2019 (7) TMI 456 - HC - VAT and Sales Tax

Court overturns penalty on export unit due to lack of evidence, emphasizing proof needed for tax penalties

Moser Baer India Ltd. Versus Commissioner Income Tax

The court allowed the revision against the Trade Tax Tribunal's decision to reduce the penalty imposed on the assessee for a technical defect in Form-31. ... 100% EOU - Imposition of penalty U/s 15 (A) (o) of U.P. Trade Tax Act, 1948 - mere technical defect in Form-31 - absence of any intention to evade payment of tax - HELD THAT:- The Act clearly stipulates that a penalty under Section 15-A-(1) (O) of the Act may be imposed if the Assessing Officer is satisfied that the offending dealer had intention to evade tax. Such satisfaction must be recorded in the penalty order itself and not outside it. In the facts of the present case, other than mentioning the default noted by the Assessing Officer, there is no satisfaction recorded of such intention to evade tax. A satisfaction required to be reached by the Act, cannot be a matter of interference to be drawn in revision proceedings but the same must be found to be in existence on a plain reading of the order passed by the Assessing Authority. There can be no presumption on such satisfaction having been reached and there can be no argument to infer its presence. Even otherwise, in the facts of the present case, it appears difficult to accept the presence of such intention, as the assessee is a 100% export oriented unit whose export sales were found to be exempt and there is no allegation that the assessee was engaged in trading of goods that were being imported. Revision allowed. Issues:- Revision filed against Trade Tax Tribunal's order reducing penalty- Question of law: Imposition of penalty for technical defect in Form-31Analysis:1. The revision was filed against the Trade Tax Tribunal's order that reduced the penalty imposed on the assessee. The original penalty under Section 15-A-(1) (O) of the U.P. Trade Tax Act was reduced from Rs. 10,80,000 to Rs. 5,40,000 for the assessment year 2004-05.2. The main question of law in this case was whether a mere technical defect in Form-31 warrants the imposition of a penalty under Section 15 (A) (o) of the Act, especially in the absence of any intention to evade tax.3. The assessee, a 100% export-oriented unit, imported dyes for manufacturing compact discs and digital video discs. The imported dyes were exempt from excise duty, and the assessee had the necessary certificates for procurement and movement of the goods.4. The issue arose when the goods were detained during a road check because Form-31 accompanying the goods did not have the description of goods, invoice number, and date filled in. The penalty was imposed on the assessee, even though the fault lay with the consignor.5. The Assessing Officer imposed the penalty citing the incomplete Form-31 and absence of the original invoice. The first appeal authority and the Tribunal upheld the penalty, albeit reducing it by half.6. The assessee argued that as a 100% export-oriented unit with no intention to evade tax, the penalty was unjustified. The penalty order lacked a clear recording of the intention to evade tax, a prerequisite under the Act.7. The court noted that the Act requires a clear satisfaction of the intention to evade tax for imposing a penalty. In this case, there was no evidence or allegation of tax evasion by the assessee, who was engaged in legitimate manufacturing activities.8. Considering the circumstances, the court allowed the revision, setting aside the Tribunal's order and ruling in favor of the applicant-assessee, stating that the penalty imposed was illegal and contrary to law due to the absence of intention to evade tax.This detailed analysis highlights the key legal aspects and arguments presented in the judgment, focusing on the imposition of penalties for technical defects in documentation without evidence of tax evasion.