2013 (4) TMI 613 - HC - VAT and Sales Tax

Seizure and confiscation and levy of penalty - passenger carrying golden ornaments,entered the State of Jammu & Kashmir crossing Check Post Lakhanpur - Commissioner Commercial Taxes appear to have received an information, about the appellants stay in Room No.2108 of Grand Palace Hotel possessing some unaccounted for goods with intent to evade tax, has vide his order No.Camp/PA/CCT/325 dated 19.06.2005, authorized,under Section 66(3),Shri K. H. Rizvi, Additional Commissioner, to inspect the premises and also to take action under Section 66(6) of the Act, if necessary. Held that - Stringent provisionsas incorporated in the Statute books so as to ensure that the party/dealer shows transparency to the satisfaction of the authorities that tax leviable shall not, in any way, be evaded, have to be adhered to strictly so that contravention may not get chance of encouragement or may not have implication of sending a signal that the stringent provisions only remain on the statute book and are never meant for implementation. - , the appellant, admittedly, on her own showing before the first Appellate Authority has stated that she had come along with golden ornaments for market survey, means she is dealing in the business and had got a huge quantity for sale, therefore, she cannot escape the liability of penalty, as has been imposed. - Levy of penalty confirmed. The appellants ordinary place of residence i.e. room in hotel Grand Palace where she had stayed, was inspected, so properly proceedings, in accordance with Section 66 of the VAT Act were initiated and there from it has emerged that the appellant had committed a default as she had not declared carrying of goods at Check posts, one at Lakhanpur and another at Lower Munda, while entering into the State of Jammu & Kashmir. Such kind of default has to be dealt with in accordance Section 69(1)(o) and Section 69(1)(s)(xiii). Additional Commissioner, no doubt, has been authorized so was dealing with the proceedings under Section 66(6) of VAT Act, that falls within the scope of other proceedings. When it is so, the said authority has to be treated as an appropriate authority for the purposes of Section 69(1)(s) of the VAT Act, therefore, Additional Commissioner was competent to impose penalty under Section 69(1)(o) read with Section 69(1)(s)(xiii). It is clear that when penalty is levied, unless amount of penalty is paid or security in prescribed form is furnished, the seized taxable goods shall not be released. Therefore, when amount of penalty is paid, security is not required.

Issues Involved:
1. Imposition of Penalty under Section 66(6) of the J&K VAT Act, 2005.
2. Jurisdiction of the Additional Commissioner under Sections 67(10) and 69(1)(o) of the J&K VAT Act, 2005.
3. Definition of "appropriate authority" under Section 69 of the Act.
4. Applicability of Section 67 of the Act to goods in transit or being transported.
5. Demand for security where penalty has already been levied.

Detailed Analysis:

1. Imposition of Penalty under Section 66(6) of the J&K VAT Act, 2005:
The court confirmed the imposition of penalty under Section 66(6) of the VAT Act, stating that the appellant, who was carrying gold ornaments for market survey, was required to possess documents or account books as maintained in the ordinary course of business. The appellant's contention that she was not a dealer under the Act was rejected. The court noted that the term "such other person" in Section 66(6) extends the applicability of the provision beyond registered dealers to any person carrying taxable goods without proper documentation. The penalty was proportionately reduced by the Appellate Authority based on the revised valuation of the goods.

2. Jurisdiction of the Additional Commissioner under Sections 67(10) and 69(1)(o) of the J&K VAT Act, 2005:
The Tribunal held that the Additional Commissioner did not have jurisdiction under Section 67(10) as the section applies to goods in transit or being transported, not to goods already at the destination. The court agreed with this interpretation, stating that once the goods had reached their destination without interception, Section 67 would not apply. However, the court disagreed with the Tribunal's view on Section 69(1)(o), concluding that the Additional Commissioner was competent to impose penalties for defaults under this section as he was authorized to deal with proceedings under Section 66(6) of the VAT Act.

3. Definition of "appropriate authority" under Section 69 of the Act:
The Tribunal's interpretation that the "appropriate authority" under Section 69 is the Assessing Authority (CTO) was challenged. The court clarified that the Additional Commissioner, authorized under Section 66(6) to conduct inspections and seize goods, could be considered an "appropriate authority" for imposing penalties under Section 69(1)(o). The court referred to Section 104(2)(c) of the VAT Act and the transitional provisions, concluding that the Additional Commissioner retained jurisdiction as an appropriate authority.

4. Applicability of Section 67 of the Act to goods in transit or being transported:
The Tribunal held that Section 67 applies only to goods in transit or being transported and not to goods already at their destination. The court upheld this view, noting that Section 67's provisions are intended to monitor and check the transport of goods to prevent tax evasion. Since the appellant's goods had already reached their destination without interception, Section 67 was not applicable.

5. Demand for security where penalty has already been levied:
The court clarified that under the proviso to Section 66(6), once a penalty is levied, the goods cannot be released unless the penalty is paid or security is furnished. Therefore, if the penalty amount is paid, there is no need for additional security. The court directed that upon realization of the penalty, the seized gold ornaments should be released to the appellant.

Conclusion:
The court disposed of the references, maintaining the penalty under Section 66(6) and clarifying the jurisdiction of the Additional Commissioner under Sections 67(10) and 69(1)(o). It also affirmed the requirement for security only if the penalty is not paid. The Tribunal and the first Appellate Authority were instructed to proceed accordingly.

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