2012 (7) TMI 873 - HC - VAT and Sales Tax

Levy of penalty u/s 45 2 c & 45 6 of Gujarat Sales Tax Act, 1969 - Intention to evade tax - Held that - The appellant has exported under Duty Entitlement Pass Book (for short DEPV) which was not taxable as goods at the time of filing the return, though the sales were recorded in the books of account as tax free. DEPV was same as REP licenses. They were treated as goods in view of decision in Yasha Overseas (2008 (5) TMI 43 - SUPREME COURT ). In either of the scheme, the licenses are known as DEPB. The Hon ble Apex Court has held that the nomenclature may be different in different schemes but they are one and the same scheme considered within the definition of goods. - Prior to the decision in the case of Yasha Overseas V/s. Commissioner of Sales Tax and Others (2008 (5) TMI 43 - SUPREME COURT ) these goods were non-taxable but after the Hon ble the Apex Court clarified the liability, they have become taxable. Therefore, there was no intention of the assessee to avoid payment of tax deliberately. Appellant was litigating under the bonafide belief that the goods exported were exempted from payment of Sales Tax and for the first time, the goods become taxable after the decision of the Hon ble the Apex Court in the case of Yasha Overseas V/s. Commissioner of Sales Tax and Others (2008 (5) TMI 43 - SUPREME COURT ) and thereafter, the appellant deposited the tax interest and penalty - penalty could not have been imposed on the appellant and that there was no intention of the appellant to evade the payment of Sales Tax - Decided in favour of assessee.

Summary

Issues:
Challenge to Orders of Gujarat Value Added Tax Tribunal, Levy of Penalty under Gujarat Sales Tax Act, 1969, Interpretation of DEPB and REP licenses, Intent to Evade Sales Tax, Precedents on Penalty Imposition.

Analysis:
The High Court heard a tax appeal challenging the orders of the Gujarat Value Added Tax Tribunal regarding the levy of penalties under the Gujarat Sales Tax Act, 1969 for the years 2000-01, 2001-02, and 2002-03. The substantial question of law focused on whether penalties could be imposed prior to a specific decision by the Apex Court and when the tax had already been paid. The appellant contended that they had no intention to evade the Sales Tax Act and believed in good faith that the goods exported were exempt from tax before the Apex Court's ruling in a specific case.

The appellant had paid the tax, interest, and penalty for the three years in question. The dispute centered on the imposition of penalties that had already been paid, with the appellant arguing that they were not willfully evading tax but were genuinely litigating based on their belief in the tax exemption of the exported goods before the Apex Court's clarification. The Court noted that the goods in question, exported under DEPB, were considered taxable following the Apex Court's decision, even though they were initially treated as non-taxable.

Citing precedents, including the case of Sree Krishna Electricals v. State of Tamil Nadu and Hindustan Steel Ltd v. The State of Orissa, the Court emphasized that penalties should not be imposed for technical or venial breaches or when there is a bona fide belief that the party is not liable to act as prescribed by the statute. The Court further referred to the case of Hemchandbhai & Co. v. The State of Gujarat, highlighting that penalties should only be imposed when there is deliberate defiance of the law or contumacious conduct.

After considering the arguments and precedents, the Court concluded that the appellant had acted in good faith and had paid the tax, interest, and penalty after the Apex Court's ruling. Therefore, the Court held that the penalty imposed was unjustified, and the appellant was entitled to a refund of the penalty amount deposited. The Court ruled in favor of the appellant, directing the refund of the penalty within six months.

In summary, the High Court ruled in favor of the appellant, emphasizing their good faith belief and compliance with the tax payment following the Apex Court's decision. The Court held that the penalty imposition was unwarranted, leading to the appellant's entitlement to a refund of the penalty amount.