2011 (12) TMI 454 - HC - VAT and Sales Tax

Court dismisses penalty on VAT form submission for transit goods; no intent to evade tax.

The High Court upheld the respondent-assessee's challenge against a penalty imposed under section 76(6) of the Rajasthan Value Added Tax Act, 2003. The ... Penalty under section 76(6) - Held that:- It is evident that for one the declaration under form VAT-49 was not required in the course of goods in transit in view of the fact that admittedly the goods were not for sale and were being only for demonstration purposes. This fact was not negatived in any enquiry and the certificate in this regard accompanying the goods in transit not established to be false. Further even otherwise declaration in form VAT-49 was submitted to the assessing authority along with reply to the show-cause notice. it is not conceivable that there was any intent to evade tax which could be made out against the respondent-assessee and consequently, the levy of penalty against the respondent-assessee was absolutely illegal, arbitrary and ultra virus of provisions of the Act of 2003 - Following decision of D. P. Metals [2001 (10) TMI 881 - SUPREME COURT OF INDIA] - Decided against Revenue. Issues:Challenge to order upholding penalty under section 76(6) of the Rajasthan Value Added Tax Act, 2003.Analysis:The case involved a challenge to an order upholding a penalty imposed under section 76(6) of the Rajasthan Value Added Tax Act, 2003. The penalty was levied on the respondent-assessee for not having the necessary declaration form VAT-49 accompanying the goods in transit, which was deemed a violation of rule 5(1)(i) of the Rajasthan Value Added Tax Rules, 2006. The assessing authority had imposed a penalty of Rs. 6,00,000 despite the respondent-assessee submitting form VAT-49 along with their reply to the show-cause notice. The assessing authority overlooked this submission, leading to the penalty being levied.The appellate authority and the Rajasthan Tax Board, however, noted that the respondent-assessee had submitted form VAT-49 along with other necessary documents like 'bilty' and invoice. They concluded that the submission of form VAT-49 with the reply to the show-cause notice was sufficient compliance with the law, as per section 76(2)(b) of the Act of 2003. They also considered that the goods in transit were not for sale but for demonstration purposes, as evidenced by a certificate accompanying the goods. Relying on the principles established in the case of State of Rajasthan v. D.P. Metals, it was held that there was no intent to evade tax, and therefore, no penalty could be justified.The High Court judge, Alok Sharma, after reviewing the facts, found that the goods in transit were not for sale but for demonstration purposes, and the submission of form VAT-49 was not required in such a scenario. The certificate accompanying the goods supporting this fact was not proven false. Additionally, the submission of form VAT-49 to the assessing authority along with the reply further supported the lack of intent to evade tax. Drawing from the precedent set in the case of D. P. Metals, the judge concluded that the levy of penalty against the respondent-assessee was illegal, arbitrary, and in violation of the Act of 2003. Therefore, the revision petition was dismissed.