2018 (2) TMI 767 - HC - VAT and Sales Tax

Penalty u/s 15-A (I)(o) of the Act - case of petitioner is that Form-31 is to be filled by seller and merely for the reason that details are not correctly filled, it would not mean that there was intention to evade payment of tax - whether penalty justified? - Held that - Tribunal, however, has observed that there is no check post between Faridabad and Noida, therefore, possibility of misuse of Form-31 cannot be ruled out. The specific finding by the first appellate authority that there was no such misuse of form-31 by the assessee in the past, has neither been dealt with nor has been reserved. Even otherwise sales and purchase of earth moving equipments and its spare parts are made through banking transactions and are subject to the provisions of Central Excise Act. The mere fact that cheque number is not specified in the order of first appellate authority would not justify inference that the transaction was not a banking transaction. Tribunal is not justified in restoring penalty upon the assessee under Section 15-A (i)(o) - decided in favor of assessee.

Summary

Issues involved:
1. Legality of Trade Tax Tribunal's decision in restoring penalty
2. Justification of Trade Tax Tribunal's decision in allowing the department's appeal
3. Liability of the purchasing dealer for the selling dealer's mistake

Issue 1: Legality of Trade Tax Tribunal's decision in restoring penalty
The revisionist, an assessee, challenged the Trade Tax Tribunal's decision restoring a penalty imposed by the assessing authority under Section 15-A (I)(o) of the Act. The Tribunal reversed the first appellate authority's decision, citing the incomplete Form-31 and the absence of cheque details as reasons for potential tax evasion. However, the first appellate authority had found no intention to evade tax, considering the transaction's genuineness backed by Form-C, proper accounting, and cheque payment. The Tribunal's reasoning lacked sufficient evidence and failed to address the absence of misuse instances by the assessee in the past. The Tribunal's decision was deemed unjustified as it did not reverse the first appellate authority's findings, leading the High Court to rule in favor of the assessee, holding the Tribunal's restoration of the penalty as unjustified.

Issue 2: Justification of Trade Tax Tribunal's decision in allowing the department's appeal
The Trade Tax Tribunal's decision to allow the department's appeal, despite the department's absence during proceedings, raised concerns regarding procedural fairness. The Tribunal's actions, including raising grounds not presented by the department and disregarding the applicant's counsel's submissions, were questioned. The Tribunal's independent decision-making without department representation and consideration of unraised grounds was deemed unjustified. The lack of departmental representation and the Tribunal's deviation from presented arguments undermined the fairness and legality of the decision, leading to doubts about the Tribunal's impartiality and adherence to due process.

Issue 3: Liability of the purchasing dealer for the selling dealer's mistake
The case involved a registered dealer purchasing goods against Form-C, where the selling dealer failed to fill Form-31 completely, leading to penalty proceedings. The assessing authority suspected tax evasion due to incomplete documentation but the first appellate authority found no such intent, considering proper documentation, cheque payment, and past compliance. The High Court highlighted the absence of misuse instances by the purchasing dealer and the genuine nature of the transaction. The Tribunal's focus on incomplete forms and lack of cheque details overlooked the overall transaction integrity, leading to an unjust penalty restoration. The High Court emphasized the need for a holistic assessment of circumstances beyond form discrepancies to determine tax evasion intent and dealer liability, ultimately ruling in favor of the purchasing dealer against the penalty restoration.