2020 (1) TMI 752 - HC - VAT and Sales Tax

Waiver of penalty u/s section 54(1)(14) of the VAT Act - Form 38 was blank - contravention of the provisions of Section 50 of the Act, 2008 - HELD THAT - Perusal sub Section 6 of Section 28A itself indicates that penalty can be imposed only after giving opportunity of being heard that the goods were being so transported in an attempt to evade payment of tax due or likely to be due under the Act and therefore mens rea becomes essential ingredient - Non-filling up of column no. 6 i.e. not mentioning of bill / cash memo / chalan / invoice number may lead to an inference that in case of non-checking of goods the declaration form may be re-used for importing goods of same quantity, weight and value to evade payment of tax but it cannot be the sole ground to impose penalty under Section 54(1)(14) of the Act, 2008. Satisfaction has to be recorded after giving opportunity to the dealer / person and after considering all the relevant materials / evidences on record that there was an intention to evade payment of tax. The guilty mind is necessary to be established to impose penalty under Section 54(1)(14) of the Act, 2008. In the present case also the vehicle was accompanied by Form 38 and all other documents were being carried along with other documents and only due to human error column would remain unfilled. It was the duty of the Officer managing the Check Post who after discovering that some column of Form 38 found unfilled should have filled the same himself in the light of Circular dated 03.02.2009 and should have allowed the vehicle to proceed alongwith the goods - It is undisputed that the goods transported were the same which were mentioned in the various documents (bill/builty/challan etc.) carried by the driver of the vehicle. Revision dismissed.

Summary

Issues Involved:
1. Levy of penalty under Section 54(1)(14) of the VAT Act, 2008.
2. Compliance with the provisions of Section 50 of the VAT Act, 2008.
3. Validity and interpretation of Form 38 requirements.
4. Intention to evade tax and the necessity of mens rea for imposing penalties.
5. Role of the Check Post Officer in verifying and filling incomplete forms.

Detailed Analysis:

1. Levy of Penalty under Section 54(1)(14) of the VAT Act, 2008:
The revision was filed against the Commercial Tax Tribunal's order dated 14.05.2013, which set aside the penalty imposed on the respondent. The penalty of ?1,38,000 was initially imposed under Section 54(1)(14) of the VAT Act, 2008 due to the incomplete filling of Form 38 during the transportation of goods. The Tribunal concluded that the mere omission of filling Column 6 of Form 38 did not indicate an intention to evade tax, deeming the penalty arbitrary.

2. Compliance with Provisions of Section 50 of the VAT Act, 2008:
Section 50 mandates that any person importing goods into the state must carry a properly filled declaration form (Form 38). The driver is required to carry this form along with other relevant documents. If the goods are found without proper documentation, the authorities may detain them and impose penalties after giving the transporter an opportunity to be heard.

3. Validity and Interpretation of Form 38 Requirements:
Form 38 must include detailed information such as the dealer's name, description of goods, and bill/invoice numbers. The omission of Column 6 (bill/cash memo/challan/tax invoice number) was a recurring issue leading to penalties. The department argued that leaving this column blank facilitated tax evasion by allowing the reuse of the form for unaccounted goods. However, the Tribunal found that the respondent had obtained Form 38 and the omission was due to human error, not an intention to evade tax.

4. Intention to Evade Tax and Necessity of Mens Rea for Imposing Penalties:
The judgment referenced the case of Jain Suddh Vanaspati Ltd. Vs. State of U.P., which held that penalties could only be imposed if there was material evidence indicating an attempt to evade tax. The mere absence of proper documentation was insufficient for assuming tax evasion. The court emphasized that mens rea (guilty mind) is an essential element for imposing penalties under Section 54(1)(14). The Tribunal's finding that there was no intention to evade tax was upheld, as it was not perverse or based on irrelevant material.

5. Role of the Check Post Officer in Verifying and Filling Incomplete Forms:
The respondent's counsel cited a Circular dated 03.02.2009, which instructed Check Post Officers to fill in any unfilled columns of Form 38 based on other accompanying documents and release the goods. The court noted that the officer should have filled the blank column instead of imposing a penalty, as all other documents matched the goods being transported.

Conclusion:
The High Court dismissed the revision, affirming the Tribunal's order and finding no merit in the revenue's arguments. The judgment clarified that penalties under Section 54(1)(14) require evidence of an intention to evade tax and that procedural errors alone do not justify penalties. The Check Post Officer's duty to complete incomplete forms based on available documents was also emphasized, reinforcing the need for a fair and reasonable approach in tax enforcement.