2023 (2) TMI 475 - HC - VAT and Sales Tax

Invocation of penal proceedings under Section 67(1) of the KVAT Act - goods in transit - goods transported with a view to evade tax? - Whether the Tribunal erred in directing the assessing authority to invoke the penal provisions under Section 67(1) of the KVAT Act when there is specific provision governing the matter of goods in transit under Section 47(6)? HELD THAT - Section 46(3)(e) mandates that when goods are imported to the State the transporter shall keep a copy of the declaration bill duly acknowledged by concerned authority and shall be produced on verification by any authority and the declaration should be in Form 8FA. The case of Joy Alukkas 2022 (11) TMI 92 - KERALA HIGH COURT is a case in which gold ornaments were transported from Haryana and from New Delhi through Air. When the goods were intercepted, it was found that there were defects in the delivery note and in respect of the full name and address of the consignee the invoice did not contain the full address of the consignee. The delivery notes tampered with over writings and thus the Assessing Officer had reason to believe that there was an attempt to evade tax and therefore, section 47(6) of the KVAT Act was invoked - Going through the facts of the case it can be seen that only defect is that declaration in form 8FA was not accompanied with the goods. All other documents including invoices, bill of entry and delivery note were in order and there were no defects. Hence, the decision has no application to the facts of this case. The Tribunal has found in its order that there is clear violation of the provisions on the part of the appellant/respondents which warrants imposition of penalty. But held that penalty under Section 47(6) of the KVAT Act is not warranted and liberty was given to invoke the penal provision under Section 67(1) of the KVAT Act for the offences proved against the assessee - On going through the order of the Tribunal in detail, it is opined that the Tribunal was justified in allowing the appeal and setting aside the penalty under Section 47(6) KVAT act and giving liberty to invoke Section 67(1) KVAT finding that the appellant had clearly violated the provisions of section 46(3)(e) of the KVAT. Therefore the question of law raised in this revision is answered against the petitioner and in favour of the assessee. Revision dismissed.

Summary

Issues:
1. Interpretation of Section 46(3)(e) of the Kerala Value Added Tax Act regarding the requirement of Form 8FA declaration for goods transportation.
2. Imposition of penalty under Section 47(6) or Section 67(1) of the KVAT Act for violation of tax evasion provisions.

Analysis:

Issue 1: The interpretation of Section 46(3)(e) of the KVAT Act regarding the necessity of Form 8FA declaration for goods transportation was central to the case. The State contended that the absence of this mandatory declaration justified the imposition of penalties. The Tribunal, however, allowed the appeal, stating that while there was a violation of provisions, the penalty under Section 47(6) was not warranted. The State argued that the penalty should have been upheld under Section 47(6) due to non-compliance with the mandatory requirement. The court examined the case of Joy Alukkas (P) Ltd. v. State of Kerala, emphasizing the importance of strict adherence to statutory documents to prevent tax evasion.

Issue 2: The question of whether to impose penalties under Section 47(6) or Section 67(1) of the KVAT Act for the violation of tax evasion provisions was also addressed. The State argued for the application of Section 47(6) based on the non-compliance with Form 8FA, while the respondent contended that the omission was inadvertent, and all other necessary documents were in order. The court found that the Tribunal's decision to set aside the penalty under Section 47(6) and allow invocation of Section 67(1) was justified, considering the clear violation of Section 46(3)(e) by the assessee.

In conclusion, the court dismissed the revision, upholding the Tribunal's decision to set aside the penalty under Section 47(6) of the KVAT Act and allowing the State to invoke penal provisions under Section 67(1) due to the proven violations by the assessee. The judgment emphasized the importance of strict compliance with statutory requirements to prevent tax evasion and upheld the Tribunal's findings in favor of the respondent.