2014 (10) TMI 893 - HC - VAT and Sales Tax

Imposition of penalty - Section 53(2-A) of the Act - Non-submission of E-Sugama Form or E-Sugama Link - Held that - Ffrom the notification it is clear that, this obligation was introduced into law from 1.4.2010. Now, efforts are made to educate the dealers and, the obligation to comply with the said requirement. In the earlier notification issued it was made clear that penalty should not be imposed unless the goods is intercepted by a Mobile Check Post. However, in a subsequent circular with reference to notification dated 28.2.2011 where also the rubber is included, again it is reiterated that penalty should not be imposed till the end of the said year. When law is amended, compliance is required from the dealers, whatever the advances in technology we have made, it takes some time to adjust to the new situations and circumstances. When the authorities realizing this hardship by the circulars are insisting on compliance with the law and not to impose penalty for some time. Keeping in mind the said circulars and the fact that the law is amended with effect from 1.4.2010 and it is on 8.8.2010, hardly four months after the new provision came into force, the assessee committed the default. However, on pointed out, immediately he has complied with the said requirement of law. There is no justification seen to impose the penalty. The Revisional Authority was in error in invoking his revisional powers to interfere with the matter of this nature as the law was new and there is compliance by the assessee immediately when it was brought to his notice. In the circumstances, it cannot be said that the order passed by the Appellate Commissioner is erroneous and prejudicial to the interest of the revenue. Therefore, the impugned order is set aside. - Decided in favour of appellant

Summary

Issues:
1. Interpretation of Section 53 (12) of the Karnataka Value Added Tax Act, 2003.
2. Imposition of penalty for non-compliance with E-Sugama Form requirement.
3. Applicability of Circular No. 12/2010-11 dated 2.12.2010.
4. Revisional Authority's power to set aside Appellate Authority's order.
5. Compliance with the law and penalty imposition.
6. Justification for penalty imposition in the given circumstances.

Analysis:
1. The case involves an appeal against the order of the Additional Commissioner of Commercial Taxes under Section 53 (12) of the Karnataka Value Added Tax Act, 2003, regarding the transportation of rubber sheets by the assessee to M/s Shreeji Enterprises, Mumbai.

2. The assessee was penalized for not providing the E-Sugama Form during transportation, as required by law. The Check Post Authority issued a notice under Section 53 (12) of the Act, leading to the imposition of a penalty, which the assessee contested citing lack of awareness about the new procedure.

3. The Appellate Authority, relying on Circular No. 12/2010-11 dated 2.12.2010, set aside the penalty order. However, the Revisional Authority reversed this decision, emphasizing that non-compliance with a mandatory requirement is an attempt to avoid tax, thus justifying the penalty imposition.

4. The Revisional Authority's decision was based on two judgments indicating that non-compliance with legal requirements amounts to tax avoidance. This led to the revision of the Appellate Authority's order, prompting the assessee to appeal to the High Court.

5. The High Court noted the introduction of the E-Sugama Form requirement from 1.4.2010 and subsequent notifications and circulars educating dealers on compliance. Considering the circumstances and the assessee's immediate compliance upon notification, the Court found no justification for the penalty imposition.

6. The Court held that the Appellate Authority's decision was correct, emphasizing that the assessee's prompt compliance upon being informed of the requirement negated any intention to evade tax. Consequently, the High Court allowed the appeal, setting aside the penalty order and ruling that each party should bear its own costs.