2016 (7) TMI 544 - HC - VAT and Sales Tax

Levy of penalty - seizure of goods being dispatched by the revisionist and a consequential levy of penalty under Section 48(5) of the U.P. VAT Act, 2008 - the revisionist pointed out that during the course of loading and dispatching of consignments, the additional labour inadvertently placed certain consignments and packages meant for a particular truck onto other trucks which upon seizure led to the Department claiming that there was a discrepancy in the date of manufacture / batch number details mentioned in the tax invoices when compared with the actual consignments loaded on the truck. Held that - No material or evidence was referred to or relied upon which may have even remotely established intent to evade payment of tax. - The respondents do not rest their orders on any material or evidence, which may have dispelled this assertion. The Court further notes that the Tribunal while coming to the conclusion that the stock register was not properly maintained does not rely upon any evidence or particulars at all. The said conclusion is purely conjectural and based entirely upon the two discrepancies referred to above. The Court has no hesitation to hold that the imposition of penalty upon the assessee on account of a discrepancy in the batch numbers and date of manufacture was clearly unjustified and unwarranted in the facts and circumstances of the case. The orders of the assessing authority, the first appellate authority as also that of the Tribunal sustaining the levy of penalty upon the revisionist, therefore cannot be sustained. - Decided in favor of assessee.

Summary

Issues Involved:
1. Imposition of penalty under Section 48(5) of the U.P. VAT Act, 2008.
2. Requirement of disclosing "date of manufacture" and "batch number" under VAT Act.
3. Justification of penalty based on discrepancies in batch numbers/date of manufacture.
4. Applicability of previous judgments and precedents.

Detailed Analysis:

1. Imposition of Penalty under Section 48(5) of the U.P. VAT Act, 2008:
The case revolves around the imposition of penalty on the revisionist-assessee for discrepancies found in the goods dispatched, specifically under Section 48(5) of the U.P. VAT Act, 2008. The Tribunal upheld the penalty imposed by the assessing authority, which was challenged by the revisionist. The penalty was levied due to discrepancies in the "date of manufacture" and "batch number" details mentioned in the tax invoices compared to the actual consignments loaded on the trucks. The assessing authority did not accept the revisionist's explanation attributing the discrepancies to inadvertent mistakes by additional labor and proceeded to levy the penalty.

2. Requirement of Disclosing "Date of Manufacture" and "Batch Number" under VAT Act:
The revisionist argued that there was no statutory requirement under the VAT Act or the Rules to disclose the "date of manufacture" or "batch number" of the goods. Rule 44 of the VAT Act specifies the particulars required in a tax invoice, which do not include the "date of manufacture" or "batch number." The Tribunal, however, referred to the statutory requirement under the Food Safety Standards Act, 2006, which mandates the mention of these details. The Court noted that the VAT Act and the Rules do not mandate the disclosure of these particulars, and the discrepancy was not a violation under the VAT Act.

3. Justification of Penalty Based on Discrepancies in Batch Numbers/Date of Manufacture:
The Court emphasized that the imposition of penalty under Section 48(5) must be based on an intention to evade tax. The Tribunal did not record any conclusion that the act of the revisionist was with an intent to evade tax. The Court found that the discrepancies in the batch numbers and date of manufacture did not justify the imposition of penalty as there was no evidence of intent to evade tax. The goods were duly accounted for in the Books of Account, and the rate of tax was uniform irrespective of the date of manufacture or batch number. The Tribunal's conclusion that the stock register was not properly maintained was deemed conjectural and not based on evidence.

4. Applicability of Previous Judgments and Precedents:
The revisionist referred to several judgments, including M/S. Jagatjit Industries Ltd., Ghaziabad Vs. State of U.P., and others, to argue that discrepancies in batch numbers do not justify the imposition of penalty. The Court distinguished the Jagatjit case, noting that it dealt with the seizure of goods and not the imposition of penalty. The Court also referred to other judgments, such as Central Distillery And Breweries Ltd., Meerut, and Great Glen Distilleries And Wineries Ltd., Varanasi, which held that discrepancies in batch numbers do not justify seizure or penalty. The Court found that the Tribunal erred in relying on Jagatjit and upheld the principle that discrepancies in batch numbers do not warrant the imposition of penalty under the VAT Act.

Conclusion:
The Court concluded that the imposition of penalty on the assessee for discrepancies in the batch numbers and date of manufacture was unjustified and unwarranted. The orders of the assessing authority, the first appellate authority, and the Tribunal sustaining the levy of penalty were set aside. The revisionist was entitled to a refund of the amounts deposited towards the penalty, and the assessing authority was directed to process the refund expeditiously.