1989 (8) TMI 317 - HC - VAT and Sales Tax

Summary

Issues:
- Interpretation of section 7(1) and 7(5) of the Entry Tax Act
- Requirement of recording statement in bills under rule 7 of the Rules
- Imposition of penalty for failure to comply with statutory provisions

Analysis:
The High Court of Madhya Pradesh was presented with a reference under the M.P. General Sales Tax Act and the Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam. The central question was whether the Tribunal was correct in penalizing an assessee for not affixing seals on duplicate bills, as required by section 7(1) of the Entry Tax Act. The assessing authority imposed a penalty on the assessee for failing to issue bills containing the necessary statement as per rule 7 of the Rules. The appellate authorities upheld the penalty, leading to the reference before the High Court.

The counsel for the assessee argued that the penalty was unjust as the necessary grounds for imposing it were not established. The department, on the other hand, contended that the failure to maintain the counterfoil or duplicate of bills, as per rule 7, warranted the penalty. However, the Court observed that the penalty was imposed under section 7(5) of the Entry Tax Act, not for contravention of rule 7. With the agreement of both parties, the Court reframed the question to focus on whether the assessee violated section 7(1) of the Adhiniyam, leading to the penalty under section 7(5).

The Court delved into the statutory provisions, highlighting that section 7(1) mandates the inclusion of a statement in bills, and section 7(5) penalizes the failure to do so. Rule 7 specifies the manner of issuing bills for local goods, emphasizing the recording of a specific statement. The Court emphasized that for a penalty under section 7(5) to be justified, it must be proven that the statement was not recorded in the bills issued. In this case, the penalty was not imposed for contravening any rule but for the failure to record the required statement in bills for local goods.

Ultimately, the Court concluded that the penalty imposed on the assessee was unwarranted as there was no evidence of the failure to record the necessary statement in the bills. The Court ruled in favor of the assessee, holding that the Board was not justified in finding a violation of section 7(1) and imposing a penalty under section 7(5) of the Entry Tax Act. The reference was answered in favor of the assessee, and each party was directed to bear their own costs in the matter.