Penalty for goods movement without genuine documents fails when return records are verified and no tax evasion is proved.

Penalty under Section 14-B(7)(ii) of the Punjab General Sales Tax Act, 1948 was unsustainable where the goods were shown as returned to the principal after cancellation of agency, a credit note had been issued, and the assessing authority accepted the same bills and books of accounts during assessment. Once the supporting documents for the return of goods were verified and not found false or incorrect, the foundation for alleging movement without proper and genuine documents fell away. As no proved attempt to evade or avoid tax remained, the penalty could not be sustained. The penalty orders, together with the appellate and tribunal orders, were set aside and refund with interest was directed.

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Issues: Whether penalty under Section 14-B(7)(ii) of the Punjab General Sales Tax Act, 1948 was sustainable when the goods were claimed to have been returned to the principal on cancellation of agency and the relevant bills were verified during assessment.

Analysis: Penalty under Section 14-B(7)(ii) could be imposed only if the authority reached a finding, on enquiry, that there was an attempt to evade or avoid tax. The material showed that the agency had been cancelled, the goods were being returned to the principal, a credit note had been issued, and the assessing authority later accepted the same bills and books of accounts while completing assessment. Once the documents supporting return of goods were accepted in assessment and were not shown to be false or incorrect, the basis for holding that the goods were not accompanied by proper and genuine documents disappeared. In those circumstances, no inference of tax evasion could survive.

Conclusion: The penalty was held to be legally unsustainable and the question of law was answered in favour of the assessee.

Final Conclusion: The penalty orders and the appellate and tribunal orders were set aside, and refund of the penalty amount with interest was directed.

Ratio Decidendi: Penalty for movement of goods without proper and genuine documents cannot be sustained where the underlying transaction is duly supported by verified books of accounts and assessment records, and no proved attempt to evade tax remains.

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