2014 (8) TMI 223 - HC - VAT and Sales Tax

Legality of the penalty imposed under Section 69(1) - business of sale and purchase of Cement at Bhopal manufactured by M/s Diamond Cements, Damoh - concealment of fright or transportation charges - Held that - From the documents and material available on record, it is clear that in the matter of concealment of fright or transportation charges infact the amount was included in the Bill for purchase of Cement and the Assessing Officer has bifurcated the amount and did not permit addition of the transportation or fright charges in the cost price of product purchased i.e. cement. Therefore, it is not a case where the petitioner has concealed any item, which is taxable but has only include it to be a amount in a particular head i.e. purchase price which is not permissible. It is a case where in the particulars and details supplied by the petitioner certain incorrect and erroneous claim is made which is not sustainable under law - imposition of penalty on concealment of fright charges is not correct. It is a case where the petitioner erroneously included the amount as it was included in the bill by the Manufacturer of Cement - Decided in favour of assessee.

Summary

Issues:
Challenging VAT assessment orders and penalty imposition under Section 69(1) for the period 2004-2005.

Analysis:
The petition involves challenging VAT assessment orders and penalty imposition under Section 69(1) for the period 2004-2005. The petitioner, a registered dealer in Cement business, disputed the penalty imposed on the grounds of concealment related to transportation charges and credit notes. The Assessing Officer disallowed certain amounts for transportation and freight charges, leading to penalty imposition. However, the petitioner argued that the amounts were disclosed in the return and did not constitute concealment based on the law established by the Supreme Court. The court noted that the inclusion of these amounts in the purchase price was erroneous rather than an act of concealment, following the precedent set by the Supreme Court in similar cases.

Regarding the adjustment through credit notes, the petitioner cited a Supreme Court case approving such practices as a known business method. The court agreed that penalizing the petitioner for this transaction was unjustifiable based on established trade practices and legal precedents. The court emphasized that claiming benefits through credit notes did not amount to concealment or suppression of income warranting a penalty.

After considering the arguments and legal principles, the court concluded that the penalty imposition on the concealment of freight charges was incorrect as it was an erroneous inclusion rather than concealment. The court also found the penalty imposed for transactions through credit notes unsustainable based on established trade practices and legal precedents. Consequently, the court set aside the penalties imposed and directed the refund of the amounts to the petitioner, allowing the petition and disposing of the case in favor of the petitioner.