2014 (9) TMI 464 - HC - VAT and Sales Tax

Imposition of penalty - Detention of trucks - Non availability of declarations in form No. 75 - Held that - petitioner was not having declaration form No. 75 which is required as per sub-section (5) of section 45A of the Act of 1994. A bare reading of the aforesaid provisions of section 45A would show that under sub-section (1) every person transporting such goods as may be notified by the State Government in this behalf shall carry with him an invoice, bill or challan or any other document, by whatever name called, issued by the consignor of the goods giving such particulars as may be prescribed. Under sub-section (5) every transporter shall, before crossing any check-post or barrier set up or erected under sub-section (1), deliver to the check-post officer a declaration duly signed by the consignor in such manner, in such form and containing such particulars as may be prescribed. No declaration in relation to goods to be delivered in Madhya Pradesh shall be accepted if the consignee in Madhya Pradesh is shown or described as self unless the particulars and address of the person who delivery of the goods at the declaration in Madhya Pradesh and furnished. A bare reading of two provisions would show that the intention of the Legislature is to make them mandatory. Therefore, after, the enforcement of section 45A it is mandatory for every person or transporter who is transporting the goods to deliver to the check-post officer a declaration duly signed by the consignor as has been prescribed. Irregularity that was detected when both the vehicles were checked. It is not in dispute in both the writ petitions that the declaration required under form Nos. 75 and 85 were not produced by the transporter when the goods were seized that being so, the check-post was well within his right in taking action. However, while taking action the competent authority of the check-post the revisional authority proceeded on an assumption that the declaration under form Nos. 75 and 85 was not produced and the intention to facilitate evasion of tax was presumed due to non-production of this statutory form in the check-post. The presumption was drawn in the matter of evasion of tax without taking note of the circumstances that were existing in the present case. It is not the case of the assessing authority or revisional authority that the documents produced at the time of checking showed any difference in the matter. Record indicates that all the material particulars and information which were required were available in the documents produced at the time of checking of the vehicle and no mala fides are proved or established and the nexus to the act of non-production of documents and the intention to evade tax is not proved. Under these circumstances, the question is can penalty be imposed merely because some documents were not produced at the time of checking of the vehicle or because instead of declaration of form No. 75, declaration of form No. 85 was produced by the petitioner. The bona fide reason given by the company explaining the circumstances in the matter of non-availability of from No. 75 is not at all considered by the authorities concerned while imposing the penalty. Imposition of penalty has penal consequence. Penalty is a measure of punishing a wrong doer and the discretion for imposing penalty has to be exercised judiciously after considering all the relevant facts and circumstances in a given case. Merely, because the law empowers an authority to impose penalty that by itself is not a reason for imposing penalty. Deliberate defiance of law, guilty conduct and dishonest intention are the necessary ingredients which should be available for imposing penalty. Merely, because some technical or venial breach of a statutory provision is established that by itself is not a reason for imposing penalty. Court holds that the imposition of penalty in the facts and circumstances of the case is not a proper exercise of the discretion by the authority concerned. The authority who has passed the orders has not acted in accordance with law and exercised its discretion in the manner which cannot be approved. Considering the totality of the facts and circumstances of the case and keeping in view the principles, which governed the imposition of penalty as indicated hereinabove, both the petitions are liable to be allowed. Decided in favour of assessee.

Issues Involved:
1. Legality of the imposition of penalty under Section 45A of the M.P. Commercial Tax Act, 1994.
2. Requirement and submission of declaration forms (Form No. 75 and Form No. 85) under the Act.
3. Mens rea (intention) behind non-furnishing or incorrect furnishing of declaration forms.
4. Discretion of the authority in imposing penalties for technical or venial breaches.

Detailed Analysis:

1. Legality of the Imposition of Penalty under Section 45A of the M.P. Commercial Tax Act, 1994:
The petitioner challenged the penalty orders dated February 26, 2005, passed in Revision Nos. 16/04 and 17/04, which confirmed the penalties imposed by the Assistant Commissioner, Commercial Tax. The penalties were imposed due to the non-availability of requisite declarations (Form No. 75) with the transported goods. The petitioner argued that the imposition of penalties without providing an opportunity for a hearing was unjustified. The High Court had previously set aside the penalty orders and directed the authorities to provide an opportunity for a hearing.

2. Requirement and Submission of Declaration Forms:
The petitioner, a transporter, was required to submit Form No. 75 for goods consigned within Madhya Pradesh and Form No. 85 for goods passing through the state. The trucks were detained due to the absence of Form No. 75 and incorrect submission of Form No. 85. The petitioner argued that the non-furnishing and incorrect furnishing of declarations were inadvertent errors without any intention of tax evasion. The petitioner submitted the necessary declarations during the proceedings, which were initially unavailable due to oversight by the uneducated truck drivers.

3. Mens rea Behind Non-Furnishing or Incorrect Furnishing of Declaration Forms:
The petitioner contended that mens rea (intention) is essential for attracting penal provisions under Section 45A. The authorities imposed penalties without establishing any intention to facilitate tax evasion. The revisional authority presumed an intention to evade tax due to non-production of Form No. 75. However, the High Court noted that the invoices and other documents provided at the time of checking contained all necessary particulars, and no malafide intention was established. The Court emphasized that penalties should not be imposed for mere technical or venial breaches without dishonest intention or malice.

4. Discretion of the Authority in Imposing Penalties:
The Court referred to the Supreme Court's judgment in Hindustan Steel Ltd. v. State of Orissa, which held that penalties should not be imposed unless there is deliberate defiance of law, contumacious conduct, or dishonest intention. The Court found that the authorities imposed penalties mechanically without considering the bona fide reasons provided by the petitioner. The Court highlighted that the discretion to impose penalties must be exercised judicially, considering all relevant circumstances. The mere non-production of Form No. 75, in this case, did not establish any intention to evade tax, and the lapse was classified as a bona fide mistake.

Conclusion:
The High Court quashed the impugned orders passed by the assessing authority and the revisional authority, holding that the imposition of penalties was not a proper exercise of discretion. The Court allowed both writ petitions, emphasizing that penalties should not be imposed for technical lapses without any dishonest intention or malice. The authorities were directed to act in accordance with law and exercise discretion judiciously.

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