Compounding of excise offence does not defeat sales tax liability where smuggling and unaccounted liquor are proved

Where smuggling of liquor is proved, compounding of the excise offence does not, by itself, bar sales tax liability or penalty under the HPGST Act. The text states that once illegal import is established, the burden shifts to the assessee to show that the liquor was not sold or was otherwise accounted for. The absence of regular records in an unlawful operation cannot defeat tax liability. Compounding under the Excise Act therefore does not extinguish the State's right to levy sales tax on smuggled liquor.

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Issues: Whether composition of an offence under section 80(1) of the Punjab Excise Act, 1914 on the request of the party concerned bars levy of sales tax and penalty under the HPGST Act when smuggling of liquor is proved.

Analysis: The seized records and surrounding circumstances showed that the assessee had repeatedly used the same permits to bring in liquor consignments and had thereby smuggled liquor into the State. A partner of the assessee-firm also effectively admitted the misconduct and compounded the matter under the Excise Act. Once such illegal import was established and accepted, the burden shifted to the assessee to show that the liquor had not been sold or was otherwise accounted for. No such explanation was offered, and the absence of regular records in an illegal operation could not defeat tax liability. The mere fact of compounding under the Excise Act did not nullify the State's right to levy sales tax on the smuggled liquor.

Conclusion: Composition of the offence did not protect the assessee from sales tax liability and penalty under the HPGST Act; the levy was justified.

Ratio Decidendi: Where smuggling of goods is proved, compounding of the excise offence does not preclude sales tax liability, and the burden shifts to the assessee to disprove sale or explain the goods' disposal.

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