2019 (7) TMI 1137 - HC - VAT and Sales Tax

Imposition of penalty u/s 47(6) of the Kerala Value Added Tax Act, 2003 - failure on the part of the revision petitioner in making the declaration with respect to goods imported - failure to accompany the transport with Form 8FA declaration - HELD THAT - Going through Section 47(2) of the Act, such an irregularity is sufficient enough to create a suspicion in the mind of the intercepting authority with respect to attempt at evasion of payment of tax. But, while taking the enquiry under sub-section (6) of Section 47, the authority is bound to make a probe in order to arrive at a finding that there existed an attempt for evasion for payment of tax, at the time when the transport was made. The failure to accompany the transport with Form 8FA declaration will definitely create a presumption, with respect to the attempt at evasion of payment of tax. In the case at hand, the original authority who passed the penalty order had verified the documents produced. But the finding rendered by him is only to the effect that there occurred failure to declare the goods and in furnishing Form 8FA declaration and that the furnishing of the bill of entry will not ensure accountability of the transaction. The question as to whether the non-declaration was purposeful or not, is a matter which require detailed enquiry. If the dealer could able to prove that the transaction in question was recorded in the regular books of accounts, even before commencement of the transport, and there was no intention to evade payment of tax at that time, it has to be accepted that the presumption regarding attempt at evasion of payment of tax will be rebutted. The matter requires a reconsideration at the hands of the Enquiring Authority, dehors the conclusion arrived by the Appellate Authority - petition allowed by way of remand.

Summary

Issues Involved:
1. Legality of imposing a penalty under Section 47(6) of the Kerala Value Added Tax Act, 2003 (KVAT Act).
2. Compliance with the requirement of Form 8FA declaration under Rule 66(6)(ba) of the KVAT Rules, 2005.
3. Determination of whether there was an attempt to evade tax.
4. Validity of the procedures followed by the Enquiry Officer and Appellate Authorities.

Detailed Analysis:

1. Legality of Imposing a Penalty under Section 47(6) of the KVAT Act:
The revision petition challenges the penalty imposed by the Kerala Value Added Tax Appellate Tribunal under Section 47(6) of the KVAT Act. The Tribunal confirmed the penalty for the petitioner’s failure to comply with the statutory requirements during the transportation of goods. The Intelligence Inspector intercepted the vehicle and found irregularities, leading to the demand for security under Section 47(2) of the KVAT Act. The petitioner contested the detention notice, but the Tribunal upheld the penalty, emphasizing the mandatory nature of the Form 8FA declaration.

2. Compliance with the Requirement of Form 8FA Declaration:
The Intelligence Inspector found that the petitioner failed to append the required Form 8FA declaration as per Section 46(3)(e) of the KVAT Act and Rule 66(6)(ba) of the KVAT Rules. The petitioner argued that the goods were imported from China and cleared with all requisite documents, including the bill of entry. However, the Enquiry Officer and subsequent appellate authorities found that the petitioner did not comply with the mandatory requirement of accompanying the transport with Form 8FA declaration, which raised suspicions of tax evasion.

3. Determination of Whether There Was an Attempt to Evade Tax:
The Enquiry Officer concluded that the petitioner purposefully avoided declaring the goods to evade tax, despite the petitioner’s argument that the sale was properly accounted for and documented. The Tribunal and Appellate Authority supported this conclusion, stating that the failure to accompany the transport with Form 8FA declaration indicated an intention to evade tax. The Tribunal noted that the petitioner was aware of the requirement, as evidenced by the generation of Form 8FA for another consignment transported simultaneously.

4. Validity of the Procedures Followed by the Enquiry Officer and Appellate Authorities:
The petitioner contended that the Enquiry Officer did not demand further documents to prove the absence of tax evasion and that the statement of the driver confirmed the genuineness of the transaction. The Tribunal, however, found that the petitioner’s failure to declare the goods and furnish Form 8FA created a presumption of tax evasion. The burden to rebut this presumption lay on the petitioner, who failed to prove that the transaction was recorded in the books of accounts before the commencement of transport.

Conclusion:
The Court concluded that the matter required reconsideration by the Enquiring Authority to verify whether the non-declaration was purposeful or due to inadvertence. The revision petition was allowed to the extent of setting aside the Tribunal’s order and the original penalty order. The case was remitted to the Intelligence Officer for a fresh order, considering the observations made by the Court and after affording a reasonable opportunity to the petitioner. The new order should be passed within two months from the date of receipt of the judgment.