2007 (7) TMI 396 - SC - VAT and Sales Tax

Penalty under section 28AA - Held that - It would be in the fitness of the things to set aside the findings recorded by the High Court regarding the levy of penalty under section 28AA of the Act as well and remit the case back to the Check-post- Officer to whom the matter has been remitted back under section 28AA(4) for a fresh decision in accordance with law. The Check-post-Officer shall now decide regarding the levy of tax as well as the imposition of penalty under section 28AA(4) and section 28AA(5) in accordance with law without being influenced by any of the observations made by the High Court in the impugned judgment or by us in this order.

Summary

Issues:
1. Interpretation of section 28AA of the Karnataka Sales Tax Act, 1957 regarding transit of goods by road through the state and issuance of transit pass.
2. Validity of the penalty imposed under section 28AA(5) of the Act.
3. Applicability of the Explanation to section 28AA regarding the liability of the owner of the vehicle.
4. Maintainability of the appeal filed by the State before the Karnataka Appellate Tribunal.

Interpretation of section 28AA of the Karnataka Sales Tax Act, 1957:
The case involved the interpretation of section 28AA of the Act concerning the transit of goods by road through the state and the issuance of transit passes. The appellant, a transporter, had transported goods from Mangalore to Pondicherry/Chennai, passing through Karnataka. The dispute arose when the Check-post Officer suspected the genuineness of the movement of the goods vehicle out of Karnataka. The High Court concluded that the presumption under section 28AA(4) was rebuttable, requiring the appellant to be given an opportunity to rebut the presumption. The High Court set aside the findings regarding the levy of tax under section 28AA(4) and remitted the case back to the Check-post Officer for a fresh decision after affording the appellant an opportunity to rebut the presumption.

Validity of the penalty imposed under section 28AA(5) of the Act:
The appellant contested the penalty imposed under section 28AA(5), arguing that since the findings under section 28AA(4) had been set aside, the penalty could not be levied until the tax amount was determined. The respondent contended that the penalty was independent of section 28AA(4) and could be levied separately. The Court decided to set aside the findings regarding the penalty and remit the case back to the Check-post Officer for a fresh decision on both the tax and penalty under sections 28AA(4) and 28AA(5) without being influenced by previous observations.

Applicability of the Explanation to section 28AA regarding the liability of the owner of the vehicle:
The appellant argued that the penalty was wrongly levied on the owner of the vehicle instead of the hirer, as per the Explanation to section 28AA. The respondent contended that the penalty could be levied on the owner as well, citing a clarificatory amendment in the Explanation. The Court decided to remit the case back to the Check-post Officer to decide on the levy of tax and penalty, leaving all contentions open to be raised before the Officer.

Maintainability of the appeal filed by the State before the Karnataka Appellate Tribunal:
Initially, the appellant questioned the maintainability of the appeal filed by the State, as it was not filed by an authorized officer. The Tribunal overruled this objection, and the High Court later deemed the issue closed in favor of the State. The Court disposed of the appeal without costs, and related appeals were also disposed of accordingly based on the main judgment in Civil Appeal No. 3787 of 2006.