2010 (9) TMI 976 - HC - VAT and Sales Tax

Whether a dealer, within the meaning of section 2(8) of the Tripura Value Added Tax Act, 2004 can be made liable to pay penalty for evasion of tax if the dealer has, within the financial year, paid all taxable dues within due time, but has committed error, while submitting return with regard to the taxable liability and did not file, thereafter, revised return within the prescribed period and if so, when such a penalty can be imposed on the dealer? Held that - In the present case, when the admitted position is that the books of account were correctly maintained and all the tax, payable by dealer, in the present case, had been paid by the dealer, the mere fact that there were incorrect entries in the return filed by the dealer and that the revised return had not been filed within the prescribed period, no inference could have been drawn, in the complete absence of any other material, that the dealer had evaded taxable liability, particularly, when tax, which fell due, was paid by 12 monthly returns. Mere failure to submit correct return or correct revised return, within the prescribed period, cannot be equated with evasion of tax attracting penal provisions of section 75A, especially, when the dealer had, admittedly, paid his taxable liability within the due period and the State had not suffered any loss of Revenue. Because of what have been discussed and pointed out above, this court is of the considered view that the imposition of penalty, in the present case, suffers from complete non-application of mind. The tax imposed and the demand made are ex facie illegal and cannot be sustained. Appeal allowed.

Summary

Issues Involved
1. Liability of a dealer under the Tripura Value Added Tax Act, 2004 (TVAT Act, 2004) for penalty due to errors in submitted returns.
2. Imposition of penalty under Section 75A of the TVAT Act, 2004.
3. Requirement of filing revised returns and consequences of failure to do so under Section 25(4)(c) of the TVAT Act, 2004.

Detailed Analysis

1. Liability of a Dealer for Penalty Due to Errors in Submitted Returns
The primary issue is whether a dealer can be penalized for errors in the submitted returns when all taxable dues have been paid within the financial year. The petitioners, wholesalers of various products, were scrutinized for anomalies in their returns for the financial year 2008-09. The discrepancy noted was between the total purchases reported in the returns and the actual purchases recorded in the books of account. Despite the petitioners' explanation that the errors were unintentional and due to a mistake, the respondent concluded that the dealer had deliberately reflected less purchases to evade tax, thus attracting penal provisions under Section 75A of the TVAT Act.

2. Imposition of Penalty under Section 75A of the TVAT Act, 2004
Section 75A allows for the imposition of a penalty if the Commissioner is satisfied that a dealer has evaded tax. The court emphasized that mere failure to pay tax cannot be penalized under this section; there must be evidence of deliberate evasion. In this case, the court found that the books of account correctly reflected the sales and purchases, and the taxable liability was accurately recorded. The errors in the returns did not result in any revenue loss to the State as the tax was paid at the correct rates. The court concluded that the imposition of penalty under Section 75A was unjustified as there was no deliberate evasion of tax.

3. Requirement of Filing Revised Returns and Consequences of Failure to Do So
The court examined the requirement under Section 25(4)(c) for filing revised returns within the prescribed period. The respondents had not issued any notice to the dealer to show cause for failing to file revised returns. Without such notice and an opportunity for the dealer to explain, the imposition of penalty for not filing revised returns was deemed improper. The court highlighted that penalties for failure to perform a statutory obligation should consider all relevant factors, and in this case, the dealer had paid all due taxes, and the State did not suffer any revenue loss.

Conclusion
The court found that the imposition of penalty on the dealer was based on a misapplication of the law and lacked consideration of the relevant facts. The assessment order, demand notice, and appellate order were set aside and quashed. The court concluded that mere errors in the returns, without any evidence of deliberate evasion or revenue loss, do not justify the imposition of penalties under the TVAT Act.