2018 (1) TMI 610 - HC - VAT and Sales Tax

Tribunal overturns penalty for dealer's tax invoice error, stresses intent in tax compliance

The Tribunal ruled in favor of the revisionist, a registered dealer penalized under Section 54(1)(5)(ii) for not obtaining a tax invoice. Despite the ... Penalty - issuance of sale invoice instead of tax invoice by seller - assessee was required to disclose the Tin Number and other details to the selling dealer and to purchase such materials only by way of tax invoice - case of revisionist is that since no advantage had been taken by it, no deliberate act can be attributed to it, and therefore penalty imposed is bad in law - Held that: - the Tribunal has clearly noticed the fact that there was no undue benefit gained by the assessee on account of issuance of sale invoice instead of tax invoice - In such circumstances, the act of purchasing dealer cannot be construed as a deliberate act so as to bring it within the clutches of section 54(1)(5) - penalty not sustained - revision allowed. Issues:Imposition of penalty under Section 54(1)(5)(ii) of the Act for not obtaining a tax invoice despite being a registered dealer.Analysis:1. The revisionist, a registered dealer under the Act, purchased construction materials without obtaining a tax invoice, resulting in a penalty under Section 54(1)(5)(ii). The Tribunal noted that the revisionist did not claim input tax credit for the tax paid on the purchases. The revisionist argued that it informed the selling dealer of its registration and Tin Number, but a sale invoice was issued due to the seller's error, not to gain any advantage.2. The revisionist's counsel contended that since no advantage was taken, and no deliberate act was committed, the penalty imposed was unjustified. On the other hand, the Standing Counsel argued that the revisionist failed to disclose necessary details and purchase materials only with a tax invoice, justifying the penalty.3. Section 54(1)(5)(ii) was invoked in this case, which penalizes a dealer for not obtaining a tax invoice despite being registered. Section 22 of the Act mandates registered dealers to issue tax invoices, with purchasing dealers required to disclose their details to the selling dealer. Failure to fulfill this obligation can lead to penalties under Section 54(1)(5).4. The provision begins with the term 'deliberately,' implying intentional non-compliance. The penalty is meant to penalize deliberate acts of non-disclosure to gain undue advantage. If no benefit is derived from the lapse, penalty imposition should not be routine, as highlighted in the case law of M/s Hindustan Steel Ltd. vs. State of Orrisa (1969) 2 SCC 627.5. The Tribunal found that the revisionist did not gain any undue benefit from the sale invoice issuance error. Therefore, the act cannot be considered deliberate under Section 54(1)(5)(ii), leading to the conclusion that the penalty was unwarranted. The judgment clarifies that penalties should only be imposed when there is a deliberate intention to secure undue gain.6. In conclusion, the Tribunal ruled that since no undue benefit was derived from the mistake, the penalty imposed on the revisionist was unjustified. The judgment emphasizes the importance of examining the intent behind the dealer's actions before levying penalties under the Act.7. The revision was disposed of in favor of the revisionist, highlighting the significance of assessing the circumstances and intent behind a dealer's actions before imposing penalties under the relevant provisions of the Act.