Penalty for alleged tax evasion cannot stand where no tax liability exists and incomplete documents are otherwise rebutted.

Penalty under section 37(6) of the Haryana General Sales Tax Act could be sustained only on a finding of an attempt to evade tax due under the Act. Where the assessee was a 100 per cent export-oriented unit, the goods were purchased from abroad, and the underlying purchases and sales were not leviable to tax, incomplete challan documents at the time of checking did not by itself establish evasion. The presumption from non-production of complete documents stood rebutted on those facts, so penalty was not justified and was liable to be quashed.

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Issues: Whether penalty under section 37(6) of the Haryana General Sales Tax Act, 1973 was sustainable when the goods were transported with an incomplete challan but the underlying purchases and sales were found not leviable to tax under the Act.

Analysis: Penalty under section 37(6) can be imposed only where the authority, after inquiry, finds an attempt to evade tax due under the Act. The Tribunal itself recorded that the petitioner was a 100 per cent export-oriented unit, that the goods had been purchased from abroad, and that the purchases and sales were not leviable to tax under the Act. In such circumstances, mere non-production of complete documents at the time of checking did not establish an attempt to evade tax. The presumption arising from absence of proper documents stood rebutted on the facts found, and the cited precedent on rebuttal of presumption did not justify penalty where no tax liability existed under the Act.

Conclusion: Penalty under section 37(6) was not justified and was liable to be quashed in favour of the petitioner.

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