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TMI Blog2010 (8) TMI 827X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty and penal interest. The penalty is, therefore, liable to be set aside and the appeal to the extent of levy of penalty is allowed. In the circumstances of the case, I do not also find any justification to fasten heavy liability by way of interest on the premise that the dealer defaulted in payment of tax. The assessment order in so far as the imposition of tax is concerned is hereby upheld. Thus, the appeal is partly allowed - Appeal No. 346/CST/2009 - - - Dated:- 6-8-2010 - REDDI P.V. , J. ORDER:- P.V. REDDI J. (Chairman). This appeal under section 20 of the Central Sales Tax Act, 1956 (hereinafter referred to as, the CST Act ) is preferred against the order of the Gujarat Value Added Tax Tribunal, Ahmedabad (hereinafter referred to as, the Tribunal ). The said Tribunal is the highest appellate authority of the State within the meaning of Explanation to section 20(1) of the CST Act. The second appeal filed by the applicant herein was dismissed by the Tribunal by the impugned order dated May 14, 2009 and the order passed under the CST Act levying tax and penalty was confirmed. Initially, the appellant filed a tax appeal before the High Court of Gujarat. As the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke any effort to establish that the declarations in F form were not fake and that they were in fact issued to the two dealers in Delhi and Gujarat. On the other hand, the appellant took the stand that it cannot be penalized if the F forms issued by other dealers were found to be fake. Before this Authority, the appellant has taken the same stand. It is the contention of the appellant that the F forms as issued by the out-of-State dealers were furnished to the assessing authority and the appellant cannot be saddled with liability even if those forms were found to be not genuine. It is contended that the appellant bona fide transacted with the two commission agents and there is sufficient evidence to show that the transactions were consignment dispatches but not inter-State sales. The appellant has filed before this Authority true copies of certain documents, i.e., sale pattis said to have been furnished by Sarthak Enterprises and Zarna Corporation, the lorry receipts evidencing transport of goods and the copies of bank statements. According to the appellant money was received by cheques as borne out by the bank statements. However, from the perusal of the bank statement, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates shall be deemed for the purpose of this Act to have been occasioned otherwise than as a result of sale. The underlined(1) portion in sub-section (1) was added by the CST (Amendment) Act (Act No. 20 of 2002) with effect from May 20, 2002. Prior to the introduction of this deeming provision, the courts have held that the filing of F form (which is the prescribed form contemplated by sub-section (1)) was not mandatory or compulsory to sustain a claim that there was no inter-State sale. The fact that there was no inter-State sale and that interState movement of goods was not the result of a contract of sale between the assessee and the buyer outside the State could be proved by other evidence. For instance, dispatches to branches or consignment to the agents for the purpose of effecting sales in the other State on behalf of the assessee could have been treated as stock transfers or consignment to agents, if there was sufficient documentary evidence to prove the same. However, the legal position has materially changed from the assessment year 2002-03 onwards in view of the aforesaid amendment. The scheme of the Act now is that the filing of prescribed form (F forms) is indis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion introduced by the Amendment Act of 2002 would be meaningless and otiose. Such a construction, it is well-settled, cannot be placed on a statutory provision. For the assessment year in question, the minimum a dealer is expected to do to discharge the burden of proof is to file a valid F form. If that minimum requirement is not fulfilled, the consequences set out in the newly added deeming provision will be triggered and the assessee's claim that there was no inter-State sale, is liable to be rejected. In this state of law, the question whether the F forms filed by the appellant are fake or fictitious assumes importance. It needs no emphasis that the fake or fictitious F forms are no forms at all and they shall be treated as non est in the eye of law. The reports obtained from the sales tax officials of the other States disclose that no F forms were at all issued to the two consignees/agents with whom the appellant allegedly transacted business. Looking into the other evidence notwithstanding the failure to furnish genuine F forms does not arise and is not warranted in law. It is also worthy of mention that any prudent dealer would have contacted the said dealers who alle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uine form) would result in the deeming fiction coming into operation to the detriment of the assessee who claims exemption. The effect of this deeming provision cannot be nullified by taking a view that the assessee can still prove by means of other evidence that there was no inter-State sale. The counsel for the applicant has ought to place reliance on the observation of the Supreme Court in a recent case of Ambica Steels Ltd. v. State of U.P. [2009] 24 VST 356. Those observations are extracted hereunder (at page 358 of VST): We are informed that certain State(s) within whose jurisdiction the transferee is located is/are not issuing F forms. In such an eventuality it would be open to assessing officer to complete reassessment proceedings on its own merit after examining the transaction between the parties, keeping in mind the circumstance that the assessee is not in a position to obtain the F form, for no fault of his. From these observations of the Supreme Court, the appellant wants to infer that filing of F forms is not compulsory even after the amendment. I do not think that the learned judges of the Supreme Court laid down any such principle. The situation envisa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. The next question is about the penalty. By virtue of section 9(2) of the CST Act, the provisions of the local Sales Tax Act (Gujarat Sales Tax Act) do apply in relation to the levy of penalty and other allied matters. The penalty was purportedly levied under section 45(6) of the Gujarat Act. Subsections (5) and (6) of section 45 read as follows: (5) Where in the case of a dealer the amount of tax (a) assessed for any period under section 41 or 50; or (b) reassessed for any period under section 44; exceeds the amount of tax already paid under sub-section (1), (2) or (3) of section 47 by the dealer in respect of such period by more than twenty-five per cent of the amount of tax so paid, the dealer shall be deemed to have failed to pay the tax to the extent of the difference between the amount so assessed or reassessed as aforesaid and the amount paid. (6) Where under sub-section (5), a dealer is deemed to have failed to pay the tax to the extent mentioned in the said sub-section, there shall be levied on such dealer a penalty not exceeding one and one half times the difference referred to in sub-section (5). Penalty, in my view, cannot be sustained for more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been deleted in the notice. In the notice requiring attendance at the reassessment stage the word penalty would be wholly inapplicable. As observed earlier, it was not a specific notice directed towards levying penalty under a specific provision. There are also other legal infirmities which vitiate the penalty, in the instant case. The composite order of assessment and penalty except citing the section under which the penalty was purportedly imposed, not a word has been said as to the reason or justification for levy of penalty. There is no discussion on the point whether ingredients of relevant provision have been attracted and whether the appellant was guilty of any contumacious conduct or wilful disregard of the provisions requiring payment of tax. It is well-settled that penalty is not consequential nor adjunct to the assessment of tax. (Vide observations of the Supreme Court in Khemka Co. (Agencies) Pvt. Ltd. v. State of Maharashtra [1975] 35 STC 571). In the case of Hindustan Steel Ltd. v. State of Orissa [1970] 25 STC 211, the Supreme Court made the following pertinent observations (at page 214 of 25 STC): An order imposing penalty for failure to carry out a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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