2015 (9) TMI 1504 - HC - VAT and Sales Tax

Manufacture and sale of Sewai (vermicelli) macaroni and pasta - 12.5% or 4% - demand of differential tax, interest and penalty - whether the penalty imposed u/s 61 was justified? - Held that - it is not a case where the assessee was not paying any tax. The claim was that it falls in the category where rate of tax is applicable at four per cent. only whereas the claim of the Revenue was that it is taxable on account of falling in different entry at 12.5 per cent. but admittedly all the transactions stood recorded, disclosed and the respondent- assessee paid due tax at four per cent. on the entire goods. Payment of four per cent. on the entire turnover has been accepted and admitted by the AO himself, not only that the AO has accepted the entire turnover also. Merely because a higher rate of tax has been made applicable, does not call for imposition of penalty under section 61 of the Act - petition dismissed - decided against petitioner-Revenue.

Summary

Issues:
Sales tax revision petitions challenging common order on rate of tax and penalty under section 61.

Analysis:
The petitioner-Revenue filed sales tax revision petitions against the order of the Rajasthan Tax Board dismissing their appeals related to assessment years 2006-07 and 2007-08. The respondent-assessee, a manufacturer of Sewai, macaroni, and pasta, was paying tax at four per cent. instead of 12.5 per cent. A survey revealed the discrepancy, leading to the Assessing Officer charging tax at the higher rate, along with interest and penalty under section 61 of the RVAT Act. The Deputy Commissioner (Appeals) upheld the tax rate but deleted the penalty. Both parties appealed to the Tax Board, which upheld the tax rate but dismissed the Revenue's appeal on the penalty issue. The petitions challenged the deletion of penalty under section 61.

The petitioner-Revenue argued that there was clear tax evasion, as the assessee knowingly paid tax at a lower rate despite being aware of the correct rate. They contended that penalty was rightly levied due to fraudulent behavior and concealment of records. They cited legal precedent to support their position. The respondent-assessee, on the other hand, argued that the tax rate was debatable, and there was no intention to evade tax. They claimed a bona fide belief in the applicability of the lower tax rate. Legal judgments were cited to support their argument.

The court observed that while the tax rate discrepancy existed, there was no deliberate concealment or evasion of tax by the assessee. The issue revolved around a bona fide error in classification rather than intentional evasion. The court noted that the turnover was recorded accurately, and the penalty under section 61 may not be justified in this case. Legal precedents were cited to support this view, emphasizing the importance of disclosure and absence of fraudulent intent in tax matters.

Based on the facts and legal principles discussed, the court dismissed all revision petitions, finding no grounds for interference in the order. The judgment highlighted the significance of accurate disclosure, absence of fraudulent intent, and the debatable nature of tax rate classification in determining the applicability of penalties under section 61 of the Act.