2014 (8) TMI 1049 - HC - VAT and Sales Tax

Levy of penalty under Section 53(3) of the Andhra Pradesh Value Added Tax Act, 2005 - Furnishing of a false declaration under section 8(4) of the CST Act - Held that - Section 10 of the CST Act relates to penalties and, under sub-section (a) thereof, if a person furnishes a declaration under section 8(4) which he knows, or has reason to believe, to be false, he shall be punishable. All the provisions relating to offences, interest and penalties, including provisions relating to penalties in lieu of prosecution for an offence or in addition to the penalties or punishment for an offence, but excluding the provisions relating to matters provided for in sections 10 and 10A, in the general tax law of each State shall, with necessary modifications, apply in relation to the assessment, reassessment, collection and the enforcement of payment of any tax required to be collected under the CST Act in such State or in relation to any process connected with such assessment, reassessment, collection or enforcement of payment, as if the tax under the CST Act was a tax under such sales tax law (VAT Act). While the provisions of the A. P. VAT Act would be applicable for all provisions relating to offences, interest and penalty under the CST Act, section 9(2A) of the CST Act specifically excludes application of the A. P. VAT Act to section 10 of the CST Act. Therefore, as section 10(a) specifically provides for imposition of penalty as stipulated thereunder, the impugned order, levying penalty under section 53(3) of the A. P. VAT Act is without jurisdiction and is, accordingly, set aside. - Petition disposed of

Summary

Issues:
1. Jurisdiction of levying penalty under section 53(3) of the Andhra Pradesh Value Added Tax Act, 2005 read with section 9(2A) of the Central Sales Tax Act, 1956 without establishing mens rea.
2. Applicability of section 10(a) of the CST Act for furnishing a false declaration under section 8(4) of the CST Act.
3. Interpretation of section 9(2A) of the CST Act regarding penalties in relation to the assessment, reassessment, and collection of tax under the CST Act.

Issue 1: Jurisdiction of levying penalty under section 53(3) of the VAT Act without establishing mens rea:
The petitioner sought relief to declare the order imposing a penalty under section 53(3) of the Andhra Pradesh Value Added Tax Act, 2005, without proving mens rea, as ultra vires section 10 of the CST Act. The penalty was imposed for furnishing a false declaration under section 8(4) of the CST Act. Section 53(3) of the A. P. VAT Act mandates penalties for under-declared tax with fraud or wilful neglect. The court held that penalizing the petitioner under section 53(3) without establishing mens rea was without jurisdiction, and the order was set aside, allowing action under section 10(a) of the CST Act.

Issue 2: Applicability of section 10(a) of the CST Act for false declaration under section 8(4) of the CST Act:
The petitioner argued that penalties for furnishing a false declaration under section 8(4) of the CST Act should be under section 10(a) of the CST Act, not under section 53(3) of the VAT Act. Section 10(a) of the CST Act prescribes penalties for knowingly providing false declarations. The court agreed, stating that the impugned order under the VAT Act was without jurisdiction and set it aside, clarifying that action could still be taken under section 10(a) of the CST Act.

Issue 3: Interpretation of section 9(2A) of the CST Act regarding penalties:
Section 9(2A) of the CST Act stipulates the application of state tax laws for penalties related to the CST Act, excluding section 10 of the CST Act. The court emphasized that while general tax laws apply to penalties under the CST Act, section 9(2A) specifically excludes the application of the VAT Act to section 10 of the CST Act. This interpretation guided the court's decision to set aside the penalty imposed under the VAT Act and allow action under section 10(a) of the CST Act.

In conclusion, the High Court of Andhra Pradesh clarified the jurisdictional issues regarding penalties under the VAT Act and the CST Act, emphasizing the need to establish mens rea for penalties and the correct application of penalty provisions under the CST Act. The judgment set aside the penalty under the VAT Act and allowed for appropriate action under section 10(a) of the CST Act.