2018 (12) TMI 769 - HC - VAT and Sales Tax

Penalty u/s 15A(1)(o) of the U.P. Trade Tax Act, 1948 - intent to evade tax - Held that - There does not appear to be recorded any finding of fact as to intention to evade tax on part of the assessee. In fact the assessing authority had recorded a finding that it could not be said there was no intention to evade payment of tax. For a valid levy of penalty, a positive finding as to intention to evade tax was a sine qua non. Penalty could not be imposed on a mere possibility of intention to evade tax. The discrepancy noted in the invoice and the Import Declaration Form No. 31 may have been relevant to make further inquiry. However, it did not itself lead to a finding that the Import Declaration Form contained incorrect or false disclosure. That was a matter to be inquired by the authority at the relevant time. That not being done, the inference drawn by the Tribunal as to intent to evade tax is perverse. Decided in favor of the assessee and against the revenue - revision allowed.

Summary

Issues:
Assessment of penalty under Section 15A(1)(o) of the U.P. Trade Tax Act, 1948 for the assessment year 2003-04 based on the import of goods from Nepal.

Analysis:

1. The revision was filed by the assessee challenging the penalty imposed under Section 15A(1)(o) of the Act for importing goods from Nepal. The penalty was affirmed by the First Appeal Authority and the Tribunal. The questions of law were framed regarding the findings of infringement of Section 28-A of the Act and the intention to evade tax.

2. The Senior Counsel for the assessee argued that the discrepancy in the description of the consignee did not establish an intention to evade tax. The Tribunal's reasoning was contradictory as there was no evidence of tax evasion, and the necessary documents were in order, including the Import Declaration Form-31 and trip sheet.

3. The assessee complied with the Act and Rules by correctly describing the consignee in the prescribed documents. The minor discrepancies were reconciled, and any inadvertent errors were clarified as part of international trade practices. The Tribunal's emphasis on the invoice and bill of entry over the statutory Form-31 was disputed.

4. The Standing Counsel contended that consistent description in all documents was necessary to determine the import location. However, the absence of a finding of evasion and the lack of evidence favoring the invoice and bill of entry were highlighted. The Tribunal's failure to establish intent to evade tax was noted.

5. The Court observed that no finding of fact regarding the intention to evade tax was recorded. A positive finding of such intent was crucial for a valid penalty levy. Emphasizing the importance of prescribed documents under Rule 83(4), the Court held that the discrepancy did not automatically imply false disclosure in the Import Declaration Form.

6. The Tribunal's finding, if accepted, would place the transaction outside the Act's jurisdiction, involving goods imported from Nepal through Haryana with U.P. as a transit state. Consequently, the Court answered both questions in favor of the assessee and allowed the revision, directing the refund of the penalty amount deposited during the proceedings.

This detailed analysis of the judgment highlights the key arguments, legal principles, and the Court's reasoning in deciding the issues raised regarding the penalty imposed under the U.P. Trade Tax Act.