2014 (7) TMI 276 - HC - VAT and Sales Tax

Attempt to evasion of tax - Penalty on seller or buyer - tribunal waived the penalty - who is the owner at the time of detention - Detention of goods being hydraulic excavator while being transported on a lorry - KGST / KVAT - Intention to evade - Held that - question as to ownership of the goods, must be decided with reference to a point of time not later than the date of detention. That is a point of time when the officer entertains suspicion that there is intention to evade the tax under section 47(2) of the Act. Therefore, the question would be as to who is the owner of the goods at least as on the date of detention of the goods under section 47(2) of the Act. Under section 47(6) of the Act, when there is an intention of the seller of the goods to evade the tax which is established, it may be accompanied by the buyer being party to such guilty intention entertained by the seller. In such a case, even if the title to the goods had passed to the buyer, there can be no doubt that the penalty under section 47(6) of the Act can be imposed on the owner of the goods to be realized by the sale of the goods as provided under section 47 of the Act. Undoubtedly, if the seller continues to be the owner of the goods, nothing more remains to be enquired and his guilty mind would clothe the officer with authority to visit him with penalty by sale of the goods. Not only did the seller had the intention to evade the payment of tax, but the consignee was also party to it or was colluding with the seller. - In the circumstances of this case, this court is inclined to find that the consignee is the owner. This court already alluded to the relevant provisions in the Sale of Goods Act. Quantum of penalty - Held that - relief must be given to the party. Twice the amount of tax (Rs. 5,25,000) is ₹ 10,50,000. There is complaint that the penalty levied exceeds even twice the amount of tax. This is a case where there was a bank transaction. The tax has been paid. - penalty to be imposed equal to ₹ 3.00 lacks. View of other Judge while concurrence with first Judge - Held that - From the evidences on records, it is clear that buyer has got the ownership of goods - Further, the authorities below also have no case that the seller had retained the title in the goods and it never passed to the buyer and that was the reason why they had sent notice to the buyer and an opportunity was given to him before ordering penalty as well. So, under such circumstances, it can be safely concluded that the title in the goods passed to the buyer in this case and he has become the owner of the goods for the purpose of this section. Since it is found that the buyer has become the owner of the goods, penalty can be imposed on him only if it is proved that he had colluded with the seller in his attempt to evade payment of tax. - The fact that the original invoice alone accompanied the goods along with the transport of goods is also an indication that if the article was not intercepted by the authorities, he would not have paid the tax. So, even assuming that he becomes the owner of the goods, as proceeded by the authorities in this case and as found by this court as well, he is also liable to be proceeded against for the act of the seller as he had colluded with him for this purpose, and as such he will be liable to pay the penalty and the exoneration made by the Tribunal of the buyer is also unsustainable in law and hence the same is also liable to be set aside on this ground. - Decided against assessee.

Issues Involved:
1. Detention of hydraulic excavator under Section 47(2) of the Kerala Value Added Tax Act, 2003.
2. Imposition of penalty under Section 47(6) of the Act.
3. Appeal against the penalty by the consignee and subsequent Tribunal decision.
4. Writ petition for release of the excavator by the consignee.
5. Writ petition by the bank for release of the excavator.
6. Determination of ownership of the goods.
7. Collusion and fraudulent intention between consignor and consignee.

Detailed Analysis:

1. Detention of Hydraulic Excavator:
The hydraulic excavator was detained by authorities under Section 47(2) of the Kerala Value Added Tax Act, 2003, on suspicion of tax evasion. The officer detained the goods due to the suspicion that the transporter was attempting to evade tax.

2. Imposition of Penalty:
The adjudicating authority imposed a penalty of Rs. 13,13,830 on both the consignor and the consignee under Section 47(6) of the Act, finding an attempt to evade tax. The penalty was based on the estimation of tax likely to be evaded, as provided under Section 47(6).

3. Appeal Against Penalty:
The consignee's appeal to the appellate authority was unsuccessful. However, the Appellate Tribunal set aside the penalty, finding that the consignee was not guilty of connivance. The Tribunal noted that the consignee was a genuine buyer and had availed of a loan from the bank for the purchase. The Tribunal found that the attempt to evade tax was by the seller (consignor) and not the consignee.

4. Writ Petition for Release of Excavator:
After the Tribunal's order, the consignee filed a writ petition for the release of the excavator. The single judge directed that the excavator be released if the State did not file a revision against the Tribunal's order within fifteen days. The State filed a revision within the stipulated time, leading to a stay of the Tribunal's order.

5. Writ Petition by the Bank:
The bank, which had provided a loan for the purchase of the excavator, filed a writ petition for its release. The petition was dismissed, and the bank subsequently filed a writ appeal. The court found no merit in the bank's appeal, stating that the bank could not claim a lien over the goods in preference to the State's right under Section 47 of the Act.

6. Determination of Ownership:
The court examined who was the owner of the goods at the time of detention. It was noted that the adjudicating officer imposed a penalty on both the consignor and the consignee, which was impermissible. The court concluded that the consignee was the owner of the goods, as the property in the goods had passed to him based on the terms of the contract and the conduct of the parties.

7. Collusion and Fraudulent Intention:
The court found that the consignor had the intention to evade tax and that the consignee colluded with the consignor. The consignee's actions, including the payment of Rs. 17,60,000 in cash without explaining the source and the omission of the TIN number in the invoice, indicated collusion. The court held that the consignee was liable for the penalty due to his collusion with the consignor.

Conclusion:
The court upheld the imposition of a penalty on the consignee, treating him as the owner of the goods, but reduced the penalty to Rs. 3,00,000. The writ appeals filed by the consignee and the bank were dismissed. The court emphasized the need for a clear finding on ownership and the presence of collusion or fraudulent intention in tax evasion cases.

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