1996 (7) TMI 543 - AT - VAT and Sales Tax

Issues Involved:
1. Whether BCB is an item covered by Schedule IV of the 1994 Act.
2. Whether the seizure was vitiated due to absence of witnesses and prior recording of reasons for such seizure.
3. Whether the respondent No. 1 lacked jurisdiction to impose penalty due to absence of delegation of power.
4. If the quantum of penalty imposed is arbitrary.
5. If the notice of demand is liable to be quashed for illegal imposition of penalty.

Issue-wise Detailed Analysis:

1. Whether BCB is an item covered by Schedule IV of the 1994 Act:
The Tribunal examined whether button cell batteries (BCB) fall under entry 25 of Schedule IV of the 1994 Act. It was noted that button cell batteries are a type of dry cell battery, which are classified as either acidic or alkaline dry cells. The Tribunal referred to authoritative sources, including the Encyclopaedia Britannica, to define dry cells and concluded that BCBs are alkaline cells falling within the category of dry cells. Consequently, BCBs are covered by entry 25 of Schedule IV, which includes "Dry cells and dry cell batteries, and zinc calot and electrodes used as components of dry cells and dry cell batteries."

2. Whether the seizure was vitiated due to absence of witnesses and prior recording of reasons for such seizure:
The applicant argued that the seizure was invalid due to the absence of witnesses and failure to record reasons prior to the seizure. The Tribunal noted that rule 207 of the 1995 Rules provides that searches or seizures should be conducted as far as possible in accordance with the Code of Criminal Procedure. However, it was emphasized that non-compliance with certain procedural requirements does not vitiate the seizure if it is not possible to comply. The Tribunal found that in this case, the absence of witnesses did not affect the validity of the seizure since there was no dispute regarding the nature, quantity, or place of seizure. Additionally, the Tribunal clarified that section 70(1) of the 1994 Act does not require reasons to be recorded in writing before a seizure, unlike section 66. Therefore, the seizure was deemed valid.

3. Whether the respondent No. 1 lacked jurisdiction to impose penalty due to absence of delegation of power:
The applicant contended that the Commercial Tax Officer (respondent No. 1) lacked jurisdiction to impose the penalty as the delegation of power by the Commissioner was made on April 28, 1995, before section 3 of the 1994 Act came into force on May 1, 1995. The Tribunal acknowledged this issue but pointed out the transitional provision in section 107(f) of the 1994 Act, which allows previous delegations under repealed Acts to continue until amended, varied, or rescinded. Additionally, the Commissioner issued another delegation order on September 22, 1995, under section 3(4) of the 1994 Act, which validated the powers of the CTOs to impose penalties. Thus, the Tribunal found the penalty imposed by respondent No. 1 to be valid.

4. If the quantum of penalty imposed is arbitrary:
The Tribunal examined whether the penalty of Rs. 5 lakhs was arbitrary. The respondent No. 1 based the penalty on the market price of each BCB being Rs. 10, resulting in a total consignment value of Rs. 20 lakhs. The applicant provided a cash memo indicating a lower market price of Rs. 4 per BCB, but it lacked reference to the specific model number involved. The Tribunal upheld the respondent's valuation based on a cash memo from a dealer. It was argued that the penalty should not have been fixed at the maximum permissible rate of 25%, but the Tribunal found no grounds to interfere with the quantum of penalty as the applicant failed to provide any material basis for reduction. The Tribunal considered the circumstances and the applicant's attempt to evade tax, concluding that the penalty was justified.

5. If the notice of demand is liable to be quashed for illegal imposition of penalty:
Based on the findings above, the Tribunal found no grounds to quash the notice of demand. The seizure and imposition of penalty were deemed valid, and the quantum of penalty was upheld as justified. Therefore, the application was dismissed, and the sum of Rs. 5 lakhs deposited by the applicant was ordered to be adjusted against the penalty amount.

Conclusion:
The application challenging the seizure and imposition of penalty was dismissed. The Tribunal upheld the validity of the seizure, the jurisdiction of the respondent No. 1 to impose the penalty, and the quantum of the penalty. The sum deposited by the applicant was ordered to be adjusted against the penalty, and no order as to costs was made.

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