2021 (3) TMI 1033 - HC - VAT and Sales Tax

Revisional powers to enhance the penalty levied by the Commercial Tax Officer exercising discretionary powers vested in him under Section 53 (12) of the KVAT Act 1957 by three times - Whether the order passed by the Commercial Tax Officer imposing minimum penalty exercising discretionary powers vested in him as per Section 53(12) of the KVAT Act is erroneous? - HELD THAT - Section 53(2)(b) of the Act casts an obligation on the owner or person in charge of the goods vehicle to carry with him such documents as may be prescribed in respect of the goods carried in the goods vehicle. The consequences of non-compliance are prescribed under Section 53(12)(a) of the Act. The Commercial Tax Officer has power to levy penalty double or triple the amount of tax leviable in respect of the goods under transport in case sufficient cause is not shown. Thus the Commercial Tax Officer has discretion in the matter of imposition of penalty and the question of imposition of penalty is not automatic. In the instant case the appellant in reply to the notice issued to him proposing to levy penalty has stated that one of his relatives in Kannur Kerala had expired and therefore he had to rush to Kerala and was unable to raise a tax invoice or generate e-sugam before commencement of movement of goods. The appellant undertook to produce the books of accounts and to discharge the tax liability thereon. The aforesaid explanation was accepted by the Commercial Tax Officer as well as by the First Appellate Authority - thus Revisional Authority exceeded its power in interfering with the concurrent findings of fact recorded by the Commercial Tax Officer as well as by the First Appellate Authority and in imposing three times the penalty on the amount of tax merely on the ground that the assessee had contravened the provisions of Section 53(2)(b) of the Act. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Revisional authority's power to enhance penalty under Section 53(12) of the KVAT Act.
2. Validity of orders passed by the Commercial Tax Officer and the First Appellate Authority.
3. Interpretation of provisions of Section 53(2)(b) and Section 53(12)(a)(ii) of the KVAT Act.

Issue 1: Revisional Authority's Power to Enhance Penalty:
The appellant challenged an order enhancing penalty under Section 53(12) of the Karnataka Value Added Tax Act, 2003. The Revisional Authority justified the penalty enhancement, citing contravention of Section 53(2)(b) and Section 53(12)(a)(ii) of the Act. The appellant argued that the Commercial Tax Officer had discretion in penalty imposition and had accepted the appellant's explanation for non-compliance. Both the Commercial Tax Officer and the First Appellate Authority had accepted the appellant's explanation regarding the inability to raise necessary documents due to a family emergency. The High Court held that the Revisional Authority exceeded its power by imposing a three times penalty solely based on the contravention of Section 53(2)(b) without considering the accepted explanation.

Issue 2: Validity of Orders by Commercial Tax Officer and First Appellate Authority:
The appellant, a registered dealer in pepper and spices, faced penalty for transporting goods without proper documentation. The Commercial Tax Officer initially proposed a penalty of ?7,74,900, but reduced it to ?2,58,300 after considering the appellant's explanation. The First Appellate Authority upheld this decision. However, the Revisional Authority later enhanced the penalty back to ?7,74,900, citing contravention of Section 53(2)(b). The High Court found that the appellant's explanation was valid, and the Revisional Authority erred in disregarding the concurrent findings of the lower authorities.

Issue 3: Interpretation of Provisions of Section 53(2)(b) and Section 53(12)(a)(ii) of the KVAT Act:
Section 53(2)(b) mandates carrying prescribed documents for goods transport, with penalties under Section 53(12)(a) for non-compliance. The Act grants the Commercial Tax Officer discretion in imposing penalties, not mandating automatic penalties. In this case, the appellant's inability to produce documents due to a family emergency was accepted by the lower authorities. The High Court emphasized that penalty imposition should consider such circumstances and not be automatic. The Revisional Authority's decision to enhance the penalty solely based on contravention without considering the accepted explanation was deemed erroneous.

In conclusion, the High Court ruled in favor of the appellant, quashing the penalty enhancement order by the Additional Commissioner of Commercial Taxes. The judgment highlighted the importance of considering explanations for non-compliance before imposing penalties and the discretionary power of the Commercial Tax Officer in penalty imposition under the KVAT Act.