2008 (9) TMI 887 - HC - VAT and Sales Tax

Penalty imposed under section 29A of the KGST - Whether the transaction in question is inter-State transaction and hence section 29A of the KGST Act will not be attracted? Held that - The owner or person-in-charge of the goods vehicle had not produced the prescribed documents before the Check-post Officer and if not for the Check-post Officer detaining the goods vehicles there was every possibility of the Revenue losing the tax due to the State. The Sales Tax Officer (Enquiry) has not just levied the penalty under section 29A(4) of the Act merely on the ground that the goods was not accompanied by proper documents but also there was an attempt to evade tax due under the Act by the owner of the goods. Revision dismissed.

Issues Involved:
1. Confirmation of penalty imposed for the transaction not being a sale transaction and lack of mens rea.
2. Tax liability being on the seller and not the purchaser.
3. Applicability of section 29A of the KGST Act to inter-State transactions.
4. Imposition of maximum penalty in light of precedents.

Detailed Analysis:

Issue 1: Confirmation of Penalty and Mens Rea
The petitioner argued that the transaction in question was not a sale and lacked mens rea to attract a penalty. The court analyzed the nature of the transaction, noting that certain quantities of steel plates imported by CSL from Hyundai Corporation, Korea, were found defective and subsequently handed over to USC upon payment of customs duty and interest. The court concluded that the transaction was effectively a sale between Hyundai Corporation and USC, facilitated by CSL. The Tribunal and Sales Tax Officer (Enquiry) correctly observed that the documents tendered at the check-post were defective, justifying the penalty under section 29A(4) of the KGST Act.

Issue 2: Tax Liability on Seller vs. Purchaser
The petitioner contended that tax liability should be on Hyundai Corporation, not USC. The court noted that CSL acted merely as a bailee, and Hyundai Corporation, as the non-resident dealer, should have issued the necessary sale invoice and other declarations. The court found that the transaction was defective from the beginning, and the Check-post Officer was justified in detaining the goods and imposing a penalty due to the absence of valid documents and an attempt to evade tax.

Issue 3: Applicability of Section 29A to Inter-State Transactions
The petitioner argued that section 29A of the KGST Act should not apply as the transaction was inter-State. The court disagreed, noting that the goods were transported without the necessary documents, including the permit required under section 30E. The court emphasized that the Check-post Officer's actions prevented potential tax evasion, and the statutory requirements were not met, justifying the penalty.

Issue 4: Imposition of Maximum Penalty
The petitioner cited precedents to argue against the imposition of the maximum penalty. The court acknowledged the precedents but found that the Sales Tax Officer (Enquiry) did not levy the penalty merely due to improper documentation but also due to an evident attempt to evade tax. The court upheld the penalty, noting that the authorities had correctly identified the nature of the transaction and the deficiencies in the documents.

Conclusion:
The court rejected the revision petitions, affirming that the authorities correctly imposed the penalty under section 29A(4) of the KGST Act due to defective documentation and an attempt to evade tax. The court emphasized the importance of adhering to statutory requirements and the role of the Check-post Officer in preventing tax evasion. The precedents cited by the petitioner were acknowledged but did not alter the court's decision, as the facts of the case justified the penalty.

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