2013 (7) TMI 300 - HC - VAT and Sales Tax

Penalty u/s 12(5) - U.P Tax on Entry of Goods into Local Areas Act, 2007 - Pan Masala containing tobacco - High Court held that petitioner is not liable to pay any entry tax - Held that - It was not disputed that it has been ultimately held that the petitioner is not liable to pay any entry tax - perusal of penalty notice would show that it has been issued simply on the premises that the petitioner has made certain sales to unregistered dealers and has failed to collect entry tax at source - There is no averment, nor there is any indication in the penalty notice that the petitioner has affected sales outside the local area - Impugned penalty notice is unsustainable under the law - Following decision of Mawana Sugars Ltd. vs. Deputy Commissioner, Commercial Tax and others 2013 (6) TMI 28 - ALLAHABAD HIGH COURT - Decided in favour of assessee.

Summary

Issues:
Challenge to legality and validity of penalty notice under section 12(5) of the U.P. Tax on Entry of Goods into Local Areas Act, 2007.

Analysis:

Issue 1: Challenge to Penalty Notice
The petitioner, a registered dealer, contested the penalty notice issued under section 12(5) of the Act. The petitioner argued that they should not be penalized as they were not liable to pay entry tax since the goods were sold within the same local area. The Commercial Tax Tribunal allowed the petitioner's appeal, confirming that no entry tax was due. The department's revision of this decision was dismissed by the High Court. The penalty notice was issued based on sales to unregistered dealers without collecting entry tax at source. However, it was established that all sales were made within the local area, and there was no evidence of sales outside the local area. The penalty notice was deemed unsustainable under the law.

Issue 2: Legal Precedent
The petitioner cited a judgment where it was held that section 12 does not apply to sales within the same local area if there is no intention to move goods to another local area. The court in that case ruled that the petitioner was not liable to pay entry tax for sales within the local area. This judgment supported the petitioner's argument against the penalty notice. The court found that the current case was covered by the precedent, leading to the quashing of the penalty notice as illegal and unwarranted. The penalty proceedings against the petitioner were consequently quashed.

In conclusion, the High Court ruled in favor of the petitioner, finding the penalty notice to be illegal and unwarranted. The court relied on legal precedents and established that the petitioner was not liable to pay entry tax for sales within the local area. As a result, the penalty proceedings were quashed, and the writ petition was allowed without any costs.