2009 (12) TMI 878 - HC - VAT and Sales Tax

Penalty leviable in terms of section 53(12)(a)(i) on account of the failure to stop the goods vehicle and to produce the documents, and then to proceed after verification of the same. Held that - The mere fact that the vehicle did not stop at the check-post which has been established in the instant case is sufficient to hold that there is violation of section 53(2)(c) of the Act. Therefore, the appellant cannot escape from the levy of penalty in terms of section 53(12) read with rule 159(4). Therefore, the explanation given by the appellant that on account of there being a long queue of vehicles, the goods vehicle in question could not be stopped or that there was mistake on the part of the driver in not stopping the vehicle cannot be accepted. Considering the fact that in the instant case, the goods in question PVC pipes and as per the tax invoice four per cent has been shown to be the rate of taxation, we are of the view that the authorities concerned could not have levied 12.5 per cent of the value of the goods by way of penalty. Appeal is allowed in part

Summary

Issues:
Violation of section 53(2)(c) of the KVAT Act, 2003 regarding failure to stop the vehicle at the check-post and produce documents for verification. Imposition of penalty under section 53(12) by the Additional Commissioner of Commercial Taxes.

Analysis:
The case involved a dealer challenging a penalty imposed for failure to stop a goods vehicle at a check-post as per section 53(2)(c) of the KVAT Act, 2003. The vehicle was intercepted while transporting industrial cables, and the driver did not stop at the check-post for document verification. The appellate authority initially allowed the appeal, noting that there was no intention to evade tax as the goods were accompanied by valid invoices. However, the Additional Commissioner issued a show-cause notice, justifying the penalty under section 53(12) due to the driver's failure to stop the vehicle. The revisional authority upheld the penalty, leading to the current appeal.

The appellant argued that the penalty was unjustified as there was no intention to evade tax, and the consignment was for industrial cables with a tax rate of four percent. The government advocate contended that the penalty was valid for the violation of section 53(2)(c) and the goods carried were subject to a 12.5 percent tax rate. The court analyzed the provisions of section 53 of the Act, emphasizing the mandatory duty of the driver to stop at check-posts and submit required documents.

The court referenced relevant rules, highlighting the obligation to stop the vehicle for document inspection. Despite the appellant's explanations, the court found the violation of section 53(2)(c) established as the vehicle did not stop at the check-post, justifying the penalty under section 53(12). The court dismissed the appellant's reliance on previous decisions regarding penalties for technical breaches, as the circumstances of this case differed.

Regarding the tax rate discrepancy, the court determined that the penalty should be based on a four percent tax rate for the goods in question, not the 12.5 percent imposed by the authorities. Consequently, the appeal was partially allowed, confirming the penalty but adjusting the rate to four percent of the goods' value instead of 12.5 percent as initially levied.

In conclusion, the court upheld the penalty under section 53(12) for the violation of section 53(2)(c) but modified the rate to align with the correct tax rate applicable to the goods, emphasizing the importance of complying with statutory obligations under the KVAT Act.