2008 (2) TMI 841 - HC - VAT and Sales Tax

Whether, in the facts and circumstances of the case, an order of penalty under section 51 of the Punjab Value Added Tax Act, 2005 could be passed when it is an admitted position that no tax was leviable on import of rice from outside the State? Whether, in the facts and circumstances of the case, when documents, on scrutiny, have been found proper and genuine, an order of penalty under section 51 of the Punjab Value Added Tax Act, 2005, could be passed? Whether any order of penalty can be passed on the presumption that there was an attempt to evade tax? Held that - In view of the stated facts and the finding of fact given by the Tribunal that the assessee-appellant has attempted to evade the tax by manipulating and by pre-planning a scheme or device to evade the tax and thereafter setting in motion the said scheme (feeding of information at ICC, Banur after the vehicles were detained at ICC, Balongi) and thus, attempted to evade the tax under the Act. In view of the above, no substantial question of law arises for the determination by this court in the present appeal and thus, the same is dismissed.

Summary

Issues Involved:
1. Challenge to penalty order under section 51 of Punjab Value Added Tax Act, 2005.
2. Validity of penalty order when documents are found genuine.
3. Imposition of penalty based on presumption of tax evasion.

Issue 1: Challenge to Penalty Order under Section 51 of Punjab Value Added Tax Act, 2005
The appeal was filed challenging the penalty order passed by the VAT Tribunal under section 51 of the Punjab VAT Act, 2005. The case arose when two trucks loaded with rice were intercepted under suspicious circumstances during a tax checking operation. The drivers failed to produce necessary documents, leading to the detention of the goods. The owner later produced documents claiming no tax evasion had occurred. However, a penalty was imposed under section 51(7)(c) by the Assistant Excise and Taxation Commissioner, which was upheld by subsequent authorities, including the Tribunal. The appellant argued that no attempt to evade tax was made, as goods were declared at another checkpoint. The court rejected this argument, emphasizing that the owner's actions indicated a pre-planned scheme to evade tax, as evidenced by the sequence of events and lack of satisfactory explanations.

Issue 2: Validity of Penalty Order When Documents Are Found Genuine
The appellant contended that since the documents produced were genuine, no penalty should have been imposed. However, the court upheld the penalty order, citing the owner's failure to provide satisfactory explanations and the lack of evidence proving the genuineness of the transaction. The court highlighted that the appellant did not challenge the report of the Detaining Officer, which formed the basis for imposing the penalty. The sequence of events, including the timing of document production and the owner's actions, indicated a deliberate attempt to evade tax, leading to the affirmation of the penalty.

Issue 3: Imposition of Penalty Based on Presumption of Tax Evasion
The Tribunal dismissed the appeal, concluding that the appellant intentionally avoided reporting at a checkpoint to evade tax, later entering the consignments into the system at another location. The court agreed with this finding, stating that the appellant's actions demonstrated a deliberate scheme to evade tax. The court emphasized that no substantial question of law arose for determination, as the facts clearly indicated an attempt to evade tax through manipulation and pre-planning. Consequently, the appeal was dismissed.

In summary, the court upheld the penalty order under section 51 of the Punjab VAT Act, 2005, based on the appellant's actions indicating a deliberate attempt to evade tax, despite the production of documents. The court found no merit in the appellant's arguments and dismissed the appeal, affirming the Tribunal's decision.