2012 (1) TMI 150 - HC - VAT and Sales Tax

Penalty u/s 15A(1)(o) of the U.P. Trade Tax Act, 1948 for the transactions made in the year 1994-95 Held that - In this particular case, the Tribunal has not returned the findings that there was intention to evade the tax. On the other hand, the Tribunal has held that it is not necessary to establish mens rea in order to impose the penalty. The penalty, which has been imposed on the assessee, therefore, is not justified in the facts and circumstances of the case, which are that at the relevant time the assessee was an exempted unit and its final product was exempted and it was not liable to pay any tax at that time. The books of accounts of the assessee having been accepted at that stage also did not reflect any intention to evade any payment of tax. The penalty imposed, therefore, is not justified and it is deleted.

Summary

Issues:
Violation of section 28A of the U.P. Trade Tax Act leading to imposition of penalty under section 15A(1)(o) against the assessee.

Detailed Analysis:
The case involves a revision filed by the assessee against a penalty imposed by the Tribunal under section 15A(1)(o) of the U.P. Trade Tax Act for transactions in the year 1994-95. The assessee, engaged in the manufacture and sale of perfumed tobacco, imported raw materials intercepted by the Trade Tax Officer. The assessing authority initiated penalty proceedings, which were initially set aside by the Deputy Commissioner (Appeals) based on the exemption granted to the new unit. However, the Department's appeal was allowed by the Tribunal, emphasizing that mens rea is not necessary for penalty imposition under section 15A(1)(o).

The learned counsel for the assessee argued that there was no intention to evade tax as the imported goods were raw materials for an exempted final product. The counsel relied on precedents emphasizing the necessity of proving intent to evade tax for penalty imposition. In contrast, the standing counsel contended that the blank form XXXI accompanying the consignment indicated an intention to evade tax, justifying the penalty.

The Court observed that to impose a penalty under section 15A(1)(o), a clear finding of intent to evade tax is essential. In this case, the Tribunal failed to establish such intent, especially considering the assessee's exempted status and accepted books of accounts. Consequently, the penalty was deemed unjustified and deleted. However, the Court acknowledged the non-compliance with procedural law due to the blank form XXXI and imposed a nominal cost of &8377; 10,000 on the assessee as a deterrent.

In conclusion, the revision was allowed, emphasizing the importance of proving intent to evade tax for penalty imposition under the U.P. Trade Tax Act. The Court balanced the exoneration of the penalty based on lack of intent with a nominal cost to ensure compliance with procedural requirements.