2010 (7) TMI 926 - HC - VAT and Sales Tax

Penalty of ₹ 80,000 imposed by the assessing authority in exercise of the power under section 13A(4) of the U.P. Trade Tax Act upheld by Tribunal Held that - The Tribunal has not recorded any finding of intention to evade tax on the part of the assessee in resorting to the order of penalty and has not even taken into consideration the impact of the subsequent issuance of the transit pass to the assessee which impliedly indicates that the officer-incharge was satisfied that the goods were coming from outside U.P. for being transported through U.P. to a destination outside U.P. In the above background of facts and circumstances, no presumption can legitimately be drawn that the goods were not actually coming from outside U.P. Thus, the penal provision of section 13A(4) of the Act does not get attracted. Thus the impugned order of the Tribunal dated August 2, 2006 is unsustainable and is hereby set aside and that of the Joint Commissioner (Appeal), Trade Tax, Ghaziabad dated February 15, 2006 is restored and affirmed.

Summary

Issues:
Penalty imposition under section 13A(4) of the U.P. Trade Tax Act for alleged evasion of trade tax based on fake consignor information and detention of goods despite valid transit pass issuance.

Analysis:
The case involved a transporter appealing against a penalty of Rs. 80,000 imposed by the assessing authority under section 13A(4) of the U.P. Trade Tax Act for the assessment year 2005-06. The dispute arose when the transporter was transporting suitcases allegedly from Delhi to Guwahati but faced detention of goods at a check-post due to suspicions regarding the consignor's authenticity. Despite producing valid documents and obtaining a transit pass, the penalty was imposed, which was initially set aside but later restored on appeal by the Department.

The key legal provision in question was section 28B of the Act, which deals with the transit of goods through the State of U.P. and the issuance of transit authorizations to prevent tax evasion. The section outlines conditions for presuming goods sold within the state, primarily focusing on the failure to obtain or deliver transit passes at check-posts. The provision does not explicitly link irregularities in documentation or consignor authenticity to penalty imposition.

The court emphasized that the issuance and submission of a valid transit pass by the transporter fulfilled the requirements of section 28B, indicating the lawful movement of goods through U.P. The judgment highlighted precedents emphasizing the importance of actual movement of goods and document compliance over consignor traceability. It was established that the seizure of goods at the entry check-post, without evidence of discrepancies or tax evasion, did not justify penalty imposition.

Furthermore, the court stressed that penalty imposition necessitates a clear intention to evade tax, which was not proven in this case. The Tribunal's failure to consider the subsequent issuance of the transit pass, indicating the goods' legitimate movement, was deemed a crucial oversight. Ultimately, the court set aside the Tribunal's order, restoring the Joint Commissioner's decision and absolving the transporter of the penalty, citing the lack of grounds for penalty imposition under section 13A(4) of the Act.

In conclusion, the judgment clarified the legal requirements for penalty imposition under the U.P. Trade Tax Act, emphasizing compliance with transit regulations and the absence of evidence indicating tax evasion. The decision underscored the significance of valid documentation and actual movement of goods in determining tax liability, ultimately ruling in favor of the transporter and overturning the penalty order.