2019 (11) TMI 667 - HC - VAT and Sales Tax

Imposition of penalty on the assessee under Section 54(1)(14) of the U.P. Value Added Tax Act, 2008 - Whether authorities are justified in imposing penalty under Section 54 (1) (14) of the U.P. Value Added Tax Act, 2008 without assigning reasons to support the finding of intention to evade payment of tax? - principles of natural justice - HELD THAT - The finding of intention to evade tax had been recorded by the assessing authority on account of various fields of Import Declaration Form being found blank and the vehicle description being overwritten on that Form. The assessing authority also disbelieved the explanation furnished by the assessee on the strength of the excise documents and the fact that the assessee was a manufacturer. It is material to note that, in the present case, undisputedly, the assessee is a manufacturer who is found to have paid excise duty and additional duties and cess at the rate of 10.30 percent amounting to ₹ 20,630.85 against invoice no. 687. Similarly, duty had been paid against the other invoice - Again, it is undisputed that the assessee was a manufacturer of excisable goods for which the goods forming subject matter of penalty proceedings were raw material. Therefore, it cannot be disputed that the assessee would have been entitled to avail CENVAT with respect to the duty paid on such raw material. It is not the case of the revenue that the assessee was engaged in clandestine import and sale of sponge iron. In absence of such allegation, the explanation offered by the assessee merited very serious consideration than has been offered by the assessing authority or the Tribunal. The Tribunal has merely rejected the explanation and relied heavily on the fact that the Import Declaration Form was left blank in material fields. Once it was not disputed that the excise documents were accompanied with the goods which disclosed payment of excise duty and it was also admitted to the revenue that the assessee was engaged in manufacture of goods wherein the goods being imported were to be used as raw material, the Tribunal ought to have given more meaningful consideration to this material and its consequences, before dismissing the appeal filed by the assessee - before reaching a positive conclusion as to existence of mens rea or guilty intention of mind, the Tribunal must carefully weigh all material available on record and examine their consequence in light of the law laid down by this Court and in the context of the fact allegations made by the revenue. The matter is remitted to the Tribunal to decide the appeal afresh, preferably within a period of three months from today on the strength of the evidence available on record - revision allowed by way of remand.

Summary

Issues:
1. Imposition of penalty under Section 54(1)(14) of the U.P. Value Added Tax Act, 2008 without clear reasons for intention to evade tax.

Analysis:
The High Court of Allahabad heard a revision filed by an assessee against the Commercial Tax Tribunal's order sustaining a penalty imposed under Section 54(1)(14) of the U.P. Value Added Tax Act, 2008. The assessee, engaged in manufacturing iron and steel products, imported raw materials, including sponge iron, which were detained and seized for alleged violation. The revenue authorities imposed a penalty, suspecting an intention to evade tax based on blank fields in the Import Declaration Form and overwriting on the vehicle description. The assessee contended that it paid excise duty and additional duties, being a manufacturer, and was entitled to CENVAT credit. The High Court emphasized the need for authorities to provide clear reasons supporting the finding of intention to evade tax before imposing penalties, citing a previous judgment. The Court highlighted the importance of considering all evidence and consequences before concluding on the existence of mens rea or guilty intention, directing the Tribunal to reevaluate the appeal based on the available evidence within three months.

In the detailed analysis, the Court noted that the assessee had paid excise duty on the imported goods, which were raw materials for manufacturing iron and steel products. The Court highlighted that the assessee, being a manufacturer, was entitled to CENVAT credit and that the goods imported were taxable at a specific rate under the Central Sales Tax Act. The Court criticized the Tribunal for not giving due consideration to the excise documents accompanying the goods and the nature of the assessee's business before dismissing the appeal. Emphasizing the importance of establishing intention to evade tax based on concrete evidence, the Court set aside the Tribunal's order and remitted the matter for a fresh decision, stressing the need for a thorough examination of all available material and legal precedents.