2007 (10) TMI 567 - HC - VAT and Sales Tax

Violation of provisions of section 28B of the U.P. Trade Tax Act, 1948 - penalty imposed - Held that - The applicants failed to prove that the goods in respect of which the transit passes were obtained have gone outside the State of U.P. The admitted fact is that the transit passes obtained at the entry check-post have not been surrendered at the exit check-post. In view of the above, it is a clear case where an organised and planned method had been adopted by the applicant to evade the tax. The submission of learned counsel for the applicant that in form XXXIV there was a mention that the goods would be sent to Patna from Kanpur railway station is an afterthought. Nowhere this fact has been pleaded before the authorities below even in the grounds of appeals and in the circumstances this fact cannot be noticed for the first time in this court. The Tribunal has rightly upheld the penalty and no interference is called for by this court. Revision dismissed.

Summary

Issues:
Violation of section 28B of the U.P. Trade Tax Act, 1948 regarding surrender of transit passes at exit check-post; Allegations of organized tax evasion through dispatching goods via railway without surrendering transit passes; Reduction of penalty by Tribunal but challenge to penalty upheld.

Analysis:

1. Violation of Section 28B of the U.P. Trade Tax Act:
The case involved three parties who obtained transit passes at a check-post in U.P. for transporting goods to Bihar. The assessing authority initiated proceedings under section 15A(1)(q) as the transit passes were not surrendered at the exit check-post as required by section 28B of the Act. The applicants argued that the goods were dispatched via railway and necessary endorsements were taken to establish the movement of goods outside U.P. However, the Standing Counsel contended that the applicants had no legal option to dispatch goods via railway without surrendering the transit passes at the exit check-post.

2. Allegations of Organized Tax Evasion:
The Standing Counsel argued that the method adopted by the applicants to dispatch goods via railway without surrendering transit passes was an organized way to evade tax. It was pointed out that the booking clerk's endorsement on the transit passes had no legal value, and the party to whom the goods were allegedly dispatched had not shown the transactions as inter-State sales in their assessment. This raised doubts about the actual movement of goods outside U.P. and indicated a planned tax evasion scheme.

3. Reduction of Penalty by Tribunal:
The Tribunal allowed the appeals in part, acknowledging the violation of section 28B but reducing the penalty imposed. The applicants challenged the penalty orders before the High Court, arguing that the goods were dispatched to Bihar via railway and the necessary documentation supported their claim. However, the High Court upheld the penalty, emphasizing that the transit passes were not surrendered at the exit check-post, indicating a deliberate attempt to evade tax obligations.

In conclusion, the High Court dismissed all three revisions, affirming the penalty imposed for violating section 28B of the U.P. Trade Tax Act. The judgment highlighted the organized nature of the tax evasion scheme and rejected the arguments presented by the applicants regarding the dispatch of goods via railway. The decision underscored the importance of complying with legal requirements to prevent tax evasion practices.