Transit document penalty cannot be imposed mechanically where export movement shows no revenue loss or tax evasion risk.

Penalty for failure to produce endorsed transit declaration documents under the West Bengal Sales Tax Act was held not to be sustainable in full where the goods were proved to have moved in the course of export and no real possibility of tax evasion or revenue loss was shown. The commentary states that the penalty power under section 72(6) cannot be exercised mechanically: a mere procedural lapse or negligence does not justify full penal consequences unless the contravention creates an actual or potential revenue impact. In such circumstances, an arbitrary penalty would be inconsistent with Article 14, though a reduced deterrent amount may be retained.

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Issues: Whether penalty was justified for failure to produce endorsed transit declaration documents under section 72 of the West Bengal Sales Tax Act, 1994 when the goods had in fact been exported and there was no possibility of evasion of tax.

Analysis: The statutory scheme required the transporter to produce endorsed documents at the check-post, and section 72(6) of the West Bengal Sales Tax Act, 1994 empowered imposition of penalty for contravention. However, the penalty power could not be exercised mechanically. The decisive consideration was whether the default created any real opportunity for tax evasion or caused actual or potential loss of revenue. On the facts, the goods were not sold within West Bengal and were proved to have moved in the course of export under section 5(1) of the Central Sales Tax Act, 1956. The authorities failed to establish any revenue loss or likelihood of evasion. The omission was negligence, but it was not a tax delinquency warranting full penal consequences. In such circumstances, an arbitrary penalty would be inconsistent with Article 14 of the Constitution of India.

Conclusion: Penalty was not sustainable in the full amount and the impugned orders were interfered with, though a reduced amount was retained as deterrence.

Final Conclusion: The penalty orders were substantially set aside, but a limited deterrent payment was upheld, leaving the matter finally disposed of with partial relief to the assessee.

Ratio Decidendi: Penalty for breach of a transit-document requirement cannot be sustained mechanically unless the contravention is shown to have created a possibility of tax evasion or adverse revenue impact.

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