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TMI Blog2017 (4) TMI 1505X X X X Extracts X X X X X X X X Extracts X X X X ..... adverse evidence produced by the department - The impugned order of the first appellate authority confirming the forfeiture of excess collection of tax under the CST Act contested is also set aside. - SECOND APPEAL NOS. 339 AND 340 OF 2016 - - - Dated:- 17-4-2017 - Hon ble Mr. Justice (Retd.) B.N. Mehta, President, Mr. N.C. Andharia, Member And Mr. I.B. Vaghela, Member For the Appellant : Shri Abhay Desai, the Learned Chartered Accountant For the Respondent : Shri R.S. Parmar, the Learned Government Representative JUDGMENT Per: Mr. N.C. Andharia, Member; (1) The appellant has filed these Second Appeals against the orders dated 04/03/2016 passed by the Deputy Commissioner of Commercial Tax, Appeal-5, Vadodara ( the First Appellate Authority , for short) for the assessment year 2007-08 under the provisions of the Gujarat Value Added Tax Act, 2003 ( the GVAT Act , for short) and the Central Sales Tax Act, 1956 ( the CST Act , for short). The appellant was granted partial relief of ₹ 24,31,372/- under the GVAT Act and ₹ 2,79,965/- under the CST Act by the first Appellate Authority. (2) The appellant has raised following issues for adjudica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchase orders from the companies who had invited bids for the installation of machinery. As these companies had not agreed to issue Form C under the CST Act, these sales by the appellant were liable to be taxed under Section 8(2) of the CST Act. The terms of contract also included issue of running bills showing price inclusive of all taxes, to be raised at different stages of completion of order. The running bills were issued accordingly. However, for facilitating payment of excise duty as well as Central Sales Tax, the appellant had also prepared excise invoices showing sale value of materials, excise duty and central sales tax separately by making reverse working from the total inclusive of tax price. Mr. Desai submitted that the appellant was not correctly advised by his previous Tax Advisor about change in the provisions under Section 8(2) of the CST Act introduced from 1/4/2007 in respect of applicable rate of tax. Mr. Desai submitted that the appellant had thus mistakenly considered the applicable rate of tax at 10% / 12.5% instead of correct rate of 4% while making reverse working which had resulted in deposit of excess tax of ₹ 1,81,49,641/- along with Returns. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d hence no amount could be impounded. (8) Mr. Desai also submitted that the provision of Section 9(2) of the CST Act provides for applicability of para materia sections of the local Act to the similar matters under the CST Act and that the provisions of impounding of tax under Section 31of the GVAT Act had not been made applicable under the CST Act. Mr. Desai submitted that hence both the lower authorities had erred in applying the provision of Section 31(3) of the GVAT Act to the impounding of ₹ 1,81,49,640/- under the provisions of the CST Act. Mr.Desai has, for this submission, relied on the decision of this Tribunal in the case of Asian Paints Industrial Coatings Limited, Second Appeal No.100 of 2010 decided on 11-03-2016 and the decision of the Karnataka Sales Tax Tribunal in the case of Electronics and Controls Power Systems Private Limited, Sales Tax Appeal No.984 of 2003 decided on 17-02-2004 wherein it is held by both the Tribunals that the department cannot forfeit the amount so collected nor can it levy any penalty since the CST Act does not have any express power for the same and the provisions in the GVAT Act as to the forfeiture and penalty are not made appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons for its finding as to the excess collection and forfeiture. Mr.Parmar submitted that the first appellate authority, though he might be guided by other authority, has, being quasi judicial authority, ultimately taken independent decision applying his own mind and this fact can be ascertained from the details of the appeal order itself where the sanctity of the judicial order is visible all throughout. Mr.Parmar submitted that the first appellate authority has relied on the fact that the agreement was inclusive of tax and that the appellant was entitled to cenvat credit under the provisions of the Central Excise Tax Act, 1944 on the basis of impugned excise invoices wherein the Central Sales Tax is separately charged. Mr.Parmar submitted that the judgments relied on by the first appellate authority in the case of (1) The State of Gujarat v. Ilac Limited, [1982] 50 STC 24 (Guj), (2) T.Stens and Co. Ltd. v. The State of Tamilnadu, [2005] 141 STC 21 (Mad), (3) T.Stens and Co. Ltd. v. The State of Tamilnadu, [2005] 141 STC 227 (SC) and (4) State of Tamilnadu v. Kiran India Traders, (100 STC 131) are applicable to the facts of the appellant s case squarely. (11) Mr.Parmar has al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the first appellate authority and that therefore both the issues raised in the said rectification application should be remanded to the first appellate authority for adjudication. (15) Mr.Parmar submitted that, therefore, the order passed by the first appellate authority is just and proper and needs no interference. (16) Mr. Desai has, further on 17-03-2017, submitted a pursis during the hearing wherein it has been submitted that the judgment of Kerala High Court in the case of M/s. Leo Engineering (India) and the judgment of this Tribunal in the case of M/s. Essar Services Limited (Second Appeal No. 1039 to 1041 of 2005) are distinguishable both on law and on facts. Mr.Desai submitted that Leo Engineering (India) (supra) is based on the ratio of the judgment in the case of Mafatlal Industries Limited (supra) where the validity of section 12B, 12C and 12D of the Central Excise Act, 1944 providing for impounding of excess tax, was decided, while in the present case, validity of impounding provision is not challenged. Mr.Desai submitted that in the present case, only absence of enabling provision for impounding under section 9(2) of the CST Act is challenged which has been sq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es charged in the running bill issued in 2007-08 were inclusive of tax, and the tenders, subsequent quotations, etc for this contract had happened long back, perhaps in the year 2005-06 or 2006-07 (Tender no. date, quotation no., date, etc are not provided by any of the parties) when there was even no talk of the amendment likely to be made in Section 8(2) of the CST Act from 01-04-2007. Thus, during pre-amendment period, when the tender was published and quotation was submitted, nobody knew that the rate of tax for the inter-State transaction without the support of Form C would be going to be 4% with effect from 01-04-2007 as against the rate of tax of 10% / 12.5 % prevalent during pre-amendment period. This means when the price inclusive of taxes was finalised, the tax constituent must have been considered at the rate of 10% or 12.5% as the case may be, only. And therefore, the appellant must have had, while making reverse calculation to find out the amount on which excise duty was to be calculated, taken into consideration the rate of 10% or 12.5% while preparing excise invoice as is seen from the sample invoices produced by the Government Representative today. Thus, the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to levy a penalty on the appellant in respect thereof. It was only open to the State to prosecute the appellant, if at all, any case is made out under section 10(f) of the CST Act. (23) Section 9A of the CST Act, prohibiting collection of tax save under the provisions of the CST Act, reads as under: 9A. Collection of tax to be only by registered dealers. No person who is not a registered dealer shall collect in respect of any sale by him of goods in the course of inter-State trade or commerce any amount by way of tax under this Act, and no registered dealer shall make any such collection except in accordance with this Act and the rules made thereunder. (24) There are two sections providing for penalties under the CST Act. Section 10 and Section 10A. (25) Though the heading of Section 10 is Penalties , in fact it is a list of the Central Act specific offences for which the assessee can be punished with simple imprisonment which may extend to six months, or with fine or with both; and when the offence is a continuing offence, with a daily fine which may extend to fifty rupees for every day during which the offence continues. Section 10 reads as under: 10. Penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of the same facts on which a penalty has been imposed under this section. (2) The penalty imposed upon any dealer under sub-section (1) shall be collected by the Government of India in the manner provided in sub-section (2) of section 9 (a) in the case of an offence falling under clause (b) or clause (d) of section 10, in the State in which the person purchasing the goods obtained the form prescribed for the purposes of sub-section (4) of section 8 in connection with the purchase of such goods; (b) in the case of an offence falling under clause (c) of section 10, in the State in which the person purchasing the goods should have registered himself if the offence had not been committed. It is to be noted that, though penalty under section 10A can be imposed for the offences under section 10(b),(c) and (d), it cannot be imposed for the offence under section 10(f). For the offence under section 10(f), the only course available to the department is to proceed for prosecution under section 10. Unlike the GVAT Act, the CST Act does not have provisions for forfeiture of the excess tax collected in contravention of the provisions under the CST Act. (27) Section 9 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be viewed either as an additional tax or as a fine for the infringement of the law. The machinery or procedure for its realization comes into operation after its imposition. In any case, it is an imposition of a pecuniary liability which is comparable to a punishment for the commission of an offence. It is a well-settled canon of construction of statutes that neither a pecuniary liability can be imposed nor an offence created by mere implication. It may be debatable whether a particular procedural provision creates a substantive right or liability. But the imposition of a pecuniary liability, which takes the form of a penalty or fine for a breach of a legal obligation, cannot be relegated to the region of mere procedure and machinery for the realization of the tax. It is more than that. Such liabilities must be created by clear, unambiguous and express enactment. The language used should leave no serious doubts about its effect so that the persons who are to be subjected to such a liability for the infringement of law are not left in a state of uncertainty as to what their duties or liabilities are. This is an essential requirement of a good government of laws. It is implied in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. (30) In view of the above discussion, we conclude that the appellant has collected excess tax to the tune of ₹ 1,81,49,641/- contravening the provisions of the Central Sales Tax Act, 1956, however, since, unlike the GVAT Act, the CST Act does not provide for forfeiture of such excess tax, the order of the first appellate authority, confirming the forfeiture of tax by the assessing authority, is required to be set aside. We also allow the appellant s plea under the GVAT Act for rectification of TDS amount of ₹ 22,287/- in absence of any adverse evidence produced by the department. We, therefore, pass the following order: ORDER Second Appeal Nos. 339 and 340 of 2016 are hereby allowed. Appellant s plea for grant of credit of TDS amount of ₹ 22,287/- in Second Appeal No.339 of 2016 is allowed in the absence of any adverse evidence produced by the department. The impugned order of the first appellate authority confirming the forfeiture of excess collection of tax under the CST Act contested in Second Appeal No.340 of 2016 is also set aside. The first appellate authority shall pass consequential orders in accordance with law under the GVAT Act and the CST ..... X X X X Extracts X X X X X X X X Extracts X X X X
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