2014 (4) TMI 804 - HC - VAT and Sales Tax

Collection of penalty without order - Section 53(12)(c) of the Karnataka Value Added Tax Act, 2003 - Non-production of E-sugum form Held that - E-sugam was generated before commencement of the journey and that is on record - It is the duty of the officer to verify it - If the authorities have not verified, assessee cannot be held responsible for such lapse. Difference in the Serial No. of invoices Held that - Assessee has instruction to submit the consignor has more than one units from where the products is supplied depending upon its availability at each counter, and separate invoice books are maintained and used and therefore part of the consignment is from one unit and part of the consignment is from the another unit, though on the same day it was consigned - Thus, serial number depends on the book used. Notice to assessee of alleged contravention Held that - On perusal of records it is clear, the officer has passed the impugned order on 6.4.2013 after collecting the penalty on 27.3.2013, but perused the impugned order imposing penalty later which is described as vitiated and being in contravention of Section 53(12)- The procedure contemplated u/s 53(12) pre supposes that the notice need to be issued to show cause, and if it is found no insufficient cause regarding the alleged violation is shown, penalty could be imposed - Therefore, collection of penalty without an order u/s Section 53(12)(c), is illegal and can hardly be sustained - The order passed by the respondent imposing penalty u/s 53(12)(c) shown to be illegal, Annexure - H is quashed - The writ petition is allowed and the respondent is directed to refund the penalty of ₹ 2,48,064/- deposited by assessee towards penalty Decided in favour of assessee.

Summary

Issues:
Challenge to penalty imposed under Section 53(12) of the Karnataka Value Added Tax Act, 2003.

Analysis:
The petitioner, an assessee under the Central Sales Tax Act, contested the penalty levied by the respondent under Section 53(12) of the KVAT Act, 2003. The petitioner, engaged in business as M/S. Shivam Trading Company, purchased ghutka from M/S. KAY Flavours Pvt. Ltd., Lucknow, with two invoices covered by a single LR. The petitioner generated two E-sugams before transporting the goods. Despite initial verification at the check post, the respondent intercepted the vehicle during unloading, alleging non-production of E-sugam and different series numbers on the invoices. The respondent imposed a penalty of Rs. 2,48,064 under Section 53(12) of the KVAT Act, 2003, prompting the petitioner's challenge before the Court.

The petitioner argued in good faith, presenting valid documents at the entry point, and explained the differing series numbers on the invoices due to multiple units of the consignor. The petitioner maintained that the E-sugam was generated before the journey, placing the responsibility on the authorities to verify. The petitioner raised concerns about the respondent's hasty imposition of penalty without allowing time for a response to the alleged contravention.

The Court observed that the impugned order was passed before the penalty was collected, violating Section 53(12) of the Act. The respondent contended that proper consignment documents were not produced during interception, emphasizing the petitioner's obligation to demonstrate compliance with all requirements. However, the Court highlighted the procedural requirements under Section 53(12) necessitating the issuance of a show-cause notice before imposing penalties for non-compliance.

While acknowledging the availability of an appeal under Section 62 of the Act, the Court deemed the penalty imposition illegal and quashed the impugned order. The Court directed the respondent to refund the penalty amount deposited by the petitioner. The judgment emphasized the importance of following due process and providing opportunities for respondents to address alleged violations before penalties are imposed.

In conclusion, the Court allowed the writ petition, declaring the penalty imposition illegal and ordering the refund of the penalty amount. The judgment highlighted the necessity of adhering to procedural requirements and ensuring fairness in penalty imposition under the KVAT Act, 2003.