2016 (10) TMI 721 - HC - VAT and Sales Tax

Imposition of penalty - Cyclic Hydrocarbons (Marker) - stock transfers - transported from NOIDA to Lucknow - Form-31 in terms of Section 28A of the U.P. Trade Tax Act, 1948 Act - violation of Section 15-A(1)(o) of the 1948 Act - Held that - the goods were seized during the course of their transit, as per the assessee, from Noida to Lucknow. The assessee had before the authorities admittedly submitted the GR and Stock Transfer Invoices which had accompanied the goods. It is also not disputed by the department that the OC stamp was present along with the documentation which accompanied the goods in question. The allegedly failure on the part of the assessee to deposit the Stock Transfer Invoices dated 16 November 2006 within twenty four hours or at least till 21 November 2006 would neither be determinative nor conclusive insofar as the issue of an intent to evade the payment of tax is concerned. The mere statement of the driver that the goods had in fact been loaded at Delhi and were bound for Lucknow did not in the opinion of this Court conclusively lead one to the conclusion that the transportation was being effected in an attempt to evade assessment or payment of tax. The mere absence of a Form-31 not being fatal to the case of the assessee - penalty not justified. Order of assessment - Held that - the assessment was based entirely upon the levy of penalty upon the assessee on two occasions. The levy of penalty which formed the subject matter of Second Appeal No. 507/2011 stood anulled by the Tribunal itself. The levy of penalty has been found by this Court to be unsustainable. Since the estimation admittedly was not based on any other material the addition to the declared turnover of the assessee and levy of additional tax also must therefore necessarily fail. Revision allowed - decided in favor of assessee.

Summary

Issues:
Challenge to levy of penalty under Section 15-A(1)(o) of the 1948 Act and best judgment assessment.

Analysis:
The case involved two revisions challenging the penalty imposed on the assessee for an alleged violation of Section 15-A(1)(o) of the 1948 Act and the subsequent best judgment assessment. The Tribunal upheld the penalty and part of the assessment, leading to the revisions. The assessee was engaged in the sale of Cyclic Hydrocarbons primarily used by Oil Companies. A consignment was seized during transit from NOIDA to Lucknow without Form-31 as required by law. The Tribunal relied on the driver's statement and lack of stock transfer documents to affirm the penalty. However, it reduced the assessment amount. The revisionist argued that the goods had necessary documents and absence of Form-38 did not imply tax evasion, citing a relevant judgment.

The State respondents contended that the failure to prove prior stock transfer indicated an intent to evade tax. They emphasized the driver's statement and delay in submitting stock transfer invoices. The Court analyzed Section 15-A(1)(o) which penalizes goods imported in violation of Section 28A, requiring genuine documents for transportation. The key issue was whether the failure to use Form-31 indicated tax evasion. The Court noted the presence of GR and Stock Transfer Invoices with OC stamp, indicating a stock transfer. It held that the absence of Form-31 did not conclusively prove tax evasion.

The Court highlighted that the Department did not dispute the essential documents accompanying the goods. It emphasized that the mere absence of Form-31 was not fatal, citing a relevant judgment. The Court found the penalty unjustified. Regarding the assessment, since it was based on the penalty, and the penalty was deemed unsustainable, the assessment was also invalidated. Consequently, both revisions were allowed, setting aside the orders against the assessee in favor of the Department.