commercial Tax, 2012 NTN Vol.

49 page 202. In that case as well, the declaration

Forms were produced subsequently, along with the

reply to the show cause notice. The learned Single

Judge observed that the object of issuance of show

cause notice is to give to the party concerned, not

only an opportunity to submit an explanation as to

why the security may not be demanded, but also to

explain why the goods may not be seized. Therefore,

if in response to such a show cause notice, the party

produces the necessary documents so as to remove

the discrepancy, if any, found at the time of checking,

the authorities are legally bound to consider the same

before ordering for seizure of the goods.

10) Learned Senior Counsel for the revisionist

submits that, in fact, the seizure of the goods itself

was improper in the light of aforesaid judgments and,

consequently, the imposition of penalty was certainly

not called for.

11) He further places reliance on Section 65 of

the Act, which raises a statutory but rebuttable

presumption that, where any taxable goods for the

purpose of business, are being imported without a

form of declaration prescribed under section 48,

unless otherwise proved, after furnishing proper and

sufficient evidence, it shall be presumed that such

goods are being imported with a view to evade

payment of tax.

12) On the other hand, learned Brief Holder for

the State submits that the declared value of the

goods being transported was about Rs. 5,00,000/-,

whereas the actual value of goods was to the tune of

Rs. 16.38 lakhs. He also places reliance upon the

factual finding recorded by Deputy Commissioner

(Commercial Tax) in the order imposing penalty under

Section 58(XIX), wherein it is recorded that the

declaration form produced by the assessee did not

bear the seal; and the original and duplicate copies of

the declaration forms also bore different signatures of

the seller.

13) Learned Brief Holder for the State also

refers to the seizure order dated 17.08.2008, which

recorded that the value of the goods covered by Bill

Nos. 863, 864 and 865 was disclosed as Rs.

5,46,108/-, whereas the value of the entire

consignment was disclosed as Rs. 16,38,324/-. He

also refers to the impugned order passed by the

Tribunal, particularly paragraph 6, which has already

been extracted herein above.

14) He also places reliance upon the decision of

the Supreme Court in the case of Guljag Industries

Vs. Commercial Taxes Officer, (2007) 7 SCC 269.

Relying upon paragraph 32 thereof, he would submit

that in this subsequent decision, the Supreme Court

had noticed the earlier decision in the case of D.P.

Metals (supra) and held that for imposition of

penalty mens rea is not a necessary ingredient. The

Supreme Court had held that the object of the law in

respect of imposition of penalty is to remedy the loss

of revenue and not to punish the offender, and the

penalty thereunder is a civil liability. Thus, transport

of goods without the relevant declaration forms would

automatically attract levy of penalty for breach.

15) He also refers to the order passed by the

First Appellate Authority, pointing out that the same

finding of fact that the original and the duplicate copy

of the Form 16 bore signatures of different persons,

was recorded by it.

16) In rejoinder, learned Senior Counsel for the

revisionist submits that the grounds for imposition of

penalty cannot be expanded beyond the allegations

levelled in the show cause notice. In this regard, he

has drawn our attention to the show cause notice

dated 17.08.2008. The limited ground taken in the

show cause notice was the absence of the declaration

form in respect of goods covered by bill Nos. 863, 864

and 865. The show cause notice does not make any

allegation with regard to the goods in question, not

being entered in the trip sheet. Therefore, this ground

could not be cited as the justification for imposition of

penalty. In any event, he submits that the trip sheet

has to be filled by the transporter and the failure of

the transporter, not to fill the same, even if true,

would not justify the imposition of penalty on the

revisionist-assessee.

17) The learned Senior Counsel has also drawn

our attention to Form 16, which was subsequently

supplied by the revisionist along with the reply to the

show cause notice. In this regard, a categorical

averment has been made in the revision petition to

the effect that there is no discrepancy in the

signatures found in the original, and copy of Form 16.

He would submit that there is no basis to claim that

the signatures thereon are different in the original and

the duplicate copy. He further submits that the seal of

the consignee/purchaser is also affixed on both - the

original and the duplicate copy, and both the papers

also bore signatures of its proprietor Shri Ram

Krishna, on behalf of M/s Brij Lal and sons. He further

submits that the signatures of the seller in Column 8

in both the copies of Form 16 are same. He has also

referred to the Circular issued on 30.04.1988 under

the U.P. Trade Tax Act, which states that the Sales

Tax check post would not detain the consignment

inter alia for the reason that the seller's seal is not

affixed on the form. He submits that the said circular

continues to be an operation by virtue of Section 80

of the Act.

18) We have considered the rival submissions

advanced before us, examined the record, as also the

decisions cited by learned counsels on either side.

19) The submission of Mr. Maulekhi, learned

counsel for the State, that the value of the goods

being transported was declared to be only Rs. 05

lakhs, whereas the actual valuation of the goods was

to the tune of Rs. 16.38 lakhs, is not borne out from

the records. In fact, the order under Section 58(XIX),

passed by the Deputy Commissioner itself records

that the value of the consignment was declared at Rs.

16,38,324/-. The submission of Mr. Maulekhi founded

upon the factual finding recorded by the Deputy

Commissioner (Commercial Tax) in the order

imposing penalty under Section 58(XIX) to the effect

that declaration form produced by the revisionist-

assessee did not bear the seal, and that the original

and duplicate copies of the declaration form also

bears different signatures of the seller, also does not

appear to be correct. We may observe that the same

finding was also returned by the First Appellate

Authority. We are conscious of the fact that in these

revision proceedings, it is not for this Court to re-

appreciate the evidence, and normally interfere with

concurrent findings of fact. However, there are

exceptions to the said rule. The revisionist has placed

on record the declaration in Form 16 along with the

present revision petition, and has made a categorical

averment in the revision petition in para 19, that

there is no discrepancy in the original and the copy of

the Form 16 bearing No. 1807258. A copy of the

same is annexed as Annexure -7 to the revision

petition.

20) We have carefully seen said Form 16

declaration for ourselves, and there is absolutely

nothing to show that there is any discrepancy in the

original and the duplicate copy of the Form 16

declaration, placed on record. The said declaration

forms bear the same signature of Sri Ram Krishna for

Brij Lal and sons, the revisionist. Even the signatures

of the seller appear to be the same to the naked eye.

Both the copies also bear the seal of Brij Lal and sons,

as also the official seal. Counsel for the respondent

has also not been able to point out any difference in

the two copies of the form.

21) Aforesaid being the position, we cannot

ignore and shut our eyes to what is evident to us from

the record. So far as the reliance placed by learned

counsel for the respondent on Guljag Industries

(supra) is concerned, we find that D.P. Metals

(supra) is a decision of three Hon'ble Judges of the

Supreme Court, as opposed to the decision in Guljag

Industries (supra), which is a decision of two

Hon'ble Judges. We are bound to follow the larger

Bench decision. From reading of the said decision it

appears that mens rea is essential to attract the

imposition of penalty. In a case where the assessee

fails to respond to the show cause notice, an

inference on mens rea to evade the tax may be

drawn. In the light of the observations made in D.P.

Metals (supra), such an inference would obviously

be drawn where the assessee resorts to hiding the

truth and tendering falsehood. However, a mistake

which leads to non-production of the declaration form

at the time of checking does not necessarily lead to

exhibition of the intention to evade payment of tax.

It is for this reason that grant of opportunity to

respond to the show cause notice, and produce the

documents, is envisaged under Section 48(8) of the

Act. If the submission of learned counsel for the

respondent is accepted, it would mean, that in every

case of failure to produce the declaration form at the

time of checking, even when the said failure is validly

explained, would attract imposition of penalty.

However, that does not appear to be the scheme of

the Act.

22) We find merit in the submission of learned

Senior Counsel for the revisionist that since the

aspect of the trip sheet not disclosing goods covered

by the three bills in question, namely, bill Nos. 863,

864 and 865 was not mentioned in the show cause

notice, the same cannot be made basis for imposing

penalty. In any event, the trip sheet is drawn by the

transporter, and not by the assessee, and failure on

the part of the transporter in this regard cannot visit

the assessee with the consequence of imposition of

penalty. Considering the fact that this was a first

such instance, as also the fact that the revisionist had

produced the declaration from in Form 16 without any

delay along with its reply to the show cause notice, in

our view, the revisionist had rebutted the statutory

presumption raised by Section 65 of the Act.

23) We, therefore, set aside the impugned

judgment passed by the Commercial Tax Tribunal,

Uttarakhand, Dehradun Bench, Dehradun, in Second

Appeal No. 11 / 2011, for the Assessment Year 2008-

09, under Section 58(XIX) dated 27.07.2013, as it is

founded upon patently erroneous findings of fact. We

further hold that the revisionist is not liable to be

subjected to any penalty.

24) In the aforesaid factual background,

revision petition stands allowed, in the aforesaid

terms.

________________ VIPIN SANGHI, C.J.

___________ S.K. MISHRA, J.

Dt: 1st JULY, 2022 Negi