2021 (4) TMI 602 - HC - VAT and Sales Tax

Restoration of penalty - at the time of interception, the e-sugam was not tendered and was furnished subsequently - Section 64(1) of Karnataka Value Added Tax Act, 2003 - HELD THAT - It is well settled in law that a penalty is attracted only if there is an attempt to evade the tax payable under the Act and not merely because the documents accompanying the goods are not in the prescribed format/form - On perusal of Section 53(12)(a) of the Act, it is evident that penalty can be levied only in case where sufficient cause is not shown. In the instant case, the First Appellate Authority namely, the Joint Commissioner of Commercial Taxes based on the material available on record, recorded a finding that goods belonging to a registered dealer of the State whose bonafides are not doubted were moving for the purpose of sale to a registered dealer in the State and the movement of goods was duly supported by invoices which disclose the particulars of the transaction which shows the movement of the goods. It is further been held that the movement of the goods has not been even doubted by the respondents and there is no material on record to indicate an attempt to evade the tax. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of Section 64(1) of the Karnataka Value Added Tax Act, 2003.
2. Application of penalty under Section 53(12)(a) for noncompliance with e-sugam requirements.
3. Justification for invoking power under Section 64(1) by the Additional Commissioner of Commercial Taxes.

Analysis:

1. The primary issue in this case revolved around the interpretation of Section 64(1) of the Karnataka Value Added Tax Act, 2003. The appellant challenged the Additional Commissioner of Commercial Taxes' decision to review and set aside the order passed by the Appellate Authority. The appellant argued that the movement of goods was legitimate and there was no attempt to evade tax. The appellant cited relevant case law to support their position, emphasizing that the Appellate Authority's decision was neither erroneous nor prejudicial to the revenue's interest.

2. The second issue involved the application of penalty under Section 53(12)(a) for noncompliance with e-sugam requirements. The appellant's goods were detained by the Deputy Commissioner of Commercial Taxes due to the absence of e-sugam at the time of interception. The Deputy Commissioner imposed a penalty, which was later set aside by the Appellate Authority. The Additional Commissioner, however, reinstated the penalty, arguing that there was a violation of Section 53(2) of the Act. The appellant contended that the e-sugam was eventually produced, and there was no intent to evade tax, as supported by the invoices and other documentation.

3. The final issue focused on the justification for invoking power under Section 64(1) by the Additional Commissioner of Commercial Taxes. The Additional Commissioner's decision to review and reverse the Appellate Authority's order was challenged by the appellant. The High Court emphasized that a penalty should only be imposed if there is an attempt to evade tax, not merely due to noncompliance with documentation requirements. The Court referred to relevant precedents to support its conclusion that the cause shown by the appellant was sufficient, and the Revisional Authority was not justified in upholding the penalty.

In conclusion, the High Court set aside the orders passed by the Additional Commissioner of Commercial Taxes and the Commercial Tax Officer, quashing the penalties imposed. The Court ruled in favor of the appellant, emphasizing that the cause shown for the delay in producing e-sugam was reasonable and there was no evidence of tax evasion.