2019 (7) TMI 1241 - HC - VAT and Sales Tax

Imposition of Penalty u/s 15A(1)(o) of the U.P. Trade Tax Act, 1948 - clerical error in filling up the invoice of the Form-31 - intent to evade present or not - demand of penalty at the maximum rate - whether demand of penalty is wholly excessive and arbitrary? - HELD THAT - The assessee had disclosed import of 67 bags of P.P. fabric. It is not the case of the revenue that 25 bags of unlaminated P.P. fabric were found over and above the consignment of 67 bags of the P.P. fabric. Thus, if there was undisclosed consignment of 25 bags of unlaminated P.P. fabric found being imported by the assessee, then at the same time, necessarily there was over disclosure of 25 bags of laminated P.P. fabric as the assessee had disclosed 67 bags of laminated P.P. fabric against 42 bags of laminated P.P. fabric. The demand of penalty @ 40% is found to be excessive. While normally the Court would remit the proceedings to appeal authority, however, keeping in mind the fact that the penalty is for A.Y. 2000-01 and the amount of penalty is not heavy, I am inclined to dispose of the present revision with the observation that the Tribunal may pass appropriate order to confine the penalty to ₹ 25,000/- (in all) - The balance amount, deposited in excess, may be refunded to the assessee. Revision allowed in part.

Summary

Issues involved:
Assessment of penalty under Section 15A(1)(o) of the U.P. Trade Tax Act, 1948 for the A.Y. 2000-01 based on undisclosed import of 25 bags of unlaminated P.P. fabric, intention to evade tax, excessive penalty imposition, and appropriate penalty amount determination.

Analysis:

1. Assessment of Penalty:
The revision was filed against the Trade Tax Tribunal's order sustaining a penalty imposed on the assessee for importing 25 bags of unlaminated P.P. fabric without disclosure. The Tribunal upheld the penalty at the maximum rate of 40% of the goods' value. The assessee argued that a clerical error in not disclosing the bifurcation of fabric types did not indicate an intention to evade tax. The revenue contended that the penalty was justified due to the undisclosed consignment. The High Court noted that while the penalty was excessive, it was undisputed that the assessee had disclosed the total import of 67 bags of P.P. fabric.

2. Intent to Evade Tax:
The assessing authority found no clerical error in the invoice filling and concluded that the undisclosed 25 bags of fabric indicated an intent to evade tax. This finding was upheld by the appeal authority and the Tribunal. The Court acknowledged the discrepancy but highlighted that the undisclosed bags were offset by an over-disclosure of laminated P.P. fabric. The Court considered the intent to evade tax established due to the non-disclosure of 25 bags of unlaminated fabric.

3. Excessive Penalty Imposition:
The Court found the 40% penalty excessive given the circumstances and the offsetting nature of the undisclosed bags against the over-disclosed bags. While typically remitting such cases to the appeal authority, the Court decided to limit the penalty to ?25,000 due to the A.Y. 2000-01 timeline and the penalty amount not being substantial. The excess amount deposited was to be refunded to the assessee, concluding that the excessive penalty imposition was unwarranted.

4. Determination of Appropriate Penalty Amount:
Considering the circumstances and the offsetting nature of the undisclosed and over-disclosed bags, the Court determined an appropriate penalty amount of ?25,000. This decision was based on the recognition that the penalty was for a specific assessment year and the penalty amount was not substantial. The Court directed the Tribunal to adjust the penalty accordingly and refund the excess amount to the assessee.

In conclusion, the High Court partly allowed the revision, answering the legal questions in favor of both the revenue and the assessee. The judgment highlighted the importance of considering all aspects of the case to determine a fair and appropriate penalty amount, taking into account the specific circumstances and the intent behind the non-disclosure.