2015 (4) TMI 1227 - HC - VAT and Sales Tax

Penalty - assessment of tax - documents indicated in sub clause (ii) of Section 57 (8) - Section 57(8)(ii) of the M.P. Value Added Tax Act - Held that - The assessment of tax has been done based on factual aspects of the matter and the documents available on record, particularly the invoices and vouchers and certain discrepancies in the documents have been pointed out by the respondents. That being so, as a factual dispute is involved in the question of assessment of tax and when the statutory remedy of appeal is available for challenging this assessment order, we are of the considered view that for challenging the assessment of tax done petitioner should take recourse to the statutory remedy of appeal available and to that extent interference by this Court is not called for - we grant liberty to the petitioner to challenge the order of Assessing Officer, as far as it pertains to imposition of value added tax and entry tax. Penalty - Held that - penalty is imposed without assigning any reason, without considering the grievance/explanation of petitioner in its right perspective and without indicating any reason as to why maximum penalty of 5 times is imposed - the authority is required to apply its mind and give reason for imposition of penalty, that also when maximum penalty is imposed - In the present case, we find that the Assessing Officer has assessed the amount of penalty in a mechanical way without application of mind. That being so, we deem it appropriate to remand the matter back to the competent assessing authority to reconsider the question of imposing the penalty afresh. Petition allowed by way of remand.

Summary

Issues:
Challenge to orders by Commercial Tax Department on penalty and tax assessment under value added tax and entry tax.

Analysis:
The petitioner, claiming to be a transporter, challenged the imposition of penalties and tax assessments by the Commercial Tax Department. The petitioner was transporting Mentha Oil for another party when his material was seized, leading to the imposition of taxes and penalties. The petitioner argued that all necessary documents for transportation were available, and penalties were imposed arbitrarily without following proper procedures. The petitioner's counsel referred to Section 57(8)(ii) of the M.P. Value Added Tax Act to argue against the imposition of penalties. The respondents presented evidence of discrepancies in the documents, indicating duplication of invoices and transportation for the same consigner, leading to the actions taken.

The Deputy Advocate General raised a preliminary objection, stating that the petitioner had the remedy of appeal available against the impugned order, suggesting that interference by the Court was unnecessary. The petitioner's counsel contended that penalties were imposed arbitrarily without considering explanations, and the maximum penalty was unjustified. The Court acknowledged the availability of a statutory remedy of appeal against the tax assessment. It noted factual disputes in the assessment based on documents and discrepancies highlighted by the respondents, concluding that the petitioner should avail the statutory remedy of appeal for challenging the tax assessment.

Regarding the imposition of penalties, the Court found that penalties were imposed without reasons and without considering the petitioner's perspective. Citing a Supreme Court case, the Court emphasized the requirement for authorities to apply their minds and provide reasons for imposing penalties, especially when the maximum penalty is levied. The Court observed a mechanical assessment of penalties by the Assessing Officer and decided to remand the matter for reconsideration of penalties, directing a fresh imposition in accordance with the law. The Court allowed the petition in part, granting liberty to challenge the tax assessment through statutory appeal and quashing the imposed penalties, providing the assessing officer the opportunity to reevaluate and impose penalties in compliance with the law.

In conclusion, the Court disposed of both writ petitions, allowing the petitioner to challenge the tax assessment through appeal and remanding the matter for a fresh imposition of penalties with proper application of mind and adherence to legal requirements.