2016 (10) TMI 637 - HC - VAT and Sales Tax

Levy of penalty at 30% of the value of goods u/s 77(8) of RST Act - survey - compliance of Rule 50 - whether DC(A) was justified in deleting the penalty on the ground that compliance under Rule 50 has not been made? - compliance under rule 50 mandatory or otherwise - Held that - The rule envisages that the Authorized Officers who carries out search u/Sec. 77 of the Act, shall adopt the procedure prescribed under Rule 50 and the word used is shall therefore, it should be followed in letter and in spirit. Admittedly, on perusal of the two appellate orders, it transpires that there was no witnesses present and only statement of the Director was recorded and therefore since there is no compliance of Rule 50, the penalty was rightly deleted by the DC(A) and upheld by the Tax Board. The goods were excisable and not only the excise duty but the sales tax @ 4% was also charged in the bill - no reason to interfere with the order of deletion of penalty - petition dismissed - decided in favor of respondent-assessee.

Summary

Issues:
1. Assailing order of the Rajasthan Tax Board dismissing Revenue's appeal.
2. Imposition of penalty under Sec. 77(8) of the RST Act.
3. Compliance of Rule 50 during survey.
4. Admissibility of Director's admission regarding discrepancies.
5. Excisability of goods and imposition of sales tax.

Analysis:
1. The High Court addressed the Sales Tax Revision Petition filed by the Revenue challenging the Rajasthan Tax Board's order. The survey conducted at the respondent's premises revealed discrepancies leading to a penalty imposition by the Assessing Officer under Sec. 77(8) of the RST Act. The Deputy Commissioner (Appeals) and Tax Board both found non-compliance with Rule 50 during the survey, crucial for witness presence. The DC(A) deleted the penalty considering the non-compliance and excisability of goods, a decision upheld by the Tax Board.

2. The Revenue contended that the Director's admission of discrepancies should not have been disregarded, emphasizing the penalty imposition's justification. Conversely, the respondent's counsel argued that the lack of Rule 50 compliance was admitted, leading to the penalty deletion. The High Court concurred with the lower authorities' findings, emphasizing the mandatory nature of Rule 50 and the excisability of goods, precluding any legal question arising from the Tax Board's order.

3. The High Court highlighted Rule 50's procedural requirements for search and seizure under Sec. 77, emphasizing the necessity of witness presence during a search. The absence of witnesses during the survey, as evidenced in the appellate orders, led to the penalty deletion. Additionally, the confirmation of excisability and sales tax imposition on the goods further solidified the factual basis for upholding the penalty deletion by the DC(A) and Tax Board.

4. Ultimately, the High Court dismissed the revision petition, finding no legal basis for interference in the Tax Board's order. The lack of Rule 50 compliance, coupled with the excisability of goods and sales tax imposition, formed the factual foundation for the penalty deletion upheld by the lower authorities. The Court affirmed the decisions, emphasizing the importance of procedural compliance and factual findings in tax matters.