2016 (12) TMI 695 - HC - VAT and Sales Tax

Imposition of penalty - detention of goods - clandestine removal - extra goods found loaded in the truck, apart from what was evident from the records - Held that - The fact, clearly shows that the authorities themselves have found the goods covered by bill No.24 dated 22.4.2002 and form-31 No.F/JJ-0952524 were being imported in accordance with law. No discrepancy or breach of any of the provisions of the Act, was found. Under the circumstances, there was no occasion to levy penalty under Section 15-A (1)(o) of the Act with respect to the goods covered by the aforesaid bill. Justification of penalty upon the assessee with respect to the extra found metal waste of 2000 Kgs. - Held that - the assessee has clearly stated that he has no concern with extra found goods and thereupon such extra found goods were seized and the same were released on deposit of security by one Subhash Chand. There is no finding in the penalty order that the extra found goods of 2000 Kgs. belong to the assessee and the same were got released by him. On the contrary, the transporter had also issued a certificate that the assessee has no concern with the aforesaid 2000 Kgs. metal scrap. This certificate was also filed before the authority. Under the circumstances, there was no evidence before the assessing authority or the first appellate authority or the Tribunal for import or transport of extra found metal waste by the assessee in contravention of the provisions of Section 28-A of the Act. Under the circumstances, with respect to those goods, no penalty could have been imposed upon the assessee. Penalty set aside - revision allowed - The amount of penalty, if any, deposited by the assessee shall be refunded by the assessing authority within four weeks from today along with interest from the date of deposit. The revision is allowed with costs of ₹ 5,000/-which shall be paid by the respondent to the assessee within four weeks - decided in favor of assessee.

Summary

Issues:
1. Challenge to order dated 10.3.2006 under Section 15-A (1) (o) of the U.P. Trade Tax Act, 1948.
2. Justification of penalty for import of 6873.800 Kg. metal waste.
3. Treatment of extra 2000 Kg. metal waste as an attempt to evade tax.
4. Validity of penalty on entire import of 8873.800 Kg. metal waste.
5. Justification of the quantum of penalty levied.

Issue 1: Challenge to Order under Section 15-A (1) (o) of the U.P. Trade Tax Act, 1948
The revision was filed challenging the order dated 10.3.2006 passed by the Member, Commercial Tax Tribunal, Varanasi Bench-V, Varanasi in Second Appeal No.515 of 2003 for the Assessment Year 2002-03, under Section 15-A (1) (o) of the U.P. Trade Tax Act, 1948. The appeal was admitted on 29.7.2009. The revision was based on questions of law regarding the justification of penalty for the import of metal waste, specifically focusing on the circumstances of the case.

Issue 2: Justification of Penalty for Import of 6873.800 Kg. Metal Waste
The applicant, a registered dealer, imported 6807.00 Kg. metric metal waste accompanied by proper documents. However, an additional 2000 Kgs. of metal waste was found in the truck during a check. The assessing authority imposed a penalty on the entire import, including the extra goods. Despite the applicant's denial of any association with the extra goods, penalties were levied. The High Court found that no evidence existed to connect the extra goods to the applicant, leading to an arbitrary imposition of penalties.

Issue 3: Treatment of Extra 2000 Kg. Metal Waste as an Attempt to Evade Tax
The applicant consistently denied any involvement with the extra 2000 Kgs. of metal waste found during the check. The authorities seized the extra goods and demanded security, which was deposited by an individual unrelated to the applicant. The High Court noted the lack of evidence linking the extra goods to the applicant, highlighting the unjust penalty imposition without proper verification of ownership.

Issue 4: Validity of Penalty on Entire Import of 8873.800 Kg. Metal Waste
The penalty imposed covered the entire import of 8873.800 Kg. metal waste, including the goods covered by genuine documents. The High Court criticized the authorities for ignoring the legitimate documentation and penalizing the applicant without establishing any connection to the extra goods. The imposition of penalties without proper investigation was deemed unjust and arbitrary.

Issue 5: Justification of the Quantum of Penalty Levied
The High Court analyzed the provisions of Section 15-A (1) (o) of the Act, emphasizing that penalties should only be imposed if goods are imported in contravention of the law. As the applicant had proper documentation for the goods covered by bill and form-31, penalties were unwarranted for those items. Regarding the extra 2000 Kgs. of metal waste, the lack of evidence linking it to the applicant rendered the penalties unjustified. The High Court allowed the revision, setting aside the impugned order and directing the refund of any deposited penalties along with interest, while also awarding costs to the applicant.

This detailed analysis of the judgment addresses the issues involved comprehensively, highlighting the key legal aspects and findings of the High Court in the case.