2022 (7) TMI 349 - HC - VAT and Sales Tax

Levy of penalty under Section 54(1)(14) of U.P. Value Added Tax Act, 2008 - penalty levied on the sole ground that the Column No. 6 of Form - 38 was left blank in contravention to provisions of Section 50 of the Act, 2008 - intent to evade tax or not - HELD THAT - It is noticed that the goods were being carried with all the relevant documents from which the goods could be identified and more specifically the goods were accompanied by Form - 38 issued by the Punjab Government as the goods were being transported as measure of stock transfer and in such transaction as there is no element of sale and hence not Liable for levy of Sales tax and therefore it cannot be said that there was any intention to evade tax. The revenue has also not denied that the revisionist had produces From - 38 Issued by the Excise and Taxation department Punjab, or that the goods were not being transferred as measure of Stock Transfer, and there is no other material or any reason to come to a conclusion that there was any intention to evade tax. Merely because the Column 6 of Form - 38 was blank the penalty has been imposed despite the fact that there is no other material to show that there was any intention to evade tax and therefore the findings recorded in the penalty order as well as the in impugned appellate order are clearly perverse and contrary to record and hence are set aside. This Court is of the considered view that the case of the revisionist is covered by the judgment in the case of THE COMMISSIONER COMMERCIAL TAX U.P. LUCKNOW VERSUS S/S DEEPAK TRADING CO. GHAZIABAD 2020 (1) TMI 751 - ALLAHABAD HIGH COURT has held that Non-filling up of column no. 6 i.e. not mentioning of bill / cash memo / chalan / invoice number may lead to an inference that in case of non-checking of goods the declaration form may be re-used for importing goods of same quantity, weight and value to evade payment of tax but it cannot be the sole ground to impose penalty under Section 54(1)(14) of the Act, 2008. The revision is allowed.

Summary

Issues:
1. Interpretation of Section 50 of the U.P. Value Added Tax Act, 2008 regarding penalty for non-compliance with Form-38 requirements.
2. Determination of intention to evade tax based on incomplete Form-38 documentation during the transportation of goods for stock transfer.
3. Application of relevant case laws in assessing penalty for non-compliance with tax regulations.

Issue 1: Interpretation of Section 50 of the U.P. Value Added Tax Act, 2008

The judgment involved a revision under Section 58 of the U.P. Value Added Tax Act, 2008, challenging a penalty imposed for non-compliance with Form-38 requirements during the transportation of goods. The revisionist, a registered company engaged in trading medicines, was transporting goods when a show cause notice was issued due to an incompletely filled Form-38. The key contention was whether leaving Column No. 6 of Form-38 blank, as per Section 50 of the Act, indicated an intention to evade tax. The revisionist argued that all necessary details were present, and the blank column did not signify tax evasion.

Issue 2: Determination of intention to evade tax for stock transfer goods

The second issue revolved around whether the transportation of goods for stock transfer, accompanied by relevant documents like Form-36 from the Punjab Government, indicated an intention to evade tax. The revisionist asserted that the goods were being transferred within their network of wholesalers and retailers as stock transfer, devoid of any sales element. Citing a previous court judgment, the revisionist argued that the mere absence of information in Column 6 of Form-38 should not lead to penalty imposition without clear evidence of tax evasion intent.

Issue 3: Application of case laws in assessing penalty for non-compliance

The judgment extensively referred to prior court decisions to analyze the penalty imposition for incomplete documentation during goods transportation. Notably, the court cited the case of Commissioner of Commercial Tax vs Deepak Trading Company Ghaziabad, emphasizing the necessity of establishing an intention to evade tax before imposing penalties. The court differentiated the present case from Multitex Filtration Engineering Ltd. vs. Commissioner of Commercial Tax, highlighting the distinction between stock transfers and sales transactions. Ultimately, the court found that the revisionist's case aligned with the principles outlined in previous judgments, leading to the setting aside of the penalty order and appellate decisions due to the lack of evidence supporting an intention to evade tax.

This detailed analysis of the judgment showcases the court's meticulous examination of the legal provisions, factual circumstances, and precedent cases to arrive at a well-reasoned decision regarding the penalty imposition for non-compliance with tax regulations during the transportation of goods.