2016 (8) TMI 1114 - HC - VAT and Sales Tax

Levy of penalty under the provisions of Section 13-A (4) of the U.P. Trade Tax Act 1948 - Held that - Significantly neither the assessing authority nor for that matter the Tribunal return or record any finding as to whether the goods which were seized had not been accounted for in the books of accounts which were maintained by the assessee. As noted above, both the assessing authority as well as the Tribunal have primarily proceeded to consider a failure on the part of the assessee to establish how the raw material had entered into the State to be fatal to its case. The Tribunal as well as the assessing authority have also referred to inconsistencies in the pleas taken by the assessee in respect of the bills and gate passes under which the raw material is said to have entered into the State. The assessing authority as well as the Tribunal have permitted the introduction of considerations that were wholly irrelevant to the exercise of power under section 13A. The goods were shown to belong to a bona fide dealer. They were shown to have been duly entered in the books of accounts. How the raw material from which the goods were manufactured entered into the State was a wholly irrelevant consideration and clearly tainted the statutory enquiry beyond repair. Having embarked upon this exercise, in the opinion of this Court, both the assessing authority as well as the Tribunal completely misdirected the enquiry, which was liable to be undertaken under sub-section (4). It is on account of this approach that no findings have been entered by the Tribunal as to whether the goods had been duly accounted for by the assessee. The Tribunal, this Court notes, does not refer to any evidence nor records any reason to dispel what the first appellate authority recorded in his order namely that the goods had been duly recorded in the books of accounts of the assessee.

Summary

Issues:
Levy of penalty under Section 13-A (4) of the U.P. Trade Tax Act 1948 based on seizure of consignments with overwriting on gate passes. Interpretation of provisions for seizure and penalty imposition. Discrepancies in explanations provided by the assessee regarding the import of raw material. Consideration of whether goods were accounted for in the books of accounts. Assessment of the Tribunal's decision on penalty imposition and the relevance of how raw material entered the State.

Analysis:
The judgment from the Allahabad High Court dealt with the revision arising from penalty proceedings under Section 13-A (4) of the U.P. Trade Tax Act 1948 against the assessee involved in printing lottery tickets and case making on job work basis. The case revolved around the seizure of two consignments under gate passes with overwriting, leading to penalty imposition by the assessing authority. The first appellate authority, however, found no cause for penalty as both the assessee and the entities receiving goods were registered dealers, and the goods were duly accounted for. The Department appealed this decision, resulting in the Tribunal upholding the penalty based on discrepancies in the assessee's explanations regarding the import of raw material into the State.

The Court highlighted the conditions for seizure under Section 13 (1-A), emphasizing the need to establish goods' traceability to bona fide dealers or doubts on proper accounting. It differentiated between seizure under sub-section (1-A) and penalty imposition under sub-section (4), noting that penalty is imposed only when goods are omitted from accounts. The Court found that neither the assessing authority nor the Tribunal determined if the seized goods were unaccounted for in the assessee's books, focusing instead on irrelevant considerations like the raw material's entry into the State, which tainted the statutory inquiry.

The Court criticized the assessing authority and the Tribunal for introducing irrelevant considerations and misdirecting the inquiry under Section 13-A. It noted the lack of findings on whether the goods were accounted for and the failure to address the evidence showing proper recording in the books of accounts. Consequently, the Court allowed the revision, setting aside the orders of the assessing authority and the Tribunal, as they failed to sustain scrutiny under Section 13-A (4).

In conclusion, the judgment clarified the legal principles governing seizure and penalty imposition under the U.P. Trade Tax Act 1948, emphasizing the importance of proper accounting and adherence to statutory requirements. It underscored the need for authorities to focus on relevant factors and evidence while conducting inquiries and imposing penalties to ensure fair and lawful proceedings.