Mandatory consignee notice and absence of tax evasion intent defeated penalty for transit non-compliance.

Mandatory notice to the consignee under the amended Punjab Value Added Tax regime was treated as a compulsory precondition for penalty proceedings, and non-service of that notice was said to vitiate the penalty order. The court also noted that penalty for transit-related non-compliance cannot be sustained where the transport documents are complete, the transaction is otherwise accounted for, and no intention to evade tax can be inferred. Mere non-reporting at the ICC barrier, on those facts, was held insufficient to establish tax evasion.

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Issues: (i) Whether notice to the consignee under the amended section 14B(7)(iii) of the Punjab Value Added Tax Act, 2005 was mandatory for sustaining the penalty order; (ii) Whether penalty could be imposed in the absence of an intention to evade tax when the transport documents were complete and available with the driver.

Issue (i): Whether notice to the consignee under the amended section 14B(7)(iii) of the Punjab Value Added Tax Act, 2005 was mandatory for sustaining the penalty order.

Analysis: The amendment to section 14B(7)(iii) had become operative before the goods were intercepted. The amended provision required issuance of notice to the consignee, and no such notice was issued. The statutory requirement was treated as compulsory, and non-compliance affected the validity of the penalty proceedings.

Conclusion: The requirement of notice to the consignee was mandatory, and failure to issue such notice vitiated the penalty order.

Issue (ii): Whether penalty could be imposed in the absence of an intention to evade tax when the transport documents were complete and available with the driver.

Analysis: The documents accompanying the goods were found to be complete, including the invoice, GR, and other particulars, and the transaction was otherwise accounted for. On those facts, no intention to evade tax could be inferred. Mere non-reporting at the ICC barrier, in these circumstances, was not sufficient to sustain penalty.

Conclusion: Penalty could not be sustained because no intention to evade tax was established.

Final Conclusion: The challenge failed, and the penalty order was not upheld because the mandatory statutory notice was not issued and the facts did not justify an inference of tax evasion.

Ratio Decidendi: Where a statute makes notice to the consignee mandatory before penal action, omission to serve such notice vitiates the penalty, and penalty for transit non-compliance cannot stand absent evidence of intent to evade tax.

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