2014 (4) TMI 992 - HC - VAT and Sales Tax

Whether penalty u/s 78(5) of the RST Act imposable Sufficiency of evidence - Held that - Judgment in Guljag Industries Versus COMMERCIAL TAXES OFFICER 2007 (8) TMI 344 - SUPREME Court followed - Object behind enacting Section 78(5) is to emphasize loss of revenue and to provide a remedy for such loss - Section 78(2) is a mandatory provision and goods put in movement under local sales, imports, exports or inter-State transactions have to be supported by requisite declaration or/and identification of the consignee and other particulars - If no enquiry was made from the consignee firm on the basis that the respondent-assessee was not able to lead evidence as to the consignee being registered and identification of the consignee, if other supporting bills, vouchers, documents etc. were found in order penalty could not have been imposed - matter is remanded back to the Assessing Authority for deciding the penalty proceedings afresh Decided in favour of revenue.

Summary

Issues:
1. Imposition of penalty under Section 78(5) of the Rajasthan Sales Tax Act, 1994.
2. Interpretation of Section 78(2) and the requirement of declaration/identification of consignee.
3. Principles of natural justice in penalty proceedings.

Imposition of Penalty under Section 78(5) of the Rajasthan Sales Tax Act, 1994:
The revision petition was filed by the petitioner-department challenging the order of the Tax Board, which upheld the decision of the Deputy Commissioner (Appeals) rejecting the revenue's appeal for imposing a penalty under Section 78(5) of the Act on the respondent-assessee. The courts below held that the penalty could not be imposed if no enquiry was made from the consignee firm and the respondent was unable to provide evidence of consignee registration and relevant identification certificates. The petitioner argued that previous Supreme Court judgments favored the revenue, emphasizing loss of revenue and the mandatory requirement of supporting declarations for goods in movement.

Interpretation of Section 78(2) and the Requirement of Declaration/Identification of Consignee:
The Supreme Court in the case of Guljag Industries highlighted the importance of Section 78(2) to prevent revenue loss, requiring declarations and consignee identification for goods in movement. The Court found that incomplete declaration forms render assessments impossible, leading to penalties under Section 78(5). The judgment stressed that mens rea is not necessary for contravention of Section 78(2), and penalties apply when goods move with incomplete documentation. The Court directed cases to be handled according to their interpretation, emphasizing the need for natural justice principles in such matters.

Principles of Natural Justice in Penalty Proceedings:
The High Court, considering various precedents, emphasized the application of natural justice principles in penalty proceedings. Rulings in cases like Commercial Taxes Officer Vs. M/s Jain Tubes and others required fresh opportunities for hearings based on Supreme Court decisions. Consequently, the revision petition was partly allowed, quashing previous orders and remanding the matter to the Assessing Authority for a fresh decision on penalty proceedings. The Court directed the Authority to provide the assessee with a specific show cause notice detailing defects in compliance with Section 78(2) and to ensure a fair hearing within six months.

In conclusion, the judgment focused on the correct application of penalty provisions under the Rajasthan Sales Tax Act, the necessity of proper documentation for goods in movement, and the overarching importance of natural justice principles in such cases.