2008 (4) TMI 692 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the seizure was improper.
2. Whether the imposition of penalty was improper.

Detailed Analysis:

Issue 1: Whether the seizure was improper
The petitioner challenged the legality of the seizure on the grounds that "reasons to believe" were not recorded before the seizure, and there was no contravention of section 73 of the West Bengal Value Added Tax Act, 2003 read with rule 107 of the West Bengal Value Added Tax Rules, 2005. The vehicles carrying taxable goods were intercepted, and the drivers failed to produce tax invoices, leading to the seizure of the goods.

The Tribunal examined the pre-seizure report and noted that the report was written in the past tense, indicating it was prepared after the seizure. The Tribunal agreed with the petitioner that the grounds for seizure were recorded post-seizure. However, the Tribunal observed that section 76(1) of the West Bengal Value Added Tax Act, 2003 does not mandate recording reasons for the seizure beforehand. The Tribunal referred to previous judgments, emphasizing that the "reasons to believe" must preexist before the seizure and should be recorded to allow the affected person to challenge the seizure.

In this case, the grounds of seizure were recorded under the "pre-seizure report," and copies were available to the petitioner. The Tribunal found no error in the seizing officer's refusal to accept unauthenticated fax copies of the tax invoices and upheld the legality of the seizure for non-compliance with rule 107 of the West Bengal Value Added Tax Rules, 2005.

Issue 2: Whether the imposition of penalty was improper
The petitioner argued that no reasons were provided for forming the opinion that the dealer had a mala fide intention, and without such intention, the imposition of penalty was not justified. The Tribunal reviewed various judgments, including those of the Calcutta High Court and the Supreme Court, which established that the formation of opinion must be based on materials on record and not arbitrary.

The Tribunal noted that for imposing a penalty under the taxing statute, it is necessary to establish the mala fide intention of the taxpayer or at least the scope and opportunity leading to evasion of tax. In this case, the driver produced the challan and declaration as required before the rule change on February 20, 2006. The Tribunal found that the dealer had no mala fide intention and no opportunity to evade tax, as the necessary particulars of the consignments were provided.

The Tribunal concluded that the imposition of the penalty was not justified and set aside the orders confirming the penalties. However, the Tribunal imposed a cost of Rs. 10,000 on the petitioner for carelessness regarding the rule requirements.

Conclusion:
- The seizure of the consignments was upheld as legal.
- The imposition of penalties was set aside due to the lack of mala fide intention and improper formation of opinion.
- The petitioner was ordered to pay a cost of Rs. 10,000 within sixty days, failing which the bonds furnished would stand forfeited.