2015 (3) TMI 178 - HC - VAT and Sales Tax

Whether in the facts and circumstances of the case where the contention of the appellant/assessee that the goods had been returned by the dealer i.e. the present applicant/appellant to M/s Escorts Ltd. Faridabad, on cancellation of the agency and the bills had been duly verified with books of accounts by the assessing authority at the time of assessment, then penalty under Section 14-B(7)(ii) of PGST Act on the ground that the goods were not accompanied by proper and genuine documents shall be sustainable - Held that - A perusal of the paper book (order of the VAT Tribunal, Punjab dated 21.08.2008) reveals that the appellant was an agent of M/s Escorts Ltd. Faridabad and that its agency was cancelled vide letter dated 18.07.2000. The goods being carried were not for sale and were being carried for being returned to M/s Escorts Ltd. Faridabad. Information regarding this fact was duly generated at the ICC and even a written statement was filed before the AETC explaining the factual and legal position. Assessment for the year 2001-02 had been completed by the assessing authority and all books and documents had been produced and the assessing authority, after duly verifying the documents relating to return of goods of the value of ₹ 5,58, 557/- against bill Nos. 1655 and 1656 to 1681 had accepted the position as taken by the appellant and framed assessment vide order dated 05.05.2008. Once the agency stood cancelled and M/s Escorts Ltd., Faridabad had given a credit note for the goods (facts that have gone unchallenged by the revenue), besides assessment having been framed, bill books and the stand of the appellant having been accepted by the assessing authority that the goods of the value of ₹ 5,58,557/- against bill Nos. 1655 and 1656 to 1681, had been returned by the appellant to M/s Escorts Ltd., Faridabad, on cancellation of the agency, there was no question of there being any attempt to evade tax. A perusal of Section 14(B)7 (ii) of the Act reveals that the sine qua non for imposing penalty is a conclusion on the basis of an enquiry by the concerned officer that there has been an attempt to avoid or evade tax under the Act. The bill Nos. 1655, 1656 to 1681 were produced before the AETC, ICC, (Export), Mehmoodpur, alongwith bill books. However, the same was disbelieved on the ground that the bill book did not find place in the current account books. Once the assessing authority has finalized the assessment proceedings vide order dated 05.05.2008 by accepting the stand of the assessee that the appellant had returned the goods to M/s Escorts Ltd., Faridabad, through bill Nos. 1655, 1656 to 1681 dated 05.05.2001 to M/s Escorts Ltd., Faridabad on cancellation of its agency/dealership and the bills were duly cross verified with the books of accounts and finding was recorded that goods returned as per bill given were only on account of termination of dealership, there was no liability to pay tax on such goods. Therefore, there is no further scope to doubt the stand of the appellant or to impose penalty particularly when the documents produced by the assessee have not been proved to be incorrect. Penalty imposed on the appellant u/s 14- B(7)(ii) of PGST Act on the ground that the goods were not accompanied by proper and genuine documents despite the stand of the appellant/assessee that the goods had been returned by it to M/s Escorts Ltd. Faridabad, on cancellation of the agency and despite the bills having been duly verified with the books of accounts by the assessing authority at the time of assessment vide order dated 05.05.2008 is held to be legally unsustainable. - Assistant Excise & Taxation Commissioner, Information Collection Centre (Export), Mehmoodpur would take steps to refund the sum of ₹ 1,65,000/- imposed by way of penalty to the appellant along with interest @ 12% p.a. w.e.f. the date of deposit of penalty amount by the appellant till date of refund, within a period of 3 months from the date of receipt of certified copy of this order. - Decided in favour of assessee.

Summary

Issues involved:
- Interpretation of penalty under Section 14-B(7)(ii) of PGST Act for goods not accompanied by proper documents
- Validity of penalty imposition for alleged attempt to evade tax based on document verification
- Assessment of liability for penalty in case of goods returned on cancellation of agency

Analysis:
1. Interpretation of penalty under Section 14-B(7)(ii) of PGST Act:
The case involved a penalty imposed under Section 14-B(7)(ii) of the Punjab General Sales Tax Act, 1948 for goods not accompanied by proper and genuine documents. The key issue was whether the penalty was legally sustainable in the given circumstances. The High Court analyzed the facts, including the cancellation of agency, return of goods to M/s Escorts Ltd. Faridabad, and the verification of bills with books of accounts by the assessing authority during assessment proceedings.

2. Validity of penalty imposition for alleged attempt to evade tax:
The appellant contended that the goods were returned to M/s Escorts Ltd. Faridabad on cancellation of the agency, and the bills had been duly verified with books of accounts during assessment. On the other hand, the department argued that the bills were not from regular bill books, indicating an attempt to evade tax. The High Court examined the evidence presented, including the credit note from M/s Escorts Ltd., Faridabad, and the assessment proceedings accepting the appellant's stand on the return of goods.

3. Assessment of liability for penalty in case of goods returned on cancellation of agency:
The High Court emphasized that once the agency was canceled, and M/s Escorts Ltd. Faridabad issued a credit note for the goods, there was no attempt to evade tax. The assessment order confirmed the return of goods on cancellation of the agency, and the bills were cross-verified with books of accounts. The Court concluded that the penalty imposed under Section 14-B(7)(ii) of the Act was legally unsustainable in this scenario.

In conclusion, the High Court ruled in favor of the appellant, holding that the penalty imposed for goods not accompanied by proper documents was unjustified. The orders passed by the authorities imposing penalties were deemed unsustainable, and the appellant was entitled to a refund of the penalty amount with interest. The judgment highlighted the importance of proper documentation and verification in tax-related matters to avoid unjust penalties and allegations of tax evasion.