2018 (12) TMI 231 - HC - VAT and Sales Tax

Court rules penalty on assessee illegal due to seller's penalty; assess only after satisfaction & hearing.

The court allowed the revision in favor of the assessee, holding that once a penalty was imposed on the seller, no further penalty could be imposed on the ... Jurisdiction to initiate or impose penalty - Whether SCN having been issued; goods having been seized and penalty having been first imposed solely on the seller (Ex-U.P. dealer) vide order dated 08.11.2013 and no liability having been fixed on the assessee in those proceedings, there survived any jurisdiction to initiate or impose penalty on the assessee there after under Section 54(1) (14) of U.P. VAT Act, 2008? - Held that:- It emerges from a plain reading of statute that the penalty under Section 54(1)(5) may be imposed if the Assessing Officer 'is satisfied' that 'any dealer or other person' had committed the wrong described under various clauses of subsection (1) of Section 54. Therefore, in the first place, for a valid penalty to arise, the Assessing Officer must record his satisfaction in that regard. Then the satisfaction must arise with respect to a person who may be a dealer or any other person as well. With reference to clause (5) of sub-section (1) of Section 54, it is seen that the penal event arises if the person being subjected to penalty imports or attempts to import or abets to import any goods in contravention of Section 50, 51 of the Act, with a view to evade payment of tax. Admittedly, besides the fact that the penalty order was made at the hands of the ex-U.P. selling dealer, to the exclusion of the assessee, the Assessing Officer first drew up penalty proceedings and passed penalty order on 08.11.2013 solely against that selling dealer. In that order, copy of which has been brought on record by means of a supplementary affidavit, the satisfaction is seen to exist solely against that dealer to the exclusion of any allegation or suspicion of infringement of law committed by the assessee. Thus, the satisfaction contemplated under Section 54(1) of the Act was recorded by the Assessing Officer on 08.11.2013 against the selling dealer only - That having been done, there survived no occasion or jurisdiction for the Assessing Officer to draw up any other or further proceedings. The power to impose penalty stood exhausted. Once the Assessing Officer recorded his satisfaction of infringement having been made with respect to the present transaction, solely by the selling dealer, it did not survive on him to record a contrary or another satisfaction as to infringement made by the assessee with respect to that transaction - However, if the Assessing Officer intends to draw a finding contrary to that recorded during the seizure proceedings so as to rope in another person (who had not been visited with the seizure order), such intent must get expressed at the first instance, i.e. while issuing penalty notice or at least before passing penalty order. However, no final opinion is being expressed in this regard, in view of the fact, in the instant case no notice was issued to the assessee during pendency of the penalty proceedings against the seller. Penalty stands deleted - revision allowed. Issues:1. Validity of penalty imposition on the assessee under Section 54(1)(14) of U.P. VAT Act, 2008.2. Jurisdiction to impose penalty on the assessee after penalty imposed on the seller.3. Interpretation of Section 54(1)(5) for penalty imposition in the case of import of goods.Analysis:1. The revision was filed against the Commercial Tax Tribunal's order under Section 54(1)(5) of the U.P. Value Added Tax Act, 2008. The questions of law admitted for revision focused on the validity of penalty imposition on the assessee.2. The assessee imported goods from a dealer in Rajasthan, and the goods were seized by the revenue authorities. A penalty was first imposed on the seller, and later on the assessee. The revision contended that penalty could only be imposed once, and the penalty on the seller exhausted the authority to impose further penalties on the assessee.3. The revenue authorities argued that penalty imposition on the assessee was valid under Section 54(1)(5) of the Act, which allows penalties on any person involved in infringing the law. The Act provides discretion to impose penalties on purchasers, sellers, or both, and the penalty could be imposed on each guilty party.4. The court analyzed Section 54(1)(5) and emphasized that penalties could be imposed after the Assessing Officer's satisfaction of a wrong committed by any dealer or person. The satisfaction must be recorded in writing after giving the concerned person a reasonable opportunity to be heard.5. The court found that the penalty imposed on the seller excluded the assessee, and the Assessing Officer's satisfaction was solely against the seller. Once satisfaction was recorded against the seller, no further penalty could be imposed on the assessee for the same transaction.6. The court noted that while seizure proceedings are summary in nature and may not bind the Assessing Officer, any intent to impose penalties on another party must be expressed before passing the penalty order. Since no notice was issued to the assessee during the penalty proceedings against the seller, the penalty imposed on the assessee was deemed illegal.7. The court allowed the revision, answering the questions of law in favor of the assessee and against the revenue. Consequently, the penalty imposed on the assessee was deleted.By thoroughly analyzing the provisions of the U.P. VAT Act, the court clarified the jurisdiction and limitations regarding penalty imposition, ensuring fairness and adherence to legal procedures in tax matters.