2019 (9) TMI 696 - HC - VAT and Sales Tax

Imposition of penalty u/s 15-A(1)(o) of the U.P. Trade Tax Act, 1948 - alleged discrepancy of issuance of the import declaration form by the assessee against the goods, actually imported by the subsidiary ITC - Whether the use of Form 31 in the name of the revisionist in case of consignment to its job worker amounts to a violation of Section 15A(1)(o) of the U.P. Trade Tax Act, 1948? HELD THAT - It is a settled position in law that for sustaining the imposition of penalty, under Section 15-A(1)(o) of the Act, the finding as to the intention to evade tax is a sine qua non . In the present case, that finding has not been recorded by the assessing authority. The penalty has been imposed and it appears that the same has been sustained by the appeal authorities, solely on account of the technical breach noted by the assessing authority, of the import declaration form having not been issued by the ITC but by the assessee. Such finding would not satisfy the test or requirement to sustain the penalty being that there must be shown to exist the intention to evade tax. The import of the goods, thus being disclosed, though by the holding company, all other matters would remain to be considered in the assessment proceedings wherein it may have been open to the authorities to draw appropriate conclusions, as to the hands at which such goods may be taxed. Thus, in absence of any finding as to intention to evade tax and the undisputed fact that the assessee was the holding company that had issued valid Form-XXXI to cover the import of goods by it's subsidiary, no penalty could have been imposed under Section 15-A(1)(o) of the Act - revision allowed.

Summary

Issues:
Penalty imposition under Section 15-A(1)(o) of the U.P. Trade Tax Act, 1948 for alleged discrepancy in issuance of import declaration form by the assessee.

Analysis:
The revisionist, an applicant-assessee, challenged the penalty order passed by the Commercial Tax Tribunal under Section 15-A(1)(o) of the U.P. Trade Tax Act, 1948. The penalty was confirmed due to a perceived discrepancy in the issuance of import declaration forms. The applicant, M/s Godfrey Phillips India Ltd., a holding company of International Tobacco Company Ltd., had manufactured packing cases for cigarettes through a third party, M/s Twenty First Century Printers Ltd. The goods were dispatched to Ghaziabad, accompanied by necessary documentation. The penalty was solely based on the discrepancy in the issuance of import declaration forms by the assessee. The revision raised the question of whether using Form 31 in the revisionist's name for consignment to its job worker violated Section 15A(1)(o) of the Act.

The Senior Counsel for the applicant argued that there was no real infringement as the import declaration forms were issued correctly on behalf of the subsidiary. It was emphasized that since the goods were duly disclosed and there was no intention to evade tax, the penalty was unjustified. On the other hand, the Standing Counsel contended that the subsidiary company, ITC, should have issued the import declaration form, not the assessee. The court noted the technical correctness of this argument but focused on whether the penalty could be imposed solely based on this discrepancy.

The court highlighted that the imposition of penalty under Section 15-A(1)(o) necessitates a finding of intention to evade tax, which was absent in this case. Despite the technical breach of the import declaration form being issued by the holding company instead of the subsidiary, the court emphasized that the intention to evade tax was crucial. Since the goods were duly disclosed and accounted for, the penalty was deemed unjustified. The court concluded that no penalty could be imposed under Section 15-A(1)(o) in the absence of any finding of intent to evade tax and considering that the holding company had issued valid Form-XXXI to cover the import of goods by its subsidiary.

In light of the above analysis, the court allowed the revision, emphasizing that the penalty imposition lacked legal basis due to the absence of evidence of intent to evade tax and the proper documentation provided by the holding company for the import of goods by its subsidiary.