2012 (10) TMI 969 - HC - VAT and Sales Tax

Whether, on the facts of the circumstance of the case, the revisional authority was right in coming to the conclusion that, payment of penalty under section 52 of the KVAT Act, result in estimation of the turnover inspite of the turnover reflected in the books of accounts? Whether, on the facts of the circumstance of the case, not challenging the order of penalty will result in estimation of the turnover under section 39(1) of the KVAT Act? Held that - Against the order of penalty, no appeal is filed. If really, if it is a case of non-possessing the documents by the driver by oversight, the appellant could have summoned the documents from the consignor, who had dispatched the goods from Goa. Even if there was an urgency and that he was compelled to pay the penalty, nothing has been prevented from filing an appeal challenging the order of penalty and no such an attempt is also made. Admittedly, the penalty has not been paid by the driver or carrier. But the penalty is paid by the appellant. If the penalty had been paid by the driver or carrier for their mistake, the matter would have been different. If the appellant for no fault of him was made to pay, the penalty at least, he would have recovered the penalty from the carrier and no such action is taken. Therefore, on the facts and circumstances of the case, the substantial questions of law framed in this appeal do not arise at all.

Issues:
1. Legality and correctness of the order dated October 23, 2009 passed under section 64(1) of the Karnataka Value Added Tax Act, 2003.
2. Levying of penalty under section 53(1) of the Act for non-compliance with section 53(2) and alleged tax evasion.
3. Appellate authority's decision, suo motu revision by Additional Commissioner of Commercial Taxes, and subsequent revisional order.
4. Questions of law regarding penalty payment, turnover estimation, and challenge to penalty order.
5. Justification of revisional authority's decision in light of the appellant's contentions.

Analysis:
1. The appellant, a steel dealer, challenged the order of penalty levied under section 53(1) of the Karnataka Value Added Tax Act, 2003, for alleged non-compliance with section 53(2) and tax evasion. The authorities discovered discrepancies during an audit where goods were being transported directly from Goa to Hiriyur without raising a local tax invoice at Hubli, leading to suspicions of tax evasion. The appellate authority initially allowed the appeal, but a suo motu revision by the Additional Commissioner of Commercial Taxes reversed this decision, restoring the penalty order.

2. The crux of the appellant's argument was that the penalty order not being challenged should not lead to the conclusion of tax evasion. The appellant contended that the transaction in question was reflected in their books of accounts, and the appellate authority had considered this before allowing the appeal. The appellant highlighted that the revisional authority's decision to overturn the appellate order was unjustified.

3. The appellant's explanation regarding the goods being dispatched from Goa to be delivered to customers at Hiriyur without proper documents was scrutinized. The absence of the driver's statement made during interception and the lack of appeal against the penalty raised doubts. It was noted that if the penalty was paid due to the driver's mistake, the appellant could have recovered it from the carrier, but no such action was taken. The court emphasized that the substantial legal questions raised did not hold ground based on the facts and circumstances of the case.

4. Ultimately, the court dismissed the appeal, indicating that the revisional authority's decision was upheld. The judgment highlighted the importance of proper documentation and adherence to tax regulations to avoid penalties and legal repercussions.

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