2015 (11) TMI 880 - HC - VAT and Sales Tax

Detention of goods alongwith documents under Section 14-B(6)(i) - Goods detained to verify the correctness of documents - Imposition of penalty - Held that - On 9.7.1991, the check barrier officer had intercepted one consignment of mustard oil packed in several tins. After scrutinizing the documents accompanying the consignment, interception note was issued. The petitioner appeared before the officer and apprised the detaining officer of the entire situation and circumstances. Despite explanation furnished by the trader, penalty under Section 14-B(7) was imposed and then was recovered in cash. The basis for imposing penalty was that the goods were sold in the course of inter-State sales and there was an attempt to evade tax. - allegations are that the goods were being transferred as branch transfer but were actually moving in the course of inter State sale and thus there was evasion of tax. Check post officer was not competent to go into the nature of transaction which could only be decided in regular assessment proceedings. It was held that he over-stepped his jurisdiction to impose penalty by holding that it was evasion of payment of tax. - there is nothing illegal or impermissible for a party in so arranging its affairs that the liability to pay tax would not be attracted or that the brunt of taxation would be reduced to the minimum. In the cited authority, version of the appellant was accepted and transfers made by the company were taken to be genuine by the Sales Tax authorities. - State Counsel has not been able to demonstrate any flaw in the approach of the Tribunal which may warrant interference - no factual or legal infirmity in the impugned order of the Tribunal - Decided against Revenue.

Issues Involved:
1. Jurisdiction of the checking officer to impose penalty under Section 14-B(7)(ii) of the Punjab General Sales Tax Act, 1948.
2. Validity of documents carried by the respondent-company's vehicles.
3. Nature of the transaction: branch transfer vs. inter-State sale.
4. Authority of the check post officer to determine the nature of the transaction.

Detailed Analysis:

1. Jurisdiction of the Checking Officer:
The primary issue addressed was whether the checking officer had the jurisdiction to impose a penalty under Section 14-B(7)(ii) of the Punjab General Sales Tax Act, 1948. The court highlighted that the impugned order of penalty was passed under this provision, which could only be invoked when there was a violation of subsection (2) or (4) of Section 14-B. The court concluded that the checking officer at ICC, Shambhu, overstepped his jurisdiction by assuming the powers of an assessing officer to determine the nature of the transaction, which is beyond the scope of his authority.

2. Validity of Documents:
The court examined whether the documents carried by the respondent-company's vehicles were proper and genuine. The drivers presented stock transfer invoices, ground receipts (GR), and forms ST-XXIV. The checking officer detained the goods, suspecting that the goods were not intended for the branch office but for another location. However, the court found that merely carrying additional documents did not change the nature of the transaction. The Tribunal had correctly concluded that the documents could not be deemed ingenuine or the transaction doubtful.

3. Nature of the Transaction:
The court discussed whether the transaction was a branch transfer or an inter-State sale. The checking officer suspected an inter-State sale, which would imply tax evasion. The court cited previous judgments, such as the Division Bench decision in GSTR No.10 of 1998 and the case of Automobile Products of India Limited v. State of Karnataka, to emphasize that the check post officer's role is limited to verifying the documents accompanying the goods and not determining the nature of the transaction. This determination falls within the jurisdiction of the regular assessing authority.

4. Authority of the Check Post Officer:
The court reiterated that the check post officer's authority is confined to ensuring that the prescribed documents are carried with the goods. The officer can detain goods if there is a reason to believe that the documents are not proper or genuine. However, the officer cannot decide on the nature of the transaction, such as whether it is a branch transfer or an inter-State sale. This was supported by precedents, including Parry and Company Ltd. v. Commissioner of Sales Tax, U.P., and Xcell Automation v. Government of Punjab.

Conclusion:
The court upheld the Tribunal's decision, which had reversed the penalty imposed by the checking officer and the first Appellate Authority. The Tribunal's reasoning that the matter should have been reported to the Assessing Authority rather than conducting summary proceedings under Section 14-B was found to be sound. The appeal by the Department was dismissed, affirming that the checking officer had acted beyond his jurisdiction and that the documents carried by the respondent-company were valid.

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