2013 (2) TMI 788 - HC - VAT and Sales Tax

Imposition of penalty u/s 78(5) of the RST Act - Form-18A - Held that - all documents were found in order and the penalty was wrongfully imposed on the respondent-assessee (transporter) when he was simply carrying the goods - further no independent verification or enquiry was got conducted either from the consignor or the consignee and the imposition of penalty on the transporter is in utter violation of the principles of natural justice - the penalty has been rightly deleted - petition dismissed - decided against petitioner-Revenue.

Summary

Issues Involved:
1. Legitimacy of penalty imposed for alleged tax evasion.
2. Validity of documents presented by the respondent-assessee.
3. Compliance with principles of natural justice.
4. Jurisdiction of Rajasthan Sales Tax authorities in imposing penalties for inter-state transactions.

Issue-wise Detailed Analysis:

1. Legitimacy of Penalty Imposed for Alleged Tax Evasion:
The assessing officer imposed a penalty of Rs. 75,000 on the respondent-assessee, suspecting tax evasion due to discrepancies found during a vehicle check. The vehicle did not stop at the check post, lacked a Gujarat permit, and carried incomplete documents. However, the Deputy Commissioner (Appeals) [DC(A)] and the Tax Board later deleted the penalty, finding no concrete evidence of tax evasion.

2. Validity of Documents Presented by the Respondent-Assessee:
The respondent-assessee provided bills, vouchers, and other documents during the check. The CTO found two sets of documents, which were explained by the respondent as due to receiving orders from two different entities. The appellate authorities found the documents to be proper and original, and no evidence suggested they were bogus or forged. The presence of two sets of documents alone was not considered sufficient to prove tax evasion.

3. Compliance with Principles of Natural Justice:
The respondent-assessee argued that no prior notice was given to the consignor or consignee, and no independent verification was conducted by the CTO. The appellate authorities agreed, emphasizing that the penalty was imposed based on discrepancies and the driver's statement without further inquiry. The court noted that the driver might have been terrorized, and proper verification from concerned parties was necessary. The imposition of the penalty without such verification was deemed unjust and in violation of natural justice principles.

4. Jurisdiction of Rajasthan Sales Tax Authorities in Imposing Penalties for Inter-state Transactions:
The court referenced several judgments, including the Supreme Court's ruling in State of Rajasthan V/s. DP Metals, which held that penalties should not be imposed if documents are later found to be proper. Additionally, it was noted that the Rajasthan Sales Tax Act does not apply to goods merely transiting through Rajasthan. The authorities can ensure goods leave Rajasthan but cannot impose penalties for transactions involving other states.

Conclusion:
The court upheld the deletion of the penalty by the appellate authorities, finding no evidence of bogus documents or intentional tax evasion. The revision petition filed by the petitioner-department was dismissed, as the appellate authorities' findings were based on facts and did not exhibit any perversity. The principles of natural justice were emphasized, and the jurisdictional limits of the Rajasthan Sales Tax authorities were clarified.