2017 (4) TMI 1073 - HC - VAT and Sales Tax

Imposition of penalty - Section 45 (7) (a) of the Telangana Value Added Tax Act, 2005 - the petitioners claim that they paid tax @ 5% on the value of the goods as demanded by the respondents, in order to avoid the risk of the goods getting detained and getting exposed to the vagaries of weather - Held that - the Officer has the discretion to impose a penalty ranging from 1% to 200%. The SCN proposes to levy penalty at 100% - Considering the fact that the dealers have paid the tax at the place where the goods were threatened to be detained and also considering the fact that they have chosen to come up only after the issue of SCN for penalty, the Assessing Officer could be considerate, while considering the objections of the petitioners. This is a small reprieve that could be granted to the petitioners on account of their conduct - petition allowed - decided in favor of petitioner.

Summary

Issues:
Challenge to show cause notice for penalty on imported paddy, detention of goods by tax authorities, demand for refund of tax paid, interpretation of Telangana Value Added Tax Act, 2005.

Analysis:

The petitioners challenged the show cause notice for penalty imposed by tax authorities after importing paddy from an unregistered dealer in Bihar into Telangana. The goods were detained by the respondents for not having advance way bills as mandated by Rule 55(2) of the Telangana Value Added Tax Rules. The petitioners paid the demanded tax to avoid detention and were later issued show cause notices for penalty under Section 45(7)(a) of the Act. They also sought a refund, claiming the procedure followed was incorrect.

The petitioners contended that goods imported via railway wagons do not require advance way bills as railway wagons are not considered goods vehicles under the Act. However, the court interpreted the definition of goods vehicle under Section 2(17) broadly to include railway wagons. Additionally, a circular classified paddy as a sensitive commodity under Rule 55(2), despite earlier notifications.

Regarding the detention of goods, the petitioners argued that a railway station is not a check post for detention. However, due to payment of the demanded tax, the court refrained from delving into factual disputes. The court also noted that the petitioners could have contested the detention and awaited an assessment order to legally challenge the situation.

The court rejected the petitioners' contentions but advised leniency in penalty imposition, considering the circumstances. The Assessing Officer was directed to consider mitigating factors and levy a proportionate penalty. The court dismissed the refund request, instructed the petitioners to submit objections to show cause notices, and emphasized leniency in penalty imposition based on the petitioners' conduct.