Transit penalty under VAT law fails absent intent to evade tax; transaction validity must be examined in regular assessment.

Penalty under section 76(6) of the Rajasthan Value Added Tax Act, 2003 was not sustainable where goods in transit were accompanied by the required documents under section 76(2)(b) and the record showed no material proving intent to evade tax. The Rajasthan HC held that the anti-evasion authority could not decide the validity of the underlying transaction or the alleged irregularity of the inter-State sale in penalty proceedings. Such issues, if relevant, belong to regular assessment, where any improper transaction may be ignored and tax assessed in accordance with law.

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Issues: Whether penalty under section 76(6) of the Rajasthan Value Added Tax Act, 2003 could be imposed when the goods in transit were accompanied by the documents required under section 76(2)(b) of the Act and there was no finding of intent to evade tax, and whether the assessing authority could decide the validity of the underlying transaction in penalty proceedings.

Analysis: The goods were found accompanied by the requisite documents, and the record disclosed no inquiry establishing deliberate concealment or an intention to evade tax. The nature or legality of the transaction was a matter for regular assessment, where any improper transaction could be ignored and tax assessed in accordance with law. The authority proceeding under the anti-evasion mechanism could not travel beyond its jurisdiction to pronounce on the alleged irregularity of the inter-State sale, especially when the goods were tax-paid and the circumstances did not indicate evasion.

Conclusion: Penalty under section 76(6) was not sustainable, and the levy was rightly set aside.

Final Conclusion: The revisions failed because the case disclosed compliance with the documentary requirements and no material showing an intent to evade tax, leaving the dispute to be dealt with, if at all, in regular assessment.

Ratio Decidendi: Penalty for transit discrepancies cannot be sustained absent material indicating intent to evade tax, and questions about the legality of the transaction itself belong to regular assessment rather than anti-evasion penalty proceedings.

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