2016 (10) TMI 1010 - HC - VAT and Sales Tax

Imposition of penalty u/s 77(8) of the Rajasthan Sales Tax Act, 1994 - excess physical stock found, than what was recorded in books - the stock of Namkeen on spot verification was 6422 kg whereas in the books it was weighted at 3892 kg only and, therefore, there was excess stock of 2530 kg - Held that - the assessee failed to discharge the onus immediately as soon as the survey took place and the onus as noticed earlier was to bring to the notice of the higher officials of the Revenue, if something wrong happened in the survey proceedings and such having not been brought, the onus has not been discharged. It is settled law that once the officer conducting survey on the basis of the very own statements of the respondent assessee having accepted the guilt/charge, having accepted about the excess stock and has no explanation to offer, it may not be proper for the court to enter upon merits of the controversy at all and unless it is demonstrated that the penalty proceedings initiated and imposed, is mala fide, perverse, based on no evidence, misreading of evidence or which a reasonable man could not form or that the person concerned was not given due opportunity, resulting in prejudice, said proceedings need no interference. Penalty upheld - petition allowed - decided in favor of Revenue.

Issues Involved:
1. Legitimacy of the excess stock found during the survey.
2. Validity of the penalty imposed under Section 77(8) of the Rajasthan Sales Tax Act, 1994.
3. Allegations of coercion and pressure during the survey.
4. Acceptance and validity of the affidavit submitted at the appellate stage.
5. Application of principles from Income Tax and Central Excise proceedings to Sales Tax proceedings.

Issue-wise Detailed Analysis:

1. Legitimacy of the Excess Stock Found During the Survey:
The survey conducted on 28.10.2002 at the respondent assessee's business premises revealed an excess stock of 2530 kg of Namkeen. The physical stock was 6422 kg compared to 3892 kg recorded in the books. The assessee accepted the excess stock without providing any explanation. This acceptance was documented on the spot, with statements signed by two witnesses.

2. Validity of the Penalty Imposed Under Section 77(8) of the Rajasthan Sales Tax Act, 1994:
The officers imposed a penalty under Section 77(8) of the Rajasthan Sales Tax Act, 1994, based on the assessee's acceptance of the excess stock. The Dy. Commissioner (Appeals) later deleted this penalty, citing procedural violations and the lack of independent witnesses. However, the High Court found that the penalty was justified as the assessee had accepted the excess stock without any coercion or pressure, and no evidence was provided to prove otherwise.

3. Allegations of Coercion and Pressure During the Survey:
The Dy. Commissioner (Appeals) and the Tax Board accepted an affidavit claiming that the statements were made under coercion and pressure. However, the High Court noted that no substantial evidence was provided to support these allegations. The court emphasized that retractions should be immediate and supported by convincing evidence. In this case, the retraction came much later, reducing its credibility.

4. Acceptance and Validity of the Affidavit Submitted at the Appellate Stage:
The High Court criticized the Dy. Commissioner (Appeals) for accepting the affidavit without giving the Assessing Officer (AO) a chance to comment. The court highlighted that any additional evidence presented at the appellate stage should be sent for the AO's comments. The affidavit, submitted almost 2½ years after the survey, was deemed insignificant and an afterthought.

5. Application of Principles from Income Tax and Central Excise Proceedings to Sales Tax Proceedings:
The High Court referred to various judgments, including CIT, Bikaner v. Ravi Mathur and others, to assert that statements recorded during surveys have significant evidentiary value. Retractions must be immediate and supported by strong evidence. The court applied these principles to the present case, concluding that the assessee's late retraction lacked credibility and did not invalidate the original statements.

Conclusion:
The High Court reversed the orders of the Dy. Commissioner (Appeals) and the Tax Board, upholding the AO's decision to impose a penalty of ?30,360/-. The court found that the assessee failed to provide timely and convincing evidence of coercion or pressure and that the acceptance of the excess stock during the survey was valid. The petition succeeded, and the penalty was deemed justified.

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