2020 (1) TMI 748 - HC - VAT and Sales Tax

Validity of revision - imposition of penalty - Form-31/documents prescribed for inter-State sale not produced - revision relates to assessment year 2005-06 - HELD THAT - It is clear that the First Appellate Authority has recorded findings of fact that the goods were being imported for production of non taxable goods and therefore import of said machine is not liable to be taxed - Secondly, that the said machine was not found in working condition and therefore the same was returned to M/s Disha Enterprises, therefore there was no sale on which such penalty can be imposed. Aforesaid facts, in the opinion of this Court, should have been considered by the Tribunal in their proper perspective and in case explanation given by the revisionist are accepted, then it is clear that it indicates that there was no intention to evade tax. Though the Tribunal was not relying on any document which may have given rise of any occasion for the assessing authority to initiate such proceedings, but looking into the fact that the revisionist at the very first instance produced the entire documents before the assessing authority, indicates that the revisionist fulfilled all the conditions as prescribed under the Act, 1948 and even then penalty has been imposed by the assessing authority. Thus, it is clear that there was no clear finding recorded by the authorities concerned to the effect that there was intention to evade tax under the Act. The finding of fact recorded by the Tribunal have not been rebutted by the revenue and therefore they have attained finality - It is clear that the machine in question was found not in working condition and has been returned back and even otherwise no concluded transaction took place on which penalty could have been imposed by the revenue. Revision allowed.

Summary

Issues:
Challenge to order imposing penalty under Section 15A of the Act, 1948 for non-carrying of relevant documents during transportation leading to detention of goods.

Analysis:
The revisionist, a partnership firm engaged in textile business, challenged an order imposing penalty for non-carrying of necessary documents during transportation of goods. The revisionist purchased a machine from Mumbai for production of non-taxable goods, but the driver inadvertently left behind critical papers during transportation. The goods were detained, and a penalty of ?1,99,923 was imposed by the assessing authority under Section 15A(1)(o) of the Act, 1948. The First Appellate Authority reduced the penalty to ?99,223, considering the revisionist's explanation that there was no intent to evade tax. Both the revisionist and the revenue appealed to the Trade Tax Tribunal, which upheld the penalty as modified by the First Appellate Authority.

The Tribunal's decision was based on the finding that the revisionist's failure to carry the relevant documents indicated an intention to evade tax. However, the revisionist argued that the machine was not in working condition and was returned, negating any taxable transaction. The Tribunal upheld the reduced penalty without considering crucial factors such as the non-taxable nature of the goods and the absence of a completed sale transaction.

The High Court analyzed legal precedents emphasizing that penalties can only be imposed if there is a clear finding of intent to evade tax. The Court noted that the revisionist promptly produced all documents before the assessing authority, demonstrating compliance with legal requirements. The Court criticized the lack of a definitive finding on tax evasion by the authorities, highlighting that the Tribunal's findings were unchallenged by the revenue. Additionally, the Court emphasized that no taxable transaction occurred due to the machine's return and non-functionality.

Relying on legal judgments emphasizing the necessity of a clear intent to evade tax for penalty imposition, the High Court allowed the revision, setting aside the Tribunal's order and relieving the revisionist of the penalty. The Court concluded that the absence of a completed sale transaction, coupled with the machine's non-working condition and return, invalidated the imposition of the penalty under Section 15A of the Act, 1948.

This detailed analysis showcases the legal intricacies surrounding the penalty imposition in the context of non-carrying of essential documents during transportation and the necessity of proving intent to evade tax for such penalties.