2021 (8) TMI 546 - HC - VAT and Sales Tax

Levy of penalty u/s 47(6) of KVAT Act - failure to carry a declaration in Form 8FA - HELD THAT - Admittedly, the goods in transit were not accompanied by Form 8FA declaration. Rule 66(6)(ba) of the KVAT Rules, 2005 read with section 46(3)(e) of the Act provides for carrying declaration under Form 8FA while the imported goods are transported within the state. When the imported goods are not declared in the manner prescribed by the Act and the Rules, it opens a window of an opportunity to the dealer to suppress the transaction. Whether an actual suppression has taken place or not is not required to be considered when penalty is sought to be levied under section 47(6) of the Act. As held by the Division Bench of this Court in POLYMER DESIGNS AND MOULDINGS VERSUS STATE OF KERALA 2020 (4) TMI 74 - KERALA HIGH COURT , Form 8FA is mandatory and when the goods transported are not accompanied by the said declaration, it is only reasonable to conclude that there is an attempt to evade tax. Since the statute makes even an attempt to evade tax as penal, we are of the considered view that the imposition of penalty for failure to carry a declaration in Form 8FA is wholly justified in the circumstances of the case. Quantum of penalty - HELD THAT - Though the technical omission of carrying Form 8FA declaration is penal, the circumstances of the case do not justify imposition of the quantum of penalty as was done by the Intelligence Officer. A minimal penalty alone ought to have been imposed in the instant case. Having regard to the circumstances of the case and the nature of the transaction involved in the case, an amount of ₹ 15,000/- alone ought to have been imposed as a penalty. The quantum of penalty is reduced - question of law framed is answered and the revision petition is allowed in part.

Summary

Issues:
Imposition of penalty under section 47(6) of the Kerala Value Added Tax Act, 2003 for failure to carry a declaration in Form 8FA during the transportation of imported religious articles.

Detailed Analysis:

1. Imposition of Penalty for Failure to Carry Form 8FA:
The petitioner, a congregation of clergy running a publishing house selling religious books and articles, imported goods without the required Form 8FA declaration. The Intelligence Officer imposed a penalty of Rs. 1,22,985 under section 47(6) of the Act, suspecting an attempt to evade tax due to the missing declaration. The Tribunal upheld the penalty, leading to the petitioner filing a revision petition questioning the justification of the penalty.

2. Arguments and Counter-arguments:
The petitioner's counsel argued that the penalty for the inadvertent omission of Form 8FA was unwarranted, emphasizing the absence of any intent to evade tax. Referring to legal precedents, the counsel contended that a mere default should not automatically attract a penalty without mens rea. On the contrary, the Senior Government Pleader argued that the failure to produce Form 8FA declaration makes the assessee liable for penalty, citing the mandatory nature of the form and the presumption of tax evasion in such cases.

3. Court's Decision on Penalty Imposition:
The Court acknowledged the mandatory requirement of Form 8FA for transporting imported goods under the Act and Rules. It noted that the absence of the declaration could create an opportunity for tax suppression, making the penalty imposition justifiable. Citing previous rulings, the Court emphasized that even an attempt to evade tax is penal under the statute, supporting the penalty imposition for non-compliance with Form 8FA.

4. Reduction of Penalty Quantum:
While upholding the penalty imposition, the Court found the original penalty amount excessive considering the nature of the petitioner's business and the circumstances. It opined that a minimal penalty was more appropriate in this case. Consequently, the Court reduced the penalty amount from Rs. 1,22,985 to Rs. 15,000, considering the specific details and context of the case.

5. Conclusion:
In conclusion, the Court allowed the revision petition in part, affirming the penalty imposition but modifying the quantum of the penalty to Rs. 15,000 instead of the original amount. The judgment clarified the legal stance on Form 8FA compliance, balancing the penalty imposition with the individual circumstances and nature of the transaction involved in the case.