2018 (3) TMI 1269 - HC - VAT and Sales Tax

High Court upholds penalties for tax evasion under Punjab VAT Act. Compliance key to prevent evasion.

M/s Jainsons Appliances, Baddi, District Solan (HP) Versus The State of Punjab and another

The High Court dismissed the appeal challenging the Value Added Tax Tribunal's findings under the Punjab Value Added Tax Act, 2005. The appellant's ... Imposition of penalty u/s 51(7) of the PVAT Act - Whether on the facts and in the circumstances of the case, the penalty u/s 51(7) of the PVAT Act can be imposed merely for non-declaration of goods at ICC when no deficiency has been pointed out in the documents accompanying the goods? - Held that: - Learned counsel for the appellant-assessee has not been able to show that the findings recorded by the Tribunal are illegal or perverse or are based on misreading of evidence on record warranting interference by this Court. He has also not been able to produce any material to substantiate its claim made in the appeal - no substantial question of law arises - appeal dismissed - decided against appellant. Issues:1. Interpretation of provisions of Punjab Value Added Tax Act, 2005 regarding evasion of tax.2. Imposition of penalty under Section 51(7) and Section 51(12) of the PVAT Act.3. Applicability of Rule 64C of PVAT Rules, 2005 in cases of goods transported by road.4. Determining mens rea for tax evasion under Section 51(7) of the Act.Analysis:1. The appellant-assessee challenged the order of the Value Added Tax Tribunal, Punjab, regarding evasion of tax under the Punjab Value Added Tax Act, 2005. The Tribunal found that the appellant attempted to evade tax by not reporting goods at the Information Collection Centre (ICC) while entering Punjab, despite being obligated to do so. The Tribunal concluded that the appellant's actions indicated an intent to evade tax by taking an escape route, avoiding ICCs, and only paying 1.5% CST. The Tribunal upheld the penalty under Section 51(7)(c) of the PVAT Act, considering the circumstances of the case.2. The dispute also involved the imposition of penalties under Section 51(7) and Section 51(12) of the PVAT Act. The designated authority had imposed penalties under these sections, which were challenged by the appellant. The Tribunal maintained the penalty under Section 51(7)(c) while deleting the penalty under Section 51(12) of the PVAT Act. The Tribunal's decision was based on the appellant's failure to comply with reporting requirements at ICCs, indicating an attempt to evade tax, leading to the imposition of the penalty under Section 51(7)(c).3. The appellant contended that Rule 64C of the Punjab Value Added Tax Rules, 2005 was not applicable as the goods were transported by road. However, the Tribunal found that Rule 64C applied to all goods, regardless of the mode of transport, and mandated reporting at ICCs before taking delivery or transitioning goods by road. The Tribunal emphasized the importance of compliance with reporting rules to prevent tax evasion, especially in cases of interstate transactions like the one in question.4. In assessing the mens rea for tax evasion under Section 51(7) of the Act, the Tribunal considered the appellant's actions, such as avoiding ICC reporting, as indicative of an attempt to evade tax. The Tribunal highlighted the significance of following reporting procedures to prevent tax evasion and maintain transparency in transactions. The Tribunal's decision to maintain the penalty under Section 51(7)(c) was based on the appellant's actions and failure to comply with reporting requirements, indicating an intent to evade tax.In conclusion, the High Court dismissed the appeal, finding no merit in challenging the Tribunal's findings and upholding the penalties imposed under Section 51(7)(c) of the PVAT Act. The judgment underscores the importance of compliance with tax laws and reporting requirements to prevent tax evasion and ensure transparency in commercial transactions.