2007 (3) TMI 678 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of the penalty imposed under the M.P. Commercial Tax Act, 1994.
2. Applicability of Section 45A and Section 45D of the M.P. Commercial Tax Act, 1994.
3. Procedural fairness in the imposition of the penalty.

Comprehensive, Issue-wise Detailed Analysis:

1. Legality of the Penalty Imposed:
The petitioner, a registered company dealing in leasing equipment and machinery, challenged the penalty imposed by the Check-post Officer for alleged evasion of tax. The trucks carrying JCB backhoe loaders were checked at the border check-post in Madhya Pradesh, and the documents were found to be not in order. The Check-post Officer issued a show cause notice under the M.P. Commercial Tax Act, 1994, and subsequently imposed a penalty. The petitioner contended that the machines were being sent on a rental basis and not for sale, arguing that there was no tax evasion. However, the Check-post Officer and the Commissioner dismissed these contentions, leading to the petitioner challenging the orders.

2. Applicability of Section 45A and Section 45D:
The petitioner argued that Section 45A of the Act, which deals with the establishment of check-posts to prevent tax evasion, was not applicable as JCBs were not notified goods under this section. The court examined Section 45A(1), (4), and (7) and found that the provision applies only to notified goods, which JCBs were not. However, the respondents relied on Section 45D, which grants power to check goods in transit. Section 45D(2) requires transporters to carry an invoice, bill, or challan, and Section 45D(4) allows the officer to direct the transporter to take the vehicle to the nearest check-post if the documents are not in order. The court concluded that the satisfaction derived under Section 45D(4) is sufficient for taking action, and reference to Section 45A is only for its machinery provision, not the substantive requirements.

3. Procedural Fairness in the Imposition of the Penalty:
The court noted that the petitioner had declared the transaction as a stock transfer, but no evidence was provided to show that the appellant had a branch at the destination. The stand was later shifted to claim that the goods were being sent on lease. The Government Advocate pointed out inconsistencies in the petitioner's statements and the inability to trace the consignee. The court upheld the dismissal of the writ petitions by the single judge, finding no interference warranted. However, the court agreed with the petitioner's contention that the maximum penalty was imposed without providing proper reasons. The Commissioner of Commercial Tax had not explained why the maximum penalty was applicable. Therefore, the court directed the revisional authority to reconsider the quantum of penalty after giving an opportunity to the appellant.

Conclusion:
The appeals were dismissed on all grounds except for the quantum of the penalty. The revisional authority was directed to provide an opportunity to the appellant to address the quantum of penalty, and coercive steps to recover the amount were put on hold until the decision.