2015 (3) TMI 1195 - HC - VAT and Sales Tax

Levy of penalty - excess stock found - assessee is dealing in utensils, umbrellas, general kirana goods etc. - Penalty was deleted on the ground that survey did not take place in the presence of two independent witnesses and even there was no list of physical verification on the file - Held that - Rule 50 of the RST Rules postulates that not only the search operation is to be conducted in the presence of two independent witnesses but then the goods have to be weighed in the presence of the two independent witnesses but in the instant case, it is a finding of fact that even on the seizure memo, there is no signature of even one independent witness. When the procedure laid down under Section 50 has not been followed by the officers of the petitioner-Revenue, any adverse finding or discrepancy on search looses significance and in such circumstances, the penalty under Section 77(8) of the RST Act is not required to be imposed and the Tax Board on aforesaid finding of fact and appreciation of evidence, has come to a definite conclusion that the search was improper and therefore, in my view, no question of law can be said to emerge out of the order of the Tax Board. - Decided against the revenue.

Summary

Issues:
Challenge against penalty under Section 77(8) for unaccounted goods during survey without independent witnesses and proper weighing.

Analysis:
The case involved a sales tax revision petition against the Rajasthan Tax Board's order dismissing the appeal filed by the Revenue regarding penalty imposition under Section 77(8) for unaccounted goods during a survey. The survey revealed discrepancies in the stock of steel utensils at the respondent's business premises, leading to a penalty of Rs. 42,350. The Deputy Commissioner (Appeals) and the Tax Board both ruled in favor of the respondent, citing procedural lapses like the absence of independent witnesses during the survey and lack of proper weighing of goods. The DC(A) found the penalty unjustified due to procedural irregularities, which the Tax Board upheld.

The Revenue contended that the absence of independent witnesses was insignificant as the goods were admitted to be unrecorded by the respondent's representative present during the survey. However, the Court noted that procedural requirements, including proper weighing and documentation as per Rule 50 of the RST Rules, were crucial. The authorized officer's failure to accurately weigh and document the varied utensils found, as well as the absence of witness signatures on the seizure memo, raised doubts about the survey's validity. The Tax Board's decision was based on these factual discrepancies and procedural violations.

The Court highlighted that Rule 50 mandates the presence of independent witnesses during searches and proper documentation of seized goods. In this case, the lack of witness signatures on the seizure memo and failure to weigh items separately as required by the rule undermined the validity of the survey. The Court emphasized that adherence to procedural norms is essential for imposing penalties under Section 77(8) and that the Tax Board's decision was justified based on the factual findings and evidence evaluation. Ultimately, the Court dismissed the revision petition, finding no legal grounds to challenge the Tax Board's order due to the procedural irregularities observed during the survey.