2015 (1) TMI 899 - HC - VAT and Sales Tax

Imposition of penalty for contravention of carrying the goods without valid documents- contravention of Section 53(2)(b) of the Act.- Intention to evade Duty - Held that - Transporter is transporting the goods from Surat to Hubli. The consignee has paid transportation charges for the same. The consignment copy clearly shows the place where the goods have to be unloaded. The transporter is from Hyderabad. If the driver employed by the transporter fails to unload the goods in Hubli and carries the goods nearly 400 kms. beyond Hubli his explanation that by a bona fide mistake it was carried thus far cannot be accepted. More over the driver of the vehicle has categorically stated that he was asked to transport the goods to Trichy in Tamil Nadu and that is why the lorry was parked in the border of Tamil Nadu at Siddlaghatta. Therefore it is clear the transporter resorted to the above modus operandi to hoodwink the authorities at the check-post and wanted to pass on the goods to the dealer in Tamil Nadu without paying any tax in the State of Karnataka. It is a different matter if the vehicle was intercepted and the vehicle was brought back to Hubli goods were unloaded and C Forms were issued it is an afterthought. In that view of the matter the assessing authority was fully justified in imposing the penalty for contravention of carrying the goods without valid documents. The First Appellate Authority was not clear in his mind though he observed that the conduct of the transporter results in suspicion but nonetheless he reduced the penalty. Either the penalty is payable or not payable. In one breadth he cannot say there is no contravention and in another breadth he cannot say the conduct of the transporter is suspicious and reduce the penalty. The Tribunal was in total error in holding that the transporter was carrying the goods with valid documents. The documents which were carried in the vehicle had no validity beyond Hubli to transport the said consignment from Hubli to Sidlaghatta. This aspect is completely missed by the Tribunal. In that view of the matter the order passed by both the appellate authorities are unsustainable - Decided in favour of Revenue.

Summary

Issues Involved:
1. Whether the Tribunal was right in cancelling the minimum penalty imposed due to violation of Section 53(2)(b) of the Karnataka Value Added Tax Act, 2003 on the premise that there was no intention to evade tax by the person in charge of the goods vehicle.
2. Whether the Tribunal is right in holding that the provisions of Section 53(12)(a)(ii) of the Karnataka Value Added Tax Act, 2003 is not attracted.

Detailed Analysis:

1. Violation of Section 53(2)(b) and Intention to Evade Tax:

The State challenged the Karnataka Appellate Tribunal's order that set aside the penalty imposed on the assessee, arguing that the consignment was transported beyond its designated destination without unloading at Hubli. The Tribunal had concluded that since the assessee carried valid documents and later produced 'C' Forms showing the goods were returned to Hubli traders, there was no intention to evade tax.

The facts are undisputed: the consignment was to be unloaded at Hubli but was intercepted at Shidlagatta, beyond Hubli. The driver lacked documents for transporting goods beyond Hubli. The Tribunal's decision was based on the premise that the driver's mistake and subsequent compliance (returning goods to Hubli and issuing 'C' Forms) negated any intention to evade tax.

However, the High Court noted that the primary objective of Section 53 is to prevent tax evasion by ensuring proper documentation during goods movement. The goods were transported from Surat to Hubli, but the vehicle was intercepted far beyond Hubli without valid documents for the extended journey. The driver's explanation that he was heading to Trichy and parked near Tamil Nadu's border indicated a deliberate attempt to bypass tax obligations in Karnataka.

2. Applicability of Section 53(12)(a)(ii):

The Tribunal held that the provisions of Section 53(12)(a)(ii) were not attracted because the assessee had valid documents at the time of interception. However, the High Court clarified that the valid documents were only for transportation up to Hubli. The absence of documents for further transportation constituted a contravention of Section 53(2)(b).

The High Court referenced the dichotomy between contravention and tax evasion, emphasizing that strict liability arises under Section 53(5) for non-compliance, regardless of intent. The Court cited the Apex Court's ruling in Guljag Industries v. Commercial Taxes Officer, which established that penalty under such statutory provisions is a civil liability, not contingent on the intention to evade tax.

Conclusion:

The High Court found that the Tribunal erred in its judgment, as the transporter's actions clearly violated Section 53(2)(b). The Tribunal's reliance on the subsequent return of goods to Hubli and issuance of 'C' Forms did not negate the initial contravention. The First Appellate Authority's reduction of penalty was also deemed unsustainable due to the contradictory findings on the transporter's conduct.

Order:

1. The questions of law were answered in favor of the State and the assessing authority.
2. The petition was allowed.
3. The impugned orders by the Karnataka Appellate Tribunal and the First Appellate Authority were set aside.
4. The order by the assessing authority was restored.
5. Each party was ordered to bear its own costs.