2007 (11) TMI 566 - AT - VAT and Sales Tax

Issues Involved:
1. Imposition of penalty for non-compliance with procedural requirements under the West Bengal Sales Tax Act, 1994 and the West Bengal Sales Tax Rules, 1995.
2. Determination of whether the goods were actually taken out of West Bengal.
3. Consideration of mens rea (intention or ill-motive) in the imposition of penalty.
4. Judicial discretion in the imposition of penalties.

Issue-wise Detailed Analysis:

1. Imposition of Penalty for Non-compliance with Procedural Requirements:
The petitioner, a customs authorized clearing and forwarding agent, failed to produce the transit declaration at the Chichira check-post as required under the West Bengal Sales Tax Act, 1994 and the West Bengal Sales Tax Rules, 1995. The Assistant Commissioner imposed a penalty of Rs. 5,75,000 for this non-compliance, later reduced to Rs. 2.5 lakhs by the Deputy Commissioner. The Tribunal noted that both authorities imposed the penalty based solely on procedural non-compliance without investigating whether there was an actual attempt to evade tax.

2. Determination of Whether the Goods Were Actually Taken Out of West Bengal:
The petitioner provided evidence, including an endorsed way-bill at the Jamsala check-post in Orissa and certificates from the Superintendent, Central Excise, Customs and Service Tax, Balasore, and a Chartered Accountant, confirming that the goods were received at Birla Tyres' factory in Balasore. The Tribunal found that the goods were indeed transported out of West Bengal and received in Orissa, negating the possibility of tax evasion within West Bengal.

3. Consideration of Mens Rea in the Imposition of Penalty:
The Tribunal acknowledged that penalty under the Sales Tax Act is a civil liability and does not necessarily require proof of intention or mens rea, referencing the Supreme Court's decisions in R.S. Joshi v. Ajit Mills Limited and Guljag Industries v. Commercial Taxes Officer. However, it emphasized that mere procedural infringement without any impact on revenue should not automatically result in a penalty. The Tribunal stressed that the purpose of the procedural requirements is to prevent tax evasion, and penalties should be imposed judiciously, considering the context and consequences of the infringement.

4. Judicial Discretion in the Imposition of Penalties:
The Tribunal highlighted that the imposition of penalties should be a discretionary exercise, considering all relevant circumstances. It cited the Supreme Court's decision in Hindustan Steel Ltd. v. State of Orissa, which stated that penalties should not be imposed for technical or venial breaches or when the breach results from a bona fide belief. The Tribunal found that while the petitioner was negligent in not informing the authorities about the exit of the goods, there was no possibility of tax evasion. Therefore, it set aside the penalty but imposed a sum of Rs. 30,000 as a measure of deterrence for the petitioner's negligence.

Conclusion:
The Tribunal concluded that while the procedural non-compliance by the petitioner warranted scrutiny, the actual transportation of goods out of West Bengal and their receipt in Orissa negated any possibility of tax evasion. The imposition of a heavy penalty was deemed unjustified, and the Tribunal exercised its discretion to set aside the penalty, subject to a deterrent payment of Rs. 30,000 by the petitioner. The application was disposed of with no order as to costs.

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