2022 (3) TMI 859 - HC - VAT and Sales Tax

Levy of penalty u/s 54(1)(14) of the Uttar Pradesh Value Added Tax Act, 2008 - penalty could be sustained without recording any cogent finding as to intention to evade tax or not? - HELD THAT - It transpires that in assessment year in question the assessee was found transporting ten containers of Bitumin black from a registered dealer at Kolkata (West Bengal). These were intercepted in the course of import into the State. At that time the goods were accompanied to import declaration Form-38. In that, all columns except Column 6 was duly filled up. Besides the fact that the assessee explained the aforesaid as inadvertence on part of the consignor, the assessing authority did not record any finding as to intention to evade tax on part of the assessee. The penalty order was passed mechanically imposing penalty solely on account of Column 6 found blank. A division Bench of this Court in M/S Rama Pulses Vs State of U.P. Others 2009 (10) TMI 885 - ALLAHABAD HIGH COURT where it was held that before imposing penalty the authority has to give notice under Section 54 (1) and to record a finding either on the basis of material before it, or produced by the dealer, or any other person, or the department and which may include incomplete Form 38, (which may be a ground for seizure of the goods), that there was an intention to evade the payment of tax. In absence of any cogent finding as to intention to evade tax, levy of penalty under Section 54(1)(14) of the Act, is unsustainable - revision allowed.

Summary

Issues:
Challenge against penalty imposed under Section 54(1)(14) of the Uttar Pradesh Value Added Tax Act, 2008 for A.Y. 2008-09 without recording intention to evade tax.

Analysis:
The revisionist contested the penalty imposed by the Commercial Tax Tribunal under Section 54(1)(14) of the Act for the assessment year 2008-09. The Tribunal upheld the penalty without considering the intention to evade tax on the part of the assessee. The revision was based on the question of law regarding the imposition and sustainability of the penalty without a finding on the intention to evade tax.

Upon reviewing the case, the High Court noted that the assessee was transporting goods from a registered dealer in Kolkata, intercepted during import into the State with an incomplete import declaration Form-38. Despite the explanation provided by the assessee attributing the incomplete form to the consignor's oversight, the assessing authority did not establish any intention to evade tax. The penalty was mechanically imposed solely due to a blank entry in Column 6 of the form.

Referring to the legal precedent set by the Court in M/S Rama Pulses Vs State of U.P. & Others, the High Court emphasized that penalty under Section 54(1)(14) requires proof of intention to evade tax before imposition. The Court reiterated that the requirement of intention to evade tax remains essential for penalty imposition under the Act. Additionally, a similar stance was taken in The Commissioner of Commercial Tax, U.P. Lucknow Vs Deepak Trading Company, affirming the necessity of establishing intent before penalizing.

Consequently, the High Court held that in the absence of a clear finding on the intention to evade tax, the levy of penalty under Section 54(1)(14) is unsustainable. The question of law was resolved in favor of the assessee, leading to the allowance of the revision against the penalty imposed by the Commercial Tax Tribunal.