2020 (4) TMI 74 - HC - VAT and Sales Tax

Imposition of penalty u/s 47(6) of the Kerala Value Added Tax Act - only reason for imposing penalty by the Enquiring Authority is for not providing Form 8FA during transit - intent to evade tax or not - HELD THAT - The Enquiry Authority had come to a clear finding that the goods happened to be intercepted during transit. If the goods had reached the go-down and books of account were not prepared in accordance with the bill of entry or transaction was not disclosed, there was no possibility of the department coming to know about the transaction unless the import documents are verified from the customs authority. Therefore as far as the declaration in Form 8FA is concerned, it is mandatory and if any transportation is not accompanied by the said Form, it is reasonable to conclude that there is an attempt to evade tax. It is not actual evasion of tax as contemplated in the books, but it is an attempt. Probably it might be an omission. But as far as the Department is concerned, the reasonable view that the Department could take is that there is an attempt to evade tax. The Tribunal was justified in arriving at a conclusion that the appellate authority had committed error in setting aside the order of penalty. However, it is seen that double the amount of tax was imposed as penalty - The quantum of penalty is reduced. Appeal allowed in part.

Summary

Issues:
Challenge to imposition of penalty under Section 47(6) of the Kerala Value Added Tax Act based on failure to provide Form 8FA during transit.

Analysis:
The revision petitioner contested the penalty imposed by the Enquiring Authority, arguing that the absence of Form 8FA during transit was a mere mistake and not indicative of tax evasion. The 1st Appellate Authority found no malafides or intent to evade tax, setting aside the penalty. However, the Tribunal reversed this decision without valid reasons. The petitioner's counsel emphasized that a penalty should only be imposed for clear attempts to evade tax, not for inadvertent errors. The petitioner's transparent transaction details, including bank statements and bill of entry, supported the lack of malafide intent. The failure to provide Form 8FA was attributed to a bona fide omission by the transporter.

The Government Pleader contended that the absence of Form 8FA during transit, a mandatory declaration under the KVAT Act, indicated an attempt to evade tax. Citing a previous judgment, the Pleader argued that such omissions could be construed as evasion, emphasizing the importance of maintaining required documents during transportation.

The petitioner relied on a judgment directing an enquiry into intentional tax evasion and the necessity of maintaining proper records before transportation. The absence of import entries in the petitioner's books of account before transportation was highlighted. The key issue was whether the failure to provide Form 8FA constituted an attempt to evade tax, requiring an objective enquiry to prevent the provision from becoming redundant.

Referring to a similar case, the Government Pleader supported the penalty imposition. The Tribunal upheld the penalty, considering that the goods were intercepted during transit, indicating a potential attempt to evade tax. While acknowledging that the penalty was justified, the Court reduced it to an amount equal to the tax payable, considering the factual circumstances. The decision aimed to balance the penalty with the tax liability, ultimately allowing the revision in part and sustaining the Tribunal's order while reducing the penalty amount.