2006 (8) TMI 574 - HC - VAT and Sales Tax

Summary

Issues:
Penalty restoration by Tribunal, transportation of liquor without invoice, evasion of tax, legitimacy of liquor source, benefit of doubt.

Penalty Restoration by Tribunal:
The High Court heard arguments from the Senior Counsel for the revision petitioner and the Special Government Pleader for the respondent regarding the penalty restoration by the Tribunal. The order under challenge pertained to the penalty being restored by the Tribunal after overturning the decision of the first appellate authority that had canceled the penalty. The consignment in question involved 23 cases of liquor transported in a jeep without being accompanied by an invoice.

Transportation of Liquor Without Invoice:
The petitioner argued that the consignment was part of a purchase of liquor above Rs. 5 lakhs from the branch office of the Beverages Corporation, Thodupuzha, and that the common invoice copy was accompanying the lorry which carried the bulk of the purchases. However, the liquor found in the jeep, although bearing labels of Beverages Corporation, was not accompanied by an invoice. The petitioner contended that since no excise proceedings for seizure or confiscation were initiated, there was no case that the liquor was illicit.

Evasion of Tax:
While agreeing with the Tribunal's finding that there was a likelihood of tax evasion, the High Court noted that the maximum penalty levied and sustained by the Tribunal might not be justified. The petitioner was deemed to be entitled to the benefit of doubt since the officer did not assert that the liquor was illicit and released it upon furnishing security. The fact that the only legitimate source of liquor in the state was a Government Corporation and that the petitioner had produced an invoice played a significant role in the Court's decision.

Legitimacy of Liquor Source:
Given that the legitimate source of liquor in the State was a Government Corporation and the petitioner had produced an invoice, the High Court decided to reduce the penalty to an amount equal to the tax, as opposed to twice the tax amount sustained by the Tribunal. This reduction was granted on the grounds of giving the benefit of doubt to the petitioner.

Benefit of Doubt:
Ultimately, the High Court allowed the sales tax revision by modifying the Tribunal's order, reducing the penalty based on the benefit of doubt in favor of the petitioner.