2024 (8) TMI 256 - HC - VAT and Sales Tax

Penalty under Section 54(1)(14) UP VAT Act requires mens rea, not mere form filling error

HC held that penalty under Section 54(1)(14) of UP VAT Act, 2008 cannot be imposed solely for non-filling of column 6 in Form 38. Mens rea is essential ... Levy of penalty under Section 54(1)(14) of the U.P. Value Added Tax Act, 2008 - contravention of the provisions of Section 50 of the Act, 2008 - Form 38 remains unfilled - existence of mens rea/guilty mind - HELD THAT:- Perusal sub Section 6 of Section 28A itself indicates that penalty can be imposed only after giving opportunity of being heard that the goods were being so transported in an attempt to evade payment of tax due or likely to be due under the Act and therefore mens rea becomes essential ingredient, and therefore the facts in the case of M/s Guljag Industries [2007 (8) TMI 344 - SUPREME COURT] are distinguishable in respect to the provisions of the Act, 2008 applicable in the State of Uttar Pradesh. Non-filling up of column no. 6 i.e. not mentioning of bill / cash memo / chalan / invoice number may lead to an inference that in case of non-checking of goods the declaration form may be re-used for importing goods of same quantity, weight and value to evade payment of tax but it cannot be the sole ground to impose penalty under Section 54(1)(14) of the Act, 2008. Satisfaction has to be recorded after giving opportunity to the dealer / person and after considering all the relevant materials / evidences on record that there was an intention to evade payment of tax. The guilty mind is necessary to be established to impose penalty under Section 54(1)(14) of the Act, 2008. In the present case also the vehicle was accompanied by Form 38 and all other documents were being carried along with other documents and only due to human error column would remain unfilled. It was the duty of the Officer managing the Check Post who after discovering that some column of Form 38 found unfilled should have filled the same himself in the light of Circular dated 03.02.2009 and should have allowed the vehicle to proceed alongwith the goods. It is undisputed that the goods transported were the same which were mentioned in the various documents (bill/builty/challan etc.) carried by the driver of the vehicle. This Court finds no merit in the contention raised by learned Standing Counsel appearing on behalf of the revenue. The revision is accordingly allowed. Issues Involved:1. Legality of the penalty imposed under Section 54(1)(14) of the U.P. Value Added Tax Act, 2008.2. Interpretation of procedural defects in Form 38.3. Applicability of mens rea (intention to evade tax) in imposing penalties.4. Compliance with the Circular dated 03.02.2009 issued by the Commissioner, Commercial Tax U.P.Detailed Analysis:1. Legality of the Penalty Imposed Under Section 54(1)(14) of the U.P. Value Added Tax Act, 2008:The revisionist challenged the order dated 13.02.2014 by the Trade Tax Tribunal, which upheld the penalty imposed by the Assessing Authority under Section 54(1)(14) of the U.P. Value Added Tax Act, 2008. The penalty was based on the finding that Form 38 had an unfilled column, raising suspicion of tax evasion. The court examined whether the penalty was legally justified given the circumstances of the case.2. Interpretation of Procedural Defects in Form 38:The primary issue was the non-filling of Column 6 in Form 38, which led to the imposition of the penalty. The court noted that the driver was carrying all relevant documents, including the bill, challan, and bilty, from which the details could have been verified. The court referred to the judgment in *Jain Suddh Vanaspati Ltd. Vs. State of U.P.*, which held that procedural defects alone, such as unfilled columns, do not necessarily indicate an intention to evade tax.3. Applicability of Mens Rea in Imposing Penalties:The court emphasized that mens rea, or the intention to evade tax, is a crucial element for imposing penalties under Section 54(1)(14) of the Act. It cited the case of *I.C.I. India Limited Vs. Commissioner of Sales Tax*, which established that penalties cannot be imposed solely for procedural defects without evidence of an attempt to evade tax. The court distinguished this case from *M/s Guljag Industries Vs. Commercial Tax Officer*, where the Supreme Court held that non-compliance with mandatory provisions could attract penalties without proving mens rea. However, the court clarified that in the context of the U.P. Act, mens rea is essential.4. Compliance with the Circular Dated 03.02.2009:The court referred to the Circular issued by the Commissioner, Commercial Tax U.P., which directed that if any column in Form 38 remains unfilled, the inspecting officer should fill it up based on other documents and release the goods. The court found that the officer at the check post failed to comply with this directive, and the penalty was imposed without considering this procedural safeguard.Conclusion:The court concluded that the penalty imposed was not justified as there was no intention to evade tax. The procedural defect of an unfilled column in Form 38 did not warrant a penalty, especially when all relevant documents were available for verification. The court quashed the impugned order dated 13.02.2014 and directed the refund of any penalty deposited by the revisionist.Final Order:The revision was allowed, the order of the Tribunal dated 13.02.2014 was quashed, and any penalty deposited by the revisionist was ordered to be refunded in accordance with the law.