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2010 (4) TMI 998 - HC - VAT and Sales TaxWhether the penalty under section 14B(7) of the Act was exigible or not? Held that - In the absence of any cogent material and specific finding that the documents produced at ICC were fake and were not genuine and that there has been an attempt to avoid or evade the tax no penalty can legally be imposed on the assessee as contemplated under section 14B(7) of the Act. The contrary argument on behalf of the State stricto sensu deserves to be and are hereby repelled as the aforesaid judgments are the complete answer to the problem in hand. Thus it is held that on the facts and circumstances of the case penalty under section 14B(7) of the Act cannot be imposed and the Tribunal was not justified in upholding the same. In favour of assessee.
Issues Involved
1. Authority of check-post authorities to impose penalties under section 14B of the Punjab General Sales Tax Act, 1948. 2. Justification of the Tribunal in upholding the penalty under section 14B of the Act. Issue-Wise Detailed Analysis 1. Authority of Check-Post Authorities to Impose Penalties The primary issue was whether the check-post authorities are empowered to go into the nature of the transaction and impose a penalty under section 14B of the Punjab General Sales Tax Act, 1948, even though the assessing officer had not disputed the transaction as a branch transfer. The court noted that section 14B(1) of the Punjab Value Added Tax Act, 2005, deals with the establishment of check-posts and inspection of goods in transit. Under sub-section (6), the officer in charge is authorized to check documents and detain goods if necessary. Section 14B(7) outlines the procedure for imposing penalties, requiring the officer to record statements and prove the genuineness of the transaction within seventy-two hours of detention. The officer must conduct an enquiry and, if it is found that there has been an attempt to avoid or evade tax, a penalty can be imposed. The court emphasized that the penalty can only be imposed if the documents produced are fake or not genuine, and there is sufficient material and specific findings that an attempt to avoid or evade tax has been made. This process necessitates a thorough enquiry and an opportunity for the affected party to be heard. 2. Justification of the Tribunal in Upholding the Penalty The second issue was whether the Tribunal was justified in upholding the penalty under section 14B of the Act, given the circumstances of the case. The court observed that the drivers of the vehicles had produced all genuine documents depicting the description and value of the goods. It was not the Department's case that the documents were forged or not genuine. The penalty was imposed solely on the ground that the transaction was an inter-State sale, not a stock transfer. The court referred to several precedents, including the Full Bench decision in Mool Chand Chuni Lal's case, which held that the basis for penalty is an attempt to evade tax, not an assumption that goods were transported after sale within the State. The court also cited Hindustan Steel Ltd. v. State of Orissa, which ruled that penalty should not be imposed merely because it is lawful to do so; it must be imposed if the party acted in defiance of law or in conscious disregard of its obligations. The court concluded that there was no cogent material or specific finding that the documents were fake or that there was an attempt to avoid or evade tax. Therefore, the penalty under section 14B(7) of the Act was not justified, and the Tribunal erred in upholding it. Conclusion The court decided in favor of the assessee, holding that the penalty under section 14B(7) of the Act could not be imposed in the absence of any cogent material and specific finding of an attempt to avoid or evade tax. The Tribunal's decision to uphold the penalty was set aside. The Department was granted the liberty to decide the nature of the transaction (inter-State sale or stock transfer) and levy tax accordingly at the time of finalizing the return for the relevant assessment year. The appeal was accepted with no order as to costs.
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