Transit documents and absence of tax evasion intent defeat VAT penalty under Rajasthan law.

Penalty under Section 76(6) of the Rajasthan VAT Act was held unsustainable where goods in transit were accompanied by the prescribed documents under Section 76(2)(b) and there was no material showing intent to evade tax. The checking authority's suspicion that the inter-State sale was irregular could not, by itself, justify penalty or determine the transaction's legality beyond the scope of transit verification. The nature of the sale was left to regular assessment, where tax liability could be examined if otherwise leviable. In the absence of inquiry or evidence of deliberate evasion, the essential ingredient for penalty was not established, and relief was available to the assessee.

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Issues: Whether penalty under Section 76(6) of the Rajasthan VAT Act, 2003 could be sustained when the goods in transit were accompanied by the requisite documents under Section 76(2)(b) and there was no material showing intent to evade tax.

Analysis: The goods were found in transit with the prescribed documents, including goods receipt, bills and declaration forms. The mere view of the checking authority that the inter-state sale was irregular did not by itself justify penalty. The nature or legality of the transaction was a matter for regular assessment, where the transaction could be examined and tax, if otherwise leviable, could be assessed. The checking officer could not, on suspicion alone, impose penalty or determine the validity of the inter-state sale beyond the limits of his jurisdiction. In the absence of inquiry or material indicating deliberate evasion, the element required for penalty was not established.

Conclusion: Penalty under Section 76(6) was not sustainable and the assessee was entitled to relief.

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