2007 (11) TMI 587 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of the seizure of goods.
2. Imposition of penalty under section 77 of the VAT Act, 2003.
3. Compliance with section 81 of the VAT Act, 2003.
4. Consideration of mens rea in imposition of penalty.

Issue-wise Detailed Analysis:

1. Legality of the Seizure of Goods:
The applicant-company, Vinar Systems (P) Limited, challenged the order dated May 30, 2006, by the Sales Tax Officer, Kharagpur Range, regarding the seizure of various goods. The goods, including library racks and slotted angles, were dispatched to the company's branch office in Hyderabad. Despite the driver producing all relevant documents (excise invoice, challans, consignment bill), the vehicle was detained, and the consignment was seized. The Tribunal found that the excise invoices clearly indicated the goods were being transported to Hyderabad, with no discrepancies in the valuation or details of the goods. Therefore, the seizure was deemed improperly made.

2. Imposition of Penalty under Section 77 of the VAT Act, 2003:
The applicant also contested the penalty of Rs. 88,217 imposed on May 30, 2006, under section 77(1)(a) of the VAT Act, 2003. The Assistant Commissioner and Deputy Commissioner of Sales Tax confirmed the penalty, citing non-production of consignment bills as a violation of section 81 of the VAT Act. However, the Tribunal observed that the authorities did not discuss the reasons for imposing the penalty and proceeded on a predetermined view. The Tribunal held that the non-production of documents did not create a possibility of tax evasion, thus invalidating the penalty.

3. Compliance with Section 81 of the VAT Act, 2003:
The applicant argued that there was no violation of section 81, as all relevant documents were produced. Section 81 requires a transporter to carry documents, including two copies of the forwarding note, delivery challan, or similar documents. The Tribunal noted that while the forwarding note was not produced, all other documents were in order, indicating the goods' ownership and destination. The Tribunal concluded that the non-production of the forwarding note did not justify the seizure and penalty, as there was no intention to evade tax.

4. Consideration of Mens Rea in Imposition of Penalty:
The State Representative argued that mens rea (intention to evade tax) was irrelevant, citing the Supreme Court's decision in R.S. Joshi, Sales Tax Officer, Gujarat v. Ajit Mills Limited, which held that mens rea is not essential for economic crimes and departmental penalties. The Tribunal, however, emphasized that while mens rea might not be necessary, the non-production of documents must create a possibility of tax evasion to justify a penalty. The Tribunal referred to its decision in Cal-Cox Syndicate Pvt. Ltd. v. A.C.C.T., Kharagpur Range, emphasizing that mere technical infringements without the possibility of tax evasion should not lead to penalties.

Conclusion:
The Tribunal set aside the orders of the Sales Tax Officer, Assistant Commissioner, and Deputy Commissioner of Sales Tax, Kharagpur Range, regarding the seizure and penalty. It directed that the penalty amount realized from the applicant be refunded within three months. The petition was disposed of with no order as to costs.