2011 (3) TMI 1513 - HC - VAT and Sales Tax

Court rules penalty unjustified under Rajasthan Sales Tax Act for imported goods used in power distribution. Appellate orders upheld.

The court held that the penalty under section 78(5) of the Rajasthan Sales Tax Act was unjustified as the requirement for ST-18A forms did not apply to ... Penalty under section 78(5) of the Rajasthan Sales Tax Act, 1994 - requirement of declaration in Form ST-18A under rule 53 - exception for goods used in generation or distribution of electricity - meaning of 'electrical goods' and application of trade/common parlance test - requirement of opportunity under principles of natural justice before imposing penaltyRequirement of declaration in Form ST-18A under rule 53 - penalty under section 78(5) of the Rajasthan Sales Tax Act, 1994 - Whether the penalty under section 78(5) could be imposed on the assessee for absence or incompleteness of Form ST-18A accompanying the goods in transit. - HELD THAT: - The court held that rule 53 prescribes the requirement of Form ST-18A for notified imports within the State but contains an exception for goods used in generation or distribution of electricity or any other form of power. The purpose of ST-18A is regulatory-to record entry of taxable goods into the State to prevent later tax evasion-and applies to taxable electrical goods of the kind taxed under entries Nos. 96 and 111 of the contemporaneous rate notification (domestic electrical appliances). Given that the goods in question (electrical motors, control panels and V-belts) fall within the exception as goods used in distribution of power, there was no legal requirement to furnish ST-18A in this case; accordingly, the penalty under section 78(5) could not be sustained. The court further observed that even if the requirement were assumed to exist, on the facts the assessee furnished the requisite ST-18A for electrical motors and offered to complete the deficient particulars for the other items with supporting documents, but the assessing authority did not afford the opportunity to cure defects before imposing the penalty; hence the penalty was unjustified on factual grounds as well.Penalty under section 78(5) set aside because the goods fell within the exception in rule 53 and, alternatively, because the assessee was not afforded opportunity to remedy deficiencies.Meaning of 'electrical goods' and application of trade/common parlance test - Whether the imported items (electrical motors, control panels and V-belts) are 'electrical goods' within the scope of the notification requiring ST-18A. - HELD THAT: - The court noted that the term 'electrical goods' is not defined in the statute or rules and therefore the trade/common parlance test must be applied. The rate-notification entries relied upon by the State (entries Nos. 96 and 111) indicate that the taxed 'electrical goods' are predominantly domestic electrical appliances. By contrast, electrical motors, control panels and V-belts are industrial items used for distribution/transmission of power (motors convert electrical power into mechanical power and are run by supplied electrical power). In ordinary trade understanding these items serve generation/distribution functions and thus fall within the exception to rule 53 rather than within the narrower compass of item No. 8 of the notification. Consequently, they are not the class of 'electrical goods' contemplated by the notification for ST-18A.Imported items are not within the taxed category of 'electrical goods' in the notification and fall within the exception for goods used in generation/distribution of electricity.Requirement of opportunity under principles of natural justice before imposing penalty - Whether the assessing authority erred in imposing penalty without giving the assessee opportunity to cure deficient or absent declarations. - HELD THAT: - Relying on the principle in D.P. Metals, the court observed that where declarations are found deficient or absent the assessee must be given an opportunity to explain or remedy defects before a penalty is imposed. Subsequent decisions recognizing breach when ST-18A forms are blank do not eliminate the obligation to afford such opportunity. In the present case the assessee supplied the completed ST-18A for electrical motors and offered to complete other particulars using existing supporting documents; the assessing authority did not allow this and mechanically imposed the penalty. On this factual matrix the absence of opportunity rendered the penalty unsustainable.Imposition of penalty was improper because the assessee was not afforded the opportunity to remedy deficiencies in the declarations.Final Conclusion: The revision petition by the Revenue is dismissed: the appellate authorities correctly set aside the penalty because the goods fell within the exception to rule 53 and, in any event, the assessee was not given an opportunity to rectify the deficient declarations; no interference is warranted. Issues Involved:1. Imposition of penalty under section 78(5) of the Rajasthan Sales Tax Act, 1994.2. Requirement of declaration in form ST-18A for specific commodities.3. Applicability of exception clause in rule 53 of the Rajasthan Sales Tax Rules, 1995.4. Opportunity to rectify deficiencies in declaration forms.5. Classification of goods under relevant tax entries.Detailed Analysis:1. Imposition of penalty under section 78(5) of the Rajasthan Sales Tax Act, 1994:The Revenue challenged the order of the Tax Board, which upheld the decision of the Deputy Commissioner (Appeals) to dismiss the penalty of Rs. 56,790 imposed on the respondent-assessee. The penalty was initially imposed due to incomplete declaration in form ST-18A for electrical control panel and V-belts, and the absence of such declaration for electrical motors. The Revenue argued, based on Supreme Court decisions in *Guljag Industries v. Commercial Taxes Officer* and *State of Rajasthan v. D.P. Metals*, that the penalty was justified as the goods were electrical goods requiring ST-18A forms.2. Requirement of declaration in form ST-18A for specific commodities:The respondent-assessee contended that the commodities in question did not fall under entry No. 8 of the notification requiring ST-18A forms. They argued that the goods were used for the distribution of electricity or power, thus falling under the exception clause of rule 53, which exempts such goods from the requirement of ST-18A forms. The assessee also pointed out that other prescribed documents, such as sale invoices and goods transportation receipts, accompanied the goods.3. Applicability of exception clause in rule 53 of the Rajasthan Sales Tax Rules, 1995:Rule 53 exempts goods used in the generation or distribution of electricity from the requirement of ST-18A forms. The court noted that the term 'electrical goods' is not defined in the Act or Rules, thus applying the common parlance test. The notification dated March 30, 2000, specifies electrical goods requiring ST-18A forms but exempts those used for power distribution. The court concluded that the imported goods (electrical motors, control panels, and V-belts) were used for power distribution and thus fell under the exception clause.4. Opportunity to rectify deficiencies in declaration forms:The respondent-assessee argued that any deficiencies in the ST-18A forms were due to the supplier/transporter and that the assessee should not be penalized. The court referenced the *D.P. Metals* case, emphasizing the need to provide an opportunity to rectify deficiencies in compliance with natural justice principles. The court found that the assessee had furnished the required declarations and offered to correct any deficiencies, but the assessing authority denied this opportunity.5. Classification of goods under relevant tax entries:The court examined entries Nos. 96 and 111 of the rate notification dated March 30, 2000, which specify taxable electrical goods. It concluded that the imported goods did not fall under these entries, which cover more domestic electrical appliances. The court determined that the imported goods were industrial electrical goods used for power distribution, thus exempt from the ST-18A requirement.Conclusion:The court held that the penalty under section 78(5) was unjustified as the requirement for ST-18A forms did not apply to the imported goods. Additionally, the assessee was not given a fair opportunity to rectify deficiencies. The orders of the appellate authorities were upheld, and the revision petition by the Revenue was dismissed.