2023 (1) TMI 1381 - HC - VAT and Sales Tax

Penalty passed under section 72 (6) of the JVAT Act - penalty above Rs. 5, 000 can be levied if no tax is payable on the goods being transported - notice given by the respondent is in conformity with Rule 59 of the JVAT Rules 2006 or not - adequate opportunity of hearing was given or not - opportunity to be given to produce the documents. Whether in terms of Section 72 (6) of the JVAT Act any penalty above Rs. 5, 000 can be levied if no tax is payable on the goods being transported? - HELD THAT - This court holds that in terms of section 72 (6) of the JVAT Act no penalty above Rs. 5000 can be levied if no tax is payable on the goods being transported inasmuch as this section categorically provides that the penalty is to be levied on three times of the tax payable and if no tax is payable the maximum penalty is Rs. 5000/-. The contention of the Revenue counsel that there can be a scenario that 3 times of tax will be less than Rs. 5000/-; and in such circumstances the legislature has used the words penalty equal to the amount of three times of the tax leviable on such goods or rupees five thousand whichever is greater is not acceptable. Reference in this regard may also be given to the case of Krishi Utpadan Mandi Samiti v. Pilibhit Pantnagar Beej Ltd. 2003 (11) TMI 591 - SUPREME COURT wherein the Hon ble Apex Court has held that if there is any ambiguity with regard to interpretation of the statute the view which is favorable to the assessee shall be taken into consideration So far as other questions/issues raised by the counsel of the petitioner with regard to giving adequate opportunity of the petitioner-company and also inadequate notice issued under JVAT Act 2002 it is deemed proper not to give any finding on that for the sole reason that the petitioner after passing of the assessment order has availed alternative remedy of appeal and revision and had enough opportunity to canvass his case as such no prejudice has caused to him. The petitioner is liable to pay penalty of Rs. 5000/- in each case - Hence the petitioner is directed to pay the same within a period of one week from the date of receipt of the order. The Tax authority shall accept the same. Petition allowed.

Summary

Issues Involved:
1. Whether penalty above Rs. 5,000 can be levied if no tax is payable on the goods being transported u/s 72(6) of the JVAT Act.
2. Whether the notice given by the respondent is in conformity with Rule 59 of the JVAT Rules 2006.
3. Whether adequate opportunity of hearing was given, considering Rule 59 provides for 30 days' time.
4. Whether principles of natural justice require some opportunity to produce documents if they are not available at the time of checking.

Summary:

Issue 1: Penalty Above Rs. 5,000 if No Tax is Payable
The penalty u/s 72(6) of the JVAT Act can be levied as "a penalty equal to the amount of three times of the tax, leviable on such goods, or rupees five thousand whichever is greater." The court found that if no tax is leviable, only Rs. 5000/- penalty can be levied. This was substantiated by the stock transfer nature of the transactions and the fact that the respondent authorities had issued 'Form-F' and accepted that no sales tax/VAT was leviable on the goods. The court referenced the Supreme Court's ruling in Mukerian Papers Ltd. v. State of Punjab, which states that no penalty can be imposed if no tax liability exists. The court also cited Purulia and Kharagpur Transmission Company Ltd. v. State of Jharkhand, reinforcing that no penalty could be imposed if the tax liability is 'Nil'. The court concluded that the penalty amount was erroneously calculated and is unsustainable.

Issue 2: Conformity with Rule 59 of JVAT Rules 2006
The petitioner contended that the notice issued was not in Form JVAT 302, which is required by law. The court did not provide a specific finding on this issue, as the petitioner had already availed alternative remedies of appeal and revision.

Issue 3: Adequate Opportunity of Hearing
The petitioner argued that the principles of natural justice were violated as only 2-3 days were given to respond to the show cause notice, whereas Rule 59 provides for 30 days. The court did not delve deeply into this issue, as the petitioner had already pursued alternative remedies.

Issue 4: Principles of Natural Justice
The court acknowledged the petitioner's argument but did not provide a detailed finding, focusing instead on the primary issue of penalty calculation.

Conclusion:
The court quashed the penalty orders and held that the petitioner is liable to pay only Rs. 5000/- as penalty in each case. The court directed the petitioner to pay this amount within one week from the date of receipt of the order. Both writ petitions were allowed.