2021 (3) TMI 1032 - HC - VAT and Sales Tax

Levy of penalty under Section 53(12)(a)(i) of the KVAT Act - Non-reporting at the Checkpost in terms of Section 53(2) of the KVAT Act despite the Petitioner showing sufficient cause - presumption is that the Petitioner had attempted to transport the goods the State of Tamilnadu which was in fact stock transferred to the branch situated at Attibele supported with all the prescribed documents - levy of penalty while the Petitioner complied with the requirements of Section 53(2-A) by entering the stipulated details in the official website of the Commercial Taxes Department and generating E-Sugam much before the commencement of movement of goods - HELD THAT - Various contentions raised by the appellant have not been considered. The levy of penalty is not automatic, but is discretionary in nature. Therefore, the matters which have a material bearing on the issue of levy of penalty have not been considered either by the Commercial Tax Officer or by the First Appellate Authority and the Tribunal. Therefore, in the facts of the case, it is deemed appropriate to remit the matter for consideration afresh and to take a decision on the stand taken by the petitioner, supra, by a reasoned order. The matter is remitted to the Tribunal for decision afresh after affording opportunity of hearing to the parties and taking note of the submissions made on behalf of the petitioner - Petition allowed by way of remand.

Summary

Issues:
1. Interpretation of penalty under Section 53(12)(a)(i) of the Karnataka Value Added Tax Act.
2. Treatment of stock transfer and compliance with Section 53(2-A) requirements.
3. Consideration of bonafide mistake by the driver and genuineness of the transaction.

Issue 1: Interpretation of Penalty under Section 53(12)(a)(i)
The petitioner challenged the penalty imposed under Section 53(12)(a)(i) of the KVAT Act by the Karnataka Appellate Tribunal. The substantial questions of law raised focused on the Tribunal's treatment of the penalty as automatic for not reporting at the Checkpost despite the petitioner showing sufficient cause. The petitioner argued that the penalty should not have been presumed automatically, especially when compliance with Section 53(2) requirements was demonstrated. The Tribunal's decision to confirm the penalty was based on the presumption of goods being transported to another state, leading to an alleged attempt to evade taxes.

Issue 2: Treatment of Stock Transfer and Compliance
The petitioner contended that the transaction in question was a stock transfer exempted from tax under the Act. It was highlighted that all necessary details, including e-sugam generation and reporting on the Commercial Tax website, were completed before the movement of goods. Despite the driver's inadvertent mistake in route selection, the petitioner emphasized the genuineness and compliance with Section 53(2-A) requirements. The petitioner argued that the authorities failed to consider these crucial aspects, leading to the unjust imposition of the penalty.

Issue 3: Consideration of Bonafide Mistake and Genuineness
The petitioner underscored the driver's bonafide mistake in route navigation, which resulted in the vehicle being intercepted at the check-post. It was emphasized that there was no intention to evade taxes, as the transaction was duly recorded and reflected in the books of accounts. The petitioner also raised the point that immediate checks at the Tamilnadu Entry Checkpost would prevent any tax evasion attempt. The High Court, after considering both parties' submissions, concluded that the matter required a fresh consideration by the Tribunal to assess the petitioner's stand and the discretionary nature of penalty imposition. The Court quashed the Tribunal's order and remitted the matter for a reasoned decision, emphasizing the need to consider all relevant aspects before imposing penalties.

In conclusion, the High Court's judgment focused on the proper interpretation of penalty provisions, treatment of stock transfers, compliance with statutory requirements, and the consideration of bonafide mistakes in tax matters. The Court emphasized the discretionary nature of penalty imposition and the importance of a thorough evaluation of all relevant factors before levying penalties under the KVAT Act.