2007 (12) TMI 433 - HC - VAT and Sales Tax

Penalty under section 14B of the Punjab General Sales Tax Act, 1948 - Whether there is mens rea on the part of the appellant in the present case so as to attract penalty under section 14B of the PGST Act? Held That - Tribunal while deciding the appeal observed that the dealer had admitted the factual position regarding supply of material to the Panchkula Society directly by change of documents by ISSCO, Chandigarh who was the main supplier and that the dealer was working on its behalf as a supply contract as well as transporter. The only plea raised by the appellant was that this transaction was first of its kind and it was not aware of the legal position regarding charging of eight per cent inter-State tax and it was under those circumstances that only two per cent tax has been charged and had prayed for taking a lenient view and for reduction of the penalty to the minimum. A perusal of the aforesaid observations shows that the dealer had admitted regarding the commission of the offence but had only prayed for reduction in the quantum of penalty. Once it is established that the dealer was guilty of suppression of sales by charging less tax, it was the discretion of the Assessing Officer to have reduced the quantum of penalty. Since the goods were meant for trade, the amount of penalty cannot be said to be excessive in any manner. In the facts and circumstances, no question of law much less a substantial question of law would arise from the impugned order as claimed by the appellant. Appeal dismissed.

Issues Involved:
1. Imposability of penalty under section 14B of the Punjab General Sales Tax Act, 1948.
2. Presence of mens rea to attract penalty under section 14B of the PGST Act.
3. Applicability of penalty under section 14B despite the transaction attracting a higher tax rate.
4. Perverse nature of the order passed by the Sales Tax Tribunal.
5. Adherence to principles of natural justice by the Tribunal.
6. Tribunal's justification in not addressing all contentions raised by the appellant.

Issue-wise Detailed Analysis:

1. Imposability of Penalty under Section 14B of the PGST Act:
The appellant challenged the penalty imposed under section 14B of the Punjab General Sales Tax Act, 1948. The Tribunal observed that the dealer admitted to the factual position regarding the supply of material and the change of documents by ISSCO, Chandigarh. The dealer's primary plea was for leniency and reduction of the penalty, which indicates an admission of the offense. Therefore, the penalty under section 14B was deemed imposable.

2. Presence of Mens Rea:
The appellant argued that there was no mens rea (guilty mind) to attract the penalty under section 14B. However, the Tribunal's findings showed that the dealer admitted to charging only two percent tax instead of the required eight percent, under the pretext of being unaware of the legal position. This admission of undercharging tax implied mens rea, justifying the penalty.

3. Applicability of Penalty Despite Higher Tax Rate:
The appellant contended that the transaction attracted a higher tax rate of ten percent, which should negate the penalty. The Tribunal found that the dealer was guilty of suppressing sales by charging less tax. Therefore, the penalty was applicable irrespective of the higher tax rate contention.

4. Perverse Nature of Tribunal's Order:
The appellant claimed that the Tribunal's order was perverse and against the facts. However, the Tribunal's decision was based on the dealer's admission and the evidence on record. The High Court found no perversity in the Tribunal's order as it was based on factual admissions and legal provisions.

5. Adherence to Principles of Natural Justice:
The appellant argued that the Tribunal's order did not adhere to the principles of natural justice. The High Court noted that the Tribunal had considered the appellant's plea for leniency and reduction of penalty, indicating that the principles of natural justice were followed. Therefore, this contention was rejected.

6. Tribunal's Justification in Not Addressing All Contentions:
The appellant contended that the Tribunal did not address all the contentions raised during the hearing. The High Court observed that the Tribunal had considered the main plea regarding the penalty's reduction and found the dealer guilty of tax suppression. Thus, the Tribunal's decision to not address every contention was justified given the admission of guilt and the focus on the penalty's quantum.

Preliminary Objection on Maintainability:
The State counsel raised a preliminary objection regarding the maintainability of the appeal under the Punjab Value Added Tax Act, 2005, arguing that the case related to the 1948 Act. The High Court rejected this objection, stating that section 68 of the 2005 Act allows appeals to the High Court on substantial questions of law from orders passed by the Tribunal. The provisions of section 92 of the 2005 Act, which repealed the 1948 Act, did not affect the right to appeal under the new Act.

Conclusion:
The High Court dismissed the appeal, finding no substantial question of law arising from the Tribunal's order. The penalty imposed under section 14B was upheld based on the dealer's admission of undercharging tax and the legal provisions applicable. The Tribunal's adherence to natural justice and the rejection of the preliminary objection on maintainability were also affirmed.

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