2023 (1) TMI 735 - HC - VAT and Sales Tax

Levy of penalty - levy based on on conjectures and surmises - transaction was duly recorded in books of accounts and accompanied by Form C and payment were made through Banking channel - HELD THAT - This Court finds that merely on the basis of presumption and statement of the truck driver which was carrying the goods, penalty proceedings have been initiated by the assessing officer. The taxing department did not have any material on record so as to hold that there was any violation by the dealer in bringing the goods from outside the State of U.P. The Form 38 which was accompanying the goods was filled and all the tax invoice alongwith the bilti and transporter's bill was there when the truck was intercepted by mobile squad on 04.08.2016. Moreover, the statement of a truck driver cannot be the basis for initiating the penalty proceedings. The statement of truck driver which has been recorded by the officer of the department is not corroborated by any proof and the said statement cannot be relied upon for initiating the penalty proceedings. This Court finds that the action of the taxing department was not justified in initiating penalty proceedings without any material on record - The statement of a driver cannot be sole basis for initiation of penalty proceedings and no intention to evade the tax can be established from the statement of driver when the entire documents are there on record. This Court further finds that the Tribunal itself has recorded a finding that it could not be ascertained whether the truck was unloaded at Mathura or not. Once the department has not shown whether the goods were being brought at Mathura from outside the State of U.P. no question of penalty proceedings can arise. The order of Tribunal is unsustainable in the eyes of law and same is hereby set-aside - Revision allowed.

Summary

Issues:
Assessment of penalty under Section 54(1)(14) of the U.P. VAT Act, 2008 based on intercepted goods from outside the State of U.P.

Analysis:
The revision was filed challenging the Tribunal's order imposing a penalty under Section 54(1)(14) of the Act for goods intercepted at Mathura while en route to Agra. The assessee contended that penalty proceedings were initiated based on presumptions without concrete evidence. The goods were accompanied by required documents, including Form 38, and the penalty was imposed solely on the truck driver's statement. The revisionist argued that penalty cannot be based on presumptions and cited the case of Jain Shudh Vanaspati Ltd. Vs. State Of U.P. & Others, 1983 UPTC 198. The Standing Counsel defended the penalty, stating the truck driver's statement indicated goods were to be unloaded at Mathura, not Agra, and the Form 38 validity was a concern. The assessing authority rejected the reply and imposed the penalty.

The Court observed that penalty proceedings were initiated based on presumptions and the truck driver's statement without concrete evidence of any violation by the dealer. The documents accompanying the goods were in order when intercepted. The Court emphasized that the truck driver's statement alone cannot be the basis for initiating penalty proceedings. The statement lacked corroboration and could not establish tax evasion intent when all required documents were present. The Court found the taxing department unjustified in initiating penalties without substantial evidence. The Tribunal's failure to consider the assessee's objections and reliance solely on the driver's statement was criticized. As the department failed to prove whether the goods were being brought into U.P. at Mathura, the penalty imposition was deemed unwarranted.

Consequently, the Court set aside the Tribunal's order, allowing the revision. The question of law framed favored the assessee against the revenue. The judgment highlighted the necessity of concrete evidence to support penalty imposition under the U.P. VAT Act, emphasizing that presumptions and uncorroborated statements are insufficient grounds for penal actions.