2025 (10) TMI 605 - HC - VAT / Sales Tax

Revision allowed; earlier order set aside-penalty and seizure quashed for lab-use printers; blank Form-38 not proof of tax evasion

M/s. Garg Photo Films Versus The Commissioner Commercial Tax

HC allowed the revision, set aside the Tribunal's order for AY 2008-09 and quashed the penalty and seizure. The court held that printers imported for use ... Levy of penalty - seizure of goods - Form - 38 was left blank - possibility of using the same for multiple times with intent to evade payment of tax - HELD THAT:- It is not in dispute that the revisionist is engaged in the business of taking photographs, including developing, printing and enlargement of photo films. For the said purpose, the printers were purchased from Delhi, which were coming to its lab at Varanasi. The goods were not meant for sale and no adverse inference has been brought on record to show that the goods were meant for sale or the revisionist has intention to sell the same. Even if the blank form was found at the time of interception, the authority ought to have got the same filled up in accordance with law other documents, instead of seizing the goods. Merely because Form - 38 was blank, the same cannot be attributed that there was any intention on the part of the revisionist to evade payment of tax, which was not meant for sale. This Court in M/s Maharani Hardware [2022 (3) TMI 1652 - ALLAHABAD HIGH COURT], S/s Hindisawar Bidi Works [2020 (3) TMI 821 - ALLAHABAD HIGH COURT], M/s Philips Electronics India Limited [2022 (2) TMI 1515 - ALLAHABAD HIGH COURT ], S/s P.B.L. Tag Factor (India) Private Limited [2017 (9) TMI 2052 - ALLAHABAD HIGH COURT] and M/s Two Brothers Filaments Limited [2022 (3) TMI 1653 - ALLAHABAD HIGH COURT] has taken the view that even the blank forms are there, no attribution can be attached for intention to evade payment of tax. Furthermore, in the present case, the assessment order has been passed, which has been brought on record along with the supplementary affidavit, showing no adverse inference in the assessment order has been passed in pursuance of the penalty order. Further, the assessment order shows that the revisionist was never dealing with the sale or purchase of printers. On the contrary, the revisionist was dealing with development of photographs, etc. The impugned order dated 22.10.2012 passed by the Commercial Tax Tribunal, Agra for the Assessment Year 2008-09 under section 54(1(14) of the UP VAT Act cannot be sustained in the eyes of law. The same is hereby set aside - revision allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether imposition of penalty and seizure of goods is justified where Form-38 accompanying goods in transit is blank but goods are shown to be purchased for use (not for sale) by a registered dealer. 2. Whether the authority was obliged to fill up or verify a blank Form-38 in accordance with accompanying documents instead of seizing the goods. 3. Whether an assessment order that draws no adverse inference against the dealer as to sale/purchase of the goods precludes sustenance of a separate penalty order based on the same facts. ISSUE-WISE DETAILED ANALYSIS - Issue 1: Validity of penalty/seizure where Form-38 is blank but goods are for use, not sale Legal framework: UP VAT Act provisions governing movement of goods in transit with prescribed Form-38 and penalties for violations of statutory requirements concerning transport documents. Precedent Treatment: The Court referred to and followed earlier decisions of this Court holding that presence of blank statutory forms does not automatically warrant attribution of intent to evade tax; blank forms alone are insufficient to establish mens rea of tax evasion. Interpretation and reasoning: The Tribunal and lower authority relied solely on the blank columns of Form-38 to infer a tax-evasion intent and imposed 40% penalty. The Court examined material on record showing the dealer's business (photography services), the nature of goods (printers for use in the lab), invoices, and that the goods were accompanied by Form-38 and GRs. No material demonstrated that the goods were meant for sale or that there was an intention to commit tax evasion. The Court held that mere absence of entries in the form cannot, without corroborative evidence, justify seizure or imposition of penalty based on presumed intent to evade tax. Ratio vs. Obiter: Ratio - Blank or incomplete Form-38, in absence of any other incriminating material, does not suffice to infer intention to evade payment of tax where goods are shown to be for use by a registered dealer and not for sale. Obiter - Remarks on the commercial reality of the dealer's trade (photography services) and incidental observations about how goods used in trade are distinct from traded goods. Conclusion: Penalty and seizure founded solely on a blank Form-38 cannot be sustained where evidence establishes that goods were for use and there is no material showing intent to sell or evade tax; the impugned penalty is set aside. ISSUE-WISE DETAILED ANALYSIS - Issue 2: Duty of authority to fill/verify blank Form-38 rather than seize goods Legal framework: Statutory scheme contemplates movement of goods accompanied by prescribed documents (Form-38), and authorities are empowered to verify compliance; procedural safeguards and administrative duties arise where forms are incomplete. Precedent Treatment: The Court relied on prior decisions of this Court to the effect that administrative authorities should verify and, where appropriate, complete or cross-check blank statutory forms against accompanying documents rather than immediately draw adverse inference and seize goods. Interpretation and reasoning: The record showed accompanying documents (invoice, GRs) that could have been used to rectify or verify the blank form entries. The Court reasoned that the authority ought to have filled or verified the blank columns in accordance with those documents instead of immediately treating the blank form as conclusive evidence of wrongful intent and seizing the goods. The approach of immediate seizure based on form incompleteness was held to be disproportionate where documentary evidence supported the claimed purpose of the goods. Ratio vs. Obiter: Ratio - Where statutory transport forms are blank, authorities are required to verify and, if necessary, fill entries consistent with accompanying documents, before attributing wrongful intention or seizing goods. Obiter - Statements emphasizing proportionality and administrative obligation to inquire into the genuineness of documentary evidence. Conclusion: The authority's failure to verify/fill the blank Form-38 against accompanying documents renders seizure and consequent penalty unsustainable. ISSUE-WISE DETAILED ANALYSIS - Issue 3: Effect of an assessment order with no adverse inference on sustaining penalty Legal framework: Interaction between assessment proceedings under the UP VAT Act and parallel/ancillary penalty orders; principle that final assessment outcomes are material to the validity of consequent punitive orders based on same facts. Precedent Treatment: The Court followed precedents where an assessment order that does not draw an adverse inference on the same transaction has been held to undermine the basis for a separate penalty imposed for alleged evasion arising from identical facts. Interpretation and reasoning: The assessment order for the relevant assessment year, produced on record, did not record any adverse finding that the dealer was dealing in sale/purchase of printers or that there was tax evasion. Given that the assessment authority examined the transaction and refrained from recording adverse conclusions, the Court held that sustaining a separate and punitive penalty order on identical factual matrix would be incongruous and legally unsustainable. The Court accepted the submission that once assessment is concluded without adverse inference, the penalty based on the same factual premise cannot stand. Ratio vs. Obiter: Ratio - Where an assessment has been concluded without adverse findings on the same facts, a penalty order predicated on those facts cannot be sustained. Obiter - Observations on the weight to be accorded to assessment outcomes in disciplinary/penal proceedings under taxation statutes. Conclusion: The absence of adverse findings in the assessment order negates the basis for the penalty; the penalty cannot be sustained and must be set aside. CONSOLIDATED CONCLUSION On the combined application of statutory requirements, documentary record, and binding precedents, the Court concluded that seizure and imposition of penalty based solely on a blank Form-38 were not justified where goods were demonstrably for use by a registered dealer, the authority failed to verify/fill the form against accompanying documents, and the assessment proceedings drew no adverse inference; the impugned penalty order was set aside and questions of law decided in favour of the revisionist.