Erroneous factual foundation defeats penalty where route distance was wrongly calculated and evasion could not be sustained.

Penalty under Section 51(7)(c) of the Punjab Value Added Tax Act, 2005 could not survive once the factual basis for alleging evasion was shown to be erroneous. The authorities had proceeded on the assumption that the vehicles took an unusual route to avoid the nearest Information Collection Centre, but rectification proceedings established that the distance between the relevant places had been wrongly stated and the route calculation was materially incorrect. Because that mistaken distance was the foundation for treating the conduct as non-reporting and tax evasion, the penalty was held unsustainable and set aside.

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Issues: Whether the penalty imposed on the assessee under Section 51(7)(c) of the Punjab Value Added Tax Act, 2005 could be sustained when the distance on which the alleged evasion was founded was wrongly reflected and the basis for non-reporting at the Information Collection Centre no longer survived.

Analysis: The appeal arose from penalty proceedings where the authorities proceeded on the footing that the vehicles had adopted an unusual route to avoid the nearest Information Collection Centre. In rectification proceedings, the Tribunal accepted that the distance between the relevant places had been wrongly stated and that there was a material difference in the route calculations. Once that factual foundation was shown to be erroneous, the basis for treating the conduct as tax evasion and for sustaining the penalty could not stand. The Court also treated the incorrect distance calculation as sufficient to undermine the very premise of the penalty.

Conclusion: The penalty under Section 51(7)(c) of the Punjab Value Added Tax Act, 2005 was not sustainable and was set aside.

Final Conclusion: The appeal succeeded and the assessee was relieved of the impugned penalty.

Ratio Decidendi: A penalty predicated on an erroneous factual foundation cannot survive once the factual basis for alleging evasion is shown to be or unsustainable.

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