2011 (7) TMI 1080 - HC - VAT and Sales Tax

Penalty imposed by the assessing authority under section 77(8) of the Rajasthan Sales Tax Act, 1994 Held that - Whether this penalty ought to be applied in the category sales tax paid goods or not does not find discussion in the order of the assessing authority. After finding the alleged difference between the stock calculated as per sale value minus G. P. rate and stock reflected in the regular books of accounts maintained by the assessee, the assessing authority straightway computed the five times of the tax rate as penalty under section 77(8) and this aspect of the matter as to whether the goods being tax paid or taxable has escaped the attention of the assessing authority altogether. Unfortunately, learned Tax Board also has not addressed itself to this aspect of the matter. Thus the imposition of penalty on the petitioner-assessee is found to be unjust and illegal. Consequently, this revision petition is allowed arid the impugned order of penalty passed by the learned authorities below including that of learned Tax Board dated December 31, 2007 is set aside.

Summary

Issues:
Challenge to penalty imposed under section 77(8) of the Rajasthan Sales Tax Act, 1994 based on excess stock discrepancy in sales tax paid goods.

Analysis:
The petitioner-assessee contested the penalty of Rs. 88,669 imposed by the assessing authority under section 77(8) of the Act due to a discrepancy in stock found during assessment. The petitioner argued that the penalty was unjust as the excess stock was in the category of sales tax paid goods, where no further tax liability was applicable. The petitioner's counsel emphasized that the penalty provision should not apply in this scenario, where no additional tax was leviable on the goods. The petitioner's position was supported by the fact that the assessing authority did not consider the nature of the goods in determining the penalty, leading to an erroneous imposition upheld by the Tax Board.

The Revenue, represented by counsel Ankur Mathur, defended the penalty under section 77(8) based on the possession of goods not accounted for, irrespective of the category of goods. It was argued that the penalty was justified as excess stock was identified using a recognized method of deduction from the sale value, indicating a discrepancy in stock maintenance. The Revenue contended that the penalty was correctly imposed by the assessing authority and should be upheld.

The court analyzed the purpose of section 77(8) of the Act, focusing on preventing tax evasion by checking discrepancies in stock levels compared to the records. The court agreed with the petitioner that the penalty should not apply to sales tax paid goods, where no further tax liability existed. The court emphasized that the penalty provision should be triggered only when there is unaccounted stock that could lead to additional tax liability. The court highlighted the importance of physical verification for precise stock determination, cautioning against relying solely on deductions from sale values.

Ultimately, the court found the imposition of the penalty on the petitioner unjust and illegal. The court allowed the revision petition, setting aside the penalty order and directing the refund of any deposited amount with interest. The court criticized the assessing authority and the Tax Board for overlooking the crucial aspect of whether the penalty should be applied to sales tax paid goods. The judgment emphasized the need for meticulous consideration of relevant factors before imposing penalties under tax laws.