2024 (1) TMI 297 - HC - VAT and Sales Tax

Detention of goods - detention on the ground that goods were not accompanied with the proper and genuine documents and that the petitioner had made an attempt to evade tax - HELD THAT - The plea of the petitioner that the transaction is not taxable, is a bonafide plea and in the absence of either mis-declaration or concealment, it has to be held that the exercise of power of imposing penalty at Check Post, was not warranted. Undoubtedly, sale against From-C and Form E-1 is exempt from CST under Section 6(2) of the CST Act ; Form-C needs to be furnished by the seller to the prescribed authority of the Seller s State; so the onus is on the State from where the goods are being sold to ensure that the Form against which such sale is being conducted, is legitimate and genuine - the finding in the impugned order regarding genuineness of the statutory Forms C and E-1, issued by the Excise Taxation Department of the other States, is unwarranted , perverse and contrary to law. In ONKARLAL NANDLAL VERSUS THE STATE OF RAJASTHAN AND ANOTHER 1985 (9) TMI 314 - SUPREME COURT the Supreme Court held that there is no antithesis between a sale in the course of inter-State trade or commerce and a sale inside the State. Even an inter-State sale must have situs , and the situs may be in one State or another. It is held that the ETO at the Barrier or the Check Post, in the facts and circumstances of the case, could not have examined the nature of the sale transaction and act beyond the limited jurisdiction of examining the documents, accompanying goods, and impose a penalty on a transaction not otherwise liable to tax under the Act; and that the impugned order is perverse for not considering the fact that the Assessing Authority, in the assessment order dt. 04.09.2008, passed for the Assessment Year 2006- 07, had accepted the Returns filed by the petitioner and had not imposed any tax on the transaction disputed in the impugned order. It is also held that the genuineness of the Form-C and Form E-1, cannot be doubted by the Excise Taxation Authorities in Himachal Pradesh. The respondents are directed to refund the penalty collected with interest at the rate of 6% per annum from the date on which the said amount was taken from the petitioner till the date of repayment - the Revision is allowed.

Summary

Issues Involved:
1. Jurisdiction of the Excise and Taxation Officer (ETO) at the barrier or check post.
2. Legality and perversity of the impugned order in light of the Assessing Authority's acceptance of returns.
3. Genuineness of Form-C and Form-E-1 and the finding of tax evasion.

Summary:

Issue 1: Jurisdiction of the ETO at the Barrier or Check Post

The petitioner challenged the ETO's authority to impose a penalty on a transaction not liable to tax under the H.P. Value Added Tax Act, 2005. The court referred to a Division Bench decision in Xcell Automation vs. Government of Punjab & Another, which clarified that the exercise of power at the check-post should have a reasonable nexus with the attempt at evasion. The court found that the petitioner had produced all relevant documents and raised a bona fide plea against taxability, with no mis-declaration or concealment. Therefore, the exercise of power to impose a penalty at the check-post was deemed unwarranted.

Issue 2: Legality and Perversity of the Impugned Order

The court noted that the Assessing Authority had accepted the returns filed by the petitioner for the Assessment Year 2006-07 and did not impose any tax on the disputed transaction. The court held that once the Assessing Authority had accepted the returns and raised no demand for tax, it was not open for the ETO at the check-post to allege tax evasion. The court found the impugned order perverse for not considering this fact.

Issue 3: Genuineness of Form-C and Form-E-1

The court observed that the petitioner had submitted documents of title, including Purchase Order, Form-C, and Form E-1, which had been authenticated by the selling states. The court held that the Excise Department of Himachal Pradesh had no right to invalidate or question these forms. The finding regarding the genuineness of the statutory Forms C and E-1 was deemed unwarranted, perverse, and contrary to law.

Conclusion

The court allowed the revision, holding that the ETO at the barrier or check post could not examine the nature of the sale transaction beyond the limited jurisdiction of examining the accompanying documents. The impugned order was found perverse for not considering the Assessing Authority's acceptance of the petitioner's returns without imposing any tax. The court also held that the genuineness of Form-C and Form E-1 could not be doubted by the Excise and Taxation Authorities in Himachal Pradesh. Consequently, the finding of tax evasion by the petitioner was not sustained. The respondents were directed to refund the penalty collected with interest at the rate of 6% per annum from the date the amount was taken from the petitioner till the date of repayment. No costs were awarded, and pending miscellaneous applications were disposed of.