2023 (2) TMI 889 - HC - VAT and Sales Tax

Imposition of penalty under Section 40(2) of the JVAT Act - concealment of purchases for an amount of Rs.1,55,69,332/- made by the Petitioner despite the fact that the said amount was duly reflected in its revised return - suppression of facts or not - order was passed without granting sufficient opportunity to the Petitioner - violation of principles of natural justice (audi alterem partem) - HELD THAT - Admittedly, for the quarter ending September, 2015, the last date for filing of revised return was up-to January, 2016. However, before assessment proceeding was initiated on 09.01.2016 i.e., before the expiry of period of revising of return in dispute which would be itself evident from the penalty order dated 02.02.2016 at Annexure-1. Further, the Petitioner, for the purchases in dispute has utilized Form SUGAM-G and, thus, no occasion arose for suppression of any turnover with intent to evade payment of tax. In the entire Counter Affidavit no mens-rea has been alleged by Respondent-authorities. Thus, it appears that the contention of the petitioner that at best penalty under Section 30(4)(d) of the JVAT Act could have been imposed upon petitioner is correct. This specific plea of Petitioner is uncontroverted by Respondent-authorities. There is no dispute with respect to the fact that before assessment proceeding under Section 40(2) of the JVAT Act and regular assessment proceeding under Section 35 of the JVAT Act are mutually exclusive to each other. However, acceptance of GTO and revised quarterly return in the original assessment proceeding could not be totally brushed aside when the sole issue revolves around revision of return by the Petitioner-company. Admittedly, the present dispute did not pertain to filing of incorrect return with intention to suppress or conceal purchases; rather the dispute pertains to filing of revised return belatedly. Thus, the imposition of penalty under Section 40(2) of the JVAT Act upon Petitioner is not sustainable in the eye of law and if the justification of the Respondents in this regard is accepted then the provision of Section 30 more particularly; sub-section 4 would be rendered otiose. In the given facts and circumstances and in view of specific provision enshrined u/s 30(4) (d) of the Act, it is apparent that there is no deliberate act of evasion of tax which would be warranting imposition of penalty on the petitioner given the language used in Section 40(2) containing the penal provision. In fact it cannot be said to be an act of deliberately filing incorrect returns as the revised return has been duly accepted by the Assessing Officer. Reference in this regard may be made the judgment passed in the case of COMMISSIONER OF SALES TAX, UP. VERSUS SANJIV FABRICS AND HARI OIL GENERAL MILLS 2010 (9) TMI 461 - SUPREME COURT wherein the Hon ble Apex Court has held that burden would be on the revenue to prove the existence of circumstances constituting the offence - mens rea is a condition precedent for levying penalty under Section 10(b) read with Section 10A of the Act. Thus, this court holds that the penalty imposed by the revenue u/s 40(2) of the JVAT Act is not sustainable in the facts and circumstances of this case rather; penalty under Section 30(4)(d) of the JVAT Act could have been imposed upon Petitioner - the amount of alleged penalty of Rs.17,35,000/- already realized from the bank accounts of Petitioner is to be refunded to the Petitioner after deducting Rs.25000/- taking resort of Section 30 (4) of the JVAT Act which prescribes maximum penalty of Rs.25000/-. Application allowed.

Summary

Issues Involved:
1. Quashing the order dated 31st January 2022 by the Commercial Taxes Tribunal in Review Case No. DN 7 of 2022.
2. Quashing the judgment and order dated 22nd November 2021 in Revision Case No. DN 48 of 2021.
3. Issuance of a direction to refund Rs.17,35,000/- realized under Section 46(1) of the JVAT Act.

Detailed Analysis:

1. Quashing the Order Dated 31st January 2022 by the Commercial Taxes Tribunal in Review Case No. DN 7 of 2022:
The petitioner sought to quash the order dated 31st January 2022, where the Commercial Taxes Tribunal dismissed the review petition against the judgment dated 22nd November 2021. The Tribunal upheld the imposition of a penalty under Section 40(2) of the JVAT Act. The petitioner argued that the penalty was unjust as the revised return reflecting inter-state purchases was accepted by the respondent authorities, thus no concealment occurred. The court noted that the proceedings under Section 40(2) were initiated before the expiry of the period allowed for revising the return, and the revised return was accepted in the original assessment. Therefore, the penalty under Section 40(2) was not justified.

2. Quashing the Judgment and Order Dated 22nd November 2021 in Revision Case No. DN 48 of 2021:
The petitioner challenged the judgment dated 22nd November 2021, where the Tribunal upheld the penalty imposed by the Assessing Officer. The penalty was based on the alleged concealment of purchases amounting to Rs.1,55,69,332/-. The petitioner contended that the error in the original quarterly return was rectified by filing a revised return, which was accepted by the authorities. The court emphasized that the penalty under Section 40(2) requires mens rea, which was not established by the respondents. The court held that the penalty under Section 30(4)(d) of the JVAT Act, which prescribes a maximum penalty of Rs.25,000/-, was more appropriate.

3. Issuance of a Direction to Refund Rs.17,35,000/- Realized Under Section 46(1) of the JVAT Act:
The petitioner requested a refund of Rs.17,35,000/- realized through recovery proceedings under Section 46(1) of the JVAT Act. The court found that the penalty under Section 40(2) was not sustainable and directed the refund of the amount after deducting Rs.25,000/- as per Section 30(4)(d) of the JVAT Act.

Conclusion:
The court quashed the orders dated 31st January 2022 and 22nd November 2021, ruling that the penalty under Section 40(2) of the JVAT Act was not justified. The court directed the refund of Rs.17,35,000/- to the petitioner after deducting Rs.25,000/- as per Section 30(4)(d) of the JVAT Act. The writ application was allowed, and any pending interlocutory applications were disposed of.