2006 (7) TMI 625 - AT - VAT and Sales Tax

Issues Involved:
1. Authority to determine or detect under-invoicing prior to April 1, 2000.
2. Legality of seizure and penalty for under-invoicing.
3. Interpretation of Rule 212(9) and (10) of the West Bengal Sales Tax Rules, 1995.
4. Binding nature of the Bhabaneswar Singh judgment.
5. Determination of sale value and penalty amount.

Detailed Analysis:

1. Authority to determine or detect under-invoicing prior to April 1, 2000:
The petitioner argued that under Rule 212(9) of the West Bengal Sales Tax Rules, 1995, prior to April 1, 2000, commercial tax authorities lacked the power to determine or detect under-invoicing by inquiring into market value. The petitioner cited the Division Bench decision in Bhabaneswar Singh v. Commercial Tax Officer, which observed that there was no provision for seizure in the case of under-invoicing in the way-bill.

2. Legality of seizure and penalty for under-invoicing:
The Commercial Tax Officer, Central Section, found that the invoices and other sale documents were fabricated and that the disputed goods were grossly undervalued, leading to a penalty of Rs. 1,20,550. The petitioner challenged this penalty, arguing that there could be no seizure or penalty for under-invoicing before April 1, 2000.

3. Interpretation of Rule 212(9) and (10) of the West Bengal Sales Tax Rules, 1995:
The Tribunal dissected and analyzed Rule 212, particularly sub-rules (9) and (10), as they stood before the 2000 amendment. It was determined that these rules were designed as preventive measures to thwart tax evasion, including under-invoicing. The Tribunal held that the Commercial Tax Officer or Inspector had the authority to verify the correctness of the value mentioned in the way-bill with the actual value found in the consignment, which included making inquiries about the market value of the goods.

4. Binding nature of the Bhabaneswar Singh judgment:
The Tribunal noted that the Bhabaneswar Singh judgment was based on concession without any argument or discussion on the interpretation of the unamended rules. It was not considered a binding precedent as it lacked analysis or reasoning. The Tribunal emphasized that a judgment based on concession does not hold the same weight as a deliberate judicial decision.

5. Determination of sale value and penalty amount:
The Tribunal appreciated the detailed and well-reasoned order of the Commercial Tax Officer but found fault in the flat addition of 25% to the determined purchase value without market inquiry. The Tribunal noted that in some cases, 20% is added to the purchase value to arrive at the sale price. Consequently, the penalty was reduced from Rs. 1,20,530 to Rs. 90,000, considering the prevailing view at the time that no seizure could be made for under-invoicing.

Conclusion:
The Tribunal upheld the seizure of goods and the imposition of a penalty but reduced the penalty amount from Rs. 1,20,530 to Rs. 90,000. The petitioner was instructed to deposit the penalty amount by August 15, 2006, failing which the respondents could invoke and encash the bank guarantee. The application was disposed of with no order as to costs.

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