2017 (4) TMI 364 - HC - VAT and Sales Tax

Restoration of penalties - Section 67 of the KVAT Act - the assessee has not produced documents as directed by the Tribunal and has failed to prove its entitlement for input tax credit - the penalty has been levied on the assessee on the basis that the purchases and sales have no correlation with the quantity and date. It is also held that input tax is seen illegally claimed and that the accounts produced were the cooked up computer printouts drawn after four years since the dealings occurred. Insofar as the absence of correlation is concerned, the order shows that the invoice number and the date do not correlate with the invoices raised by the assessee in respect of Malabar Cements Ltd. Held that - In Annexure C common order, the Tribunal has restored the penalty levied by the Assessing Officer. However, the order does not show that the Tribunal has assigned any reasons for upsetting the findings of the first appellate authority in favour of the assessee. In other words, the Tribunal has restored the penalty levied on the assessee in Annexure A order produced in O.T. Rev. No. 158 of 2015 without any application of mind. For that reason, the order passed by the Tribunal allowing T.A. (VAT) No. 1506 of 2013, which is the subject matter of O.T. Rev. No. 158 of 2013 is to be set aside. TA (VAT) No. 1506 of 2013 will stand restored to the file of the Tribunal and the Tribunal shall re-consider the matter with notice to both sides and pass appropriate orders in the matter Petition allowed by way of remand.

Summary

Issues Involved:
1. Legitimacy of the penalty levied under Section 67 of the KVAT Act for the assessment years 2006-2007 and 2007-2008.
2. Entitlement of the assessee to avail input tax credit.
3. Penalty concerning the quantity variation of 3770 MT of coal for the assessment year 2006-2007.
4. Penalty on the sale of 1147 MT of coal for the assessment year 2006-2007.
5. Penalty for the assessment year 2007-2008 based on the correlation of purchases and sales.

Detailed Analysis:

1. Legitimacy of the Penalty Levied Under Section 67 of the KVAT Act:
The Tribunal allowed the appeals filed by the Revenue and dismissed the appeals filed by the assessee, thereby restoring the penalty orders passed by the Intelligence Officer. The penalty was initially imposed due to nil returns filed by the assessee, which were later revised. The Tribunal remitted the matter to the Intelligence Officer, directing the assessee to produce books of accounts, relevant documents, and invoices to reassess the penalty.

2. Entitlement of the Assessee to Avail Input Tax Credit:
The Tribunal required the assessee to establish entitlement to input tax credit with all relevant documents as specified in Sections 11(5)(m), 11(9), and 11(12) of the KVAT Act. The Tribunal found that the assessee failed to comply with these requirements. The Tribunal noted that original invoices were necessary for claiming input credit and that the computer printouts of accounts produced by the assessee were considered unreliable and not maintained as per legal provisions.

3. Penalty Concerning the Quantity Variation of 3770 MT of Coal for the Assessment Year 2006-2007:
The Intelligence Officer found a discrepancy in the quantity of 3770 MT of coal, which was accounted for in April 2007 but not reflected in the books for 2007-2008. The Tribunal concluded that the assessee had obtained coal from undisclosed sources and supplied it to Malabar Cements Ltd., with bills and accounts manipulated to avoid tax liability. The Tribunal upheld the penalty, rejecting the assessee's contradictory claims regarding the import location of the coal and the lack of reliable evidence to prove the movement of goods.

4. Penalty on the Sale of 1147 MT of Coal for the Assessment Year 2006-2007:
The Intelligence Officer and the Tribunal both rejected the assessee's defense of ignorance of law, noting that the assessee's headquarters were in Nagpur, and the accounts were maintained by professionals. The Tribunal confirmed the penalty, emphasizing that ignorance of law cannot condone procedural lapses.

5. Penalty for the Assessment Year 2007-2008 Based on the Correlation of Purchases and Sales:
The Tribunal found that the purchases and sales did not correlate with the quantity and date, and input tax was claimed illegally. The first appellate authority had initially found no suppression of purchases by the assessee, but the Tribunal restored the penalty without assigning reasons for overturning the appellate authority's findings. Consequently, the Tribunal's order restoring the penalty for the assessment year 2007-2008 was set aside, and the matter was remanded for reconsideration.

Conclusion:
The revisions were disposed of with the Tribunal's order being confirmed in all respects except for the penalty for the assessment year 2007-2008, which was remanded for reconsideration.