2008 (8) TMI 814 - HC - VAT and Sales Tax

Whether order of learned Tribunal upholding the levy of penalty under section 56 of the Punjab VAT Act 2005 is sustainable in the eyes of law when the assessee has not actually availed of the said benefit no demand is due from assessee on that account and there can be no mens rea in the circumstances of the case? Held that - There was no element of deliberateness in claiming of the aforementioned credit of 55, 368. Consequently the question of law which arises in this case is decided in favour of the appellant. The appeal is therefore allowed and the orders dated July 4 2006 September 25 2006 and January 29 2007 are set aside. In the result the penalty imposed under section 56 of the Punjab VAT Act and the additional demand are set aside.

Summary

Issues:
1. Levy of penalty under section 56 of the Punjab VAT Act, 2005.
2. Sustainability of the penalty in the absence of actual benefit availed by the assessee.
3. Mens rea in the circumstances of the case.

Analysis:
The judgment of the court, delivered by AJAY TEWARI J., addressed the issue of the levy of penalty under section 56 of the Punjab VAT Act, 2005. The case involved an appellant who was penalized for allegedly availing wrong input-tax credit. The appellant, a registered dealer under the Punjab VAT Act and the Punjab General Sales Tax Act, was entitled to claim input-tax credit on stock held on April 1, 2005, under section 14 of the Punjab VAT Act. The appellant had claimed credit amounts in instalments but faced penalties for claiming a specific credit in one instalment. The appellant argued that the claim was a mistake, causing no loss to the revenue as the overall tax credit exceeded the tax payable, and there was no intention to claim excess credit.

The court referred to the Hindustan Steel Ltd. v. State of Orissa case, emphasizing that penalties should not be imposed for technical or venial breaches when there is a bona fide belief that the offender is not liable to act as prescribed by the statute. Similarly, the court cited the Cement Marketing Co. of India Ltd. v. Assistant Commissioner of Sales Tax case, highlighting that penalties require a guilty mind, and a return cannot be considered false without deliberateness. Applying these principles, the court found no element of deliberateness in the appellant's actions and ruled in favor of the appellant.

Ultimately, the court allowed the appeal, setting aside the penalty imposed under section 56 of the Punjab VAT Act and the additional demand. The orders of penalty imposition were overturned, concluding that the appellant's actions did not warrant the penalties imposed.