Retrospective penalty under VAT law rejected where compliance was tested under the provision in force on the inspection date.

Carriage of granite blocks with a tax invoice and delivery note satisfied section 53(2)(b) of the Karnataka Value Added Tax Act as it stood on the date of inspection, because the then-prevailing provision permitted those documents or other prescribed documents. The later amendment enlarging the obligation could not be applied retrospectively to penalise conduct completed before it came into force, and penal liability could not be imposed for an act not punishable when done. Payment of the penalty without protest did not bar challenge to the legality of the notice, as the payment was made to secure release of detained goods. The notice and penalty were held illegal, and refund was directed.

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Issues: Whether the notice proposing penalty for carrying granite blocks with a tax invoice and delivery note in the form then prescribed was sustainable under section 53(2)(b) of the Karnataka Value Added Tax Act, 2005, and whether the subsequent amendment to that provision could be applied to penalise an act done before its commencement.

Analysis: Section 53(2)(b), as it stood on the date of inspection, permitted the owner or person in charge of a goods vehicle to carry a tax invoice or a bill of sale or a delivery note or such other prescribed documents. The documents produced showed compliance with that then existing requirement. The amendment enlarging the obligation came into force only from 1 April 2006 and could not be applied to an act completed earlier. A person cannot be subjected to penalty for conduct that was not punishable on the date it occurred. The objection that the penalty had been paid without protest did not bar challenge to the legality of the notice, since payment was made to secure release of the detained goods.

Conclusion: The notice and consequent penalty were illegal and unsustainable, and the petitioner was entitled to refund of the penalty amount.

Ratio Decidendi: A penal liability cannot be imposed retrospectively by applying an amended provision to conduct completed before the amendment came into force, and compliance must be tested with reference to the law prevailing on the date of the alleged contravention.

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