2015 (10) TMI 219 - HC - VAT and Sales Tax

Penalty under section 78(5) - Contravention of Section 78(2) of the 1994 Act read with Rule 53(1) (a)(ii) of the Rules - Held that - Where goods in transit are found to be unaccompanied by any material document required under Section 78(2) of the 1994 Act, on show cause notice being issued in respect therefor if such document is supplied filling up the lacuna, no penalty would be leviable. The Hon ble Supreme Court has not defined the nature of mistake which alone would be rectifiable by submitting the required documents with the reply to show cause notice. As long as the missing document, in this case as the declaration form ST-18-A, was furnished with the reply to show cause notice, it ought to have sufficed. Aside of aforesaid, it is not in dispute that the goods in transit were in the course of stock transfer from petitioner s factory at Aurangabad to its branch at Jaipur and a case of tax evasion could not be made out. The Assessing Officer or for that matter the Appellate Authority and the Tax Board have not held that the goods were not being transported under a branch transfer and have yet based their judgment on a purported intent to evade tax. The allegation of intent to evade tax was palpably facetious, the declaration in form ST-18-A having been submitted with the reply - order of the appellate authority and assessing officer levying penalty under Section 78(5) of the 1994 Act is liable to be set aside - Decided in favour of assessee.

Summary

Issues:
Challenge to order sustaining penalty under section 78(5) of the Rajasthan Sales Tax Act, 1994 based on missing declaration form ST-18-A during transit of goods.

Analysis:
1. The petitioner challenged the penalty imposed under section 78(5) of the 1994 Act due to a missing declaration form ST-18-A during the transportation of goods. The assessing officer found the petitioner liable for penalty as the form was not handed over to the transporter, despite the petitioner's defense that it was submitted but accidentally left by the driver. The appellate authority and Tax Board upheld this decision, leading to the revision petition.

2. The petitioner argued that the assessing officer's decision contradicted the Supreme Court's judgment in the case of State of Rajasthan vs. D.P. Metals, which emphasized providing an opportunity to produce missing documents before levying penalties. The petitioner cited various judgments following the D.P. Metals case to support their argument. They contended that the Tax Board misinterpreted the Supreme Court's ruling by focusing on intent to evade tax rather than rectifiability through subsequent document submission.

3. The court analyzed the D.P. Metals case, emphasizing that the submission of missing documents with the reply to show cause notice should absolve the assessee from penalties. It noted that the nature of the mistake leading to missing documents was not defined by the Supreme Court. Additionally, it highlighted that the goods in transit were part of a branch transfer without tax liability, making tax evasion allegations baseless. The court found the intent to evade tax claim unsubstantiated, especially since the missing form was later submitted with the reply.

4. Consequently, the court set aside the Tax Board's decision upholding the penalty, stating that the penalty under section 78(5) of the 1994 Act was unjustified in this case. As a result, the revision petition was allowed, ruling in favor of the petitioner.