GOODS ACCOMPANIED BY WRONG ‘VAT’ FORM

[Mr. M. GOVINDARAJAN]

Section 53 of Karnataka Value Added Tax Act, 2005 provides for the establishment of check post and inspection of goods in movement.  Section 53 (1) that if the Government or the Commissioner considers it necessary, with a view to prevent or check evasion of tax under this Act in any place or places in the State, it or he may, by notification, direct the establishment of a check post or the erection of a barrier, or both, at such place or places as may be notified.  Section 53(2) provides that the owner or person in charge of the vehicle shall carry with him a goods vehicle record, a trip sheet or a log book, as the case may be and carry with him such documents as may be prescribed or notified by the Commissioner in respect of the goods carried in the goods vehicle.  The owner or person in charge of the vehicle shall report at the first check-post or barrier situated on the route ordinarily taken from the place in the State, from which the movement of the goods commences, to its destination and produce the documents before any officer-in-charge of check post or barrier, or any other officer as may be empowered by the Government or the Commissioner, in this behalf, and obtain the seal of such officer affixed thereon, and, in respect of a bill of sale, give one copy thereof and, in respect of a delivery note, give a copy marked as original, to such officer and carry and retain with him the other copy until termination of movement of the goods.

Rule 157 of Karnataka VAT Rules provides prescribes the document as required by Section 53(2) of the Act as detailed below:

1. a delivery note in Form VAT 505, issued by the owner or the consignor of goods, in respect of such goods as may be notified by the Commissioner and where the goods are carried as a result of sale, a tax invoice or a bill of sale; 
2. a tax invoice or a bill of sale where the goods are carried as a result  of sale and are not covered by clause (a); and
3.  a delivery note in Form VAT 505, issued by the owner or the consignor of goods or Form VAT 515, issued by the owner or the consignor of goods, who is a dealer permitted to issue such delivery note in Form VAT 515 as may be notified by the Commissioner subject to such conditions as specified, where the goods carried are not covered by clause (a). 

As such the Karnataka VAT Act and Rules prescribes to keep proper documents on transit along with the goods.  If wrong form is held penalty will be attracted which is well explained in the case law ‘CMC Commutator (P) Limited V. Additional Commissioner of Commercial Taxes, Zone – 1, Bangalore’ – 2014 (6) TMI 83 - Karnataka High Court.  In this case the assessee was carrying the copper scrap for conversion into copper strips rods and bards from Belgaum to Bhiwandi, Thane and Bhimpore through a goods vehicle.  The said goods were accompanied by Form VAT-515.  The Commercial Tax Officer (Check Post) intercepted the said goods and having noticed that the goods were not accompanied by the requisite form VAT 505 levied the penalty under Section 53 upon the assessee.  On appeal by the assessee the first Appellate Authority cancelled the penalty imposed on the assessee.  The Revisional Authority reversed the order of the First Appellate Authority and restored the original order.

Aggrieved against the order of the Revisional Authority the assessee filed appeal before the High Court.  The assessee put forth the following contentions before the High Court-

• The goods in question were not for sale but were for recycling, the notification dated 5.1.2006 was applicable and the goods were required to be accompanied by Form VAT – 515;
• The provisions of Rule 157(1)(C) were applicable and in that view Form VAT – 515, which had accompanied the goods was sufficient.

The revenue relying on the notification dated 08.08.2008 contended that even in respect of transfer of non ferrous metal, for the purposes other than sale, the appropriate form was VAT 505.  In this case the said form was not accompanied with the goods at the time of intercepts, the penalty imposed was justified.

The High Court held that on a perusal of the notification dated 08.08.2008 it is clear that in respect of the non ferrous metal, whether it is for sale or not, the form that was required to be produced was Form VAT – 505.  Though the assessee contends that the said notification has been issued in exercise of power conferred under Rule 157(1)(C), which is applicable only in respect of the sale, what is necessary to be noticed is that the body of the notification categorically indicates that the delivery note in Form – 505 is made applicable in respect of the scrap of non ferrous metal to be carried, whether it is for sale or not.  Therefore even if it is not for sale, the non ferrous metal was required to be accompanied by Form VAT -505. 

The High Court further held that from a perusal of Forms VAT-505 and VAT -515, it is seen that both are relatable to Rule 157(1)(a).  Therefore the appropriate form that was required to accompany the non ferrous metal, which was being transported in the instant case, was form VAT – 505.  In the instant case the First Appellate Authority while setting aside the order passed by the original authority has taken note of the fact that form VAT-505 has been subsequently produced.  Even if that be the position, what is necessary to be noticed is that a notice had been issued by the original authority, while seeking to impose a penalty, by indicating the amount of Rs.3.14 lakhs.  The assessee on appearing to show cause had indicated that the penalty amount if reduced would be paid and accordingly the penalty amount was reduced to Rs.1.57 lakhs.  In such circumstances, at the first instance when the assessee has concealed and subjected itself to payment of penalty without protest and had also indicated the quantum to which it was willing to pay a difference contention cannot be urged. Therefore the High Court dismissed the appeal filed by the appellant.