2011 (3) TMI 1546 - HC - VAT and Sales Tax

Penalty under section 77(8) of the Act amounting to ₹ 32,900 on the petitioner-assessee levied Held that - In view of the fact that goods in question were purchased from the registered dealer and sold on the same date, without holding an inquiry into the genuineness of the documents, the penalty could not be imposed by the learned assessing authority, nor could these documents be brushed aside as an after thought by the learned Tax Board as has been done by it while reversing the findings of learned first appellate authority. The findings of learned Tax Board, in these circumstances, can be said to be perverse and without any basis and, therefore, the same deserves to be set aside by this court in revisional jurisdiction as it would give rise to the question of law under section 86 of the Act.Revision allowed.

Summary

Issues:
1. Imposition of penalty under section 77(8) of the Rajasthan Sales Tax Act, 1994 based on unaccounted goods.
2. Validity of penalty imposition without proper inquiry and opportunity of hearing.
3. Consideration of supporting documents in penalty imposition.
4. Compliance with principles of natural justice in penalty imposition.

Analysis:
1. The judgment concerns a revision petition filed under section 86 of the Rajasthan Sales Tax Act, 1994, challenging the imposition of a penalty under section 77(8) of the Act. The petitioner, an assessee, was penalized for alleged unaccounted goods, specifically 160 bags of "urad dal." The Tax Board reversed the order of the Deputy Commissioner (Appeals) and imposed a penalty of Rs. 32,900 on the petitioner.

2. The assessing authority imposed the penalty without proper inquiry and opportunity of hearing, acting hastily on the same day as the survey. The first appellate authority set aside the penalty after the petitioner produced supporting documents, including a purchase bill from a registered dealer and other relevant paperwork. The petitioner argued that the penalty was unjustly imposed without considering these documents and without following due process.

3. The High Court analyzed the documents produced by the petitioner, which included a sale bill, an octroi receipt, and a declaration from the Krishi Upaj Mandi Samiti, all dated the same day as the alleged transaction. The court found that the assessing authority failed to conduct a reasonable inquiry into the authenticity of these documents before imposing the penalty. The purpose of the penalty under section 77(8) is not merely to extract revenue but to penalize intentional non-recording of goods after a proper inquiry.

4. The court emphasized the importance of complying with the principles of natural justice in tax penalty cases. It held that the assessing authority should have conducted a thorough inquiry and considered the explanations provided by the assessee before imposing the penalty. The court deemed the Tax Board's decision to reverse the first appellate authority's findings as perverse and without basis, ultimately setting aside the penalty and restoring the decision of the Deputy Commissioner (Appeals).

In conclusion, the High Court allowed the revision petition, setting aside the penalty imposed by the Tax Board and restoring the decision of the Deputy Commissioner (Appeals).