2017 (8) TMI 52 - HC - VAT and Sales Tax

Valuation - Cardamom - proceedings in the instant case have been initiated on the premise that value of goods being imported was more than ₹ 1200-1300 per Kg. in the market at Lucknow and Kanpur, whereas value of big cardamom was disclosed at ₹ 160 per Kg - Held that - As would be clear from the provisions contained under Section 48(1)(iii) and 48(5), as also under Section 54(1)(21-B), in case the allegation of undervaluation was levelled, the determination of rate/price to ascertain undervaluation had to be with reference to the market rate prevalent in the local market where the transaction itself had taken place. This Court finds substance in the submission that rate in the local market has not been ascertained nor has been relied upon for the purposes of determining the question of undervaluation. Action under Section 54(1)(21-B) - Held that - The order of penalty is not sustainable for the reason that the penalty order transgresses the authority invoked while issuing notices under Section 54(1)(14) and as notices had not been issued calling for explanation of the revisionist under Section 54(1)(21-B) of the Act, the penalty order is not sustainable. So far as the question with regard to determination of undervaluation is concerned, also it is found that market rate relied upon for the purposes of undervaluation is not the market rate shown to exist in the market area, where the transaction itself has taken place. Appeal allowed - decided in favor of appellant.

Issues:
1. Allegation of undervaluation of goods imported from Nepal under U.P. Value Added Tax Act, 2008.
2. Legality of imposing penalty on grounds other than those mentioned in the notice.
3. Justification for determining the value of goods without confronting with the sample of goods.
4. Error in passing penalty order invoking jurisdiction under Section 54(1)(21-B) without initiating proceedings.

Analysis:
1. The Deputy Commissioner issued notices under Section 54(1)(14) of the U.P. Value Added Tax Act, alleging undervaluation of goods imported from Nepal by more than 50%. The revisionist contested the notice, stating no undervaluation occurred during the import process. The authorities rejected the objection, leading the assessee to file a revision before the High Court. The issue revolved around the valuation of goods imported and the imposition of penalties under the Act.

2. The questions of law framed for consideration included the legality of affirming the penalty on grounds other than those mentioned in the notice and whether penalties for undervaluation can be imposed without confronting the sample of goods. The authorities were criticized for invoking jurisdiction under Section 54(1)(21-B) without initiating proper proceedings, leading to a challenge before the High Court.

3. The relevant provisions of Section 48 and Section 54 of the Act were examined. Section 48 dealt with the power to seize goods and impose penalties if certain conditions were met. Section 54 outlined penalties for specific wrongs, including undervaluation of goods. The Court emphasized the importance of determining undervaluation based on the market rate prevalent where the transaction took place, which was not done in this case.

4. The Court found that the penalty order transgressed the authority invoked in the notice under Section 54(1)(14) and that no notices were issued under Section 54(1)(21-B) for explanation. The order of penalty was deemed unsustainable due to procedural errors and lack of proper jurisdiction. The questions raised in the revision were answered in favor of the assessee, leading to further proceedings before the Tribunal in accordance with the law.

This detailed analysis of the judgment highlights the issues, legal provisions, arguments presented, and the Court's findings, ensuring a comprehensive understanding of the case and the decision rendered by the High Court.

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