AI Drafter 
TaxTMI 
TaxTMI 
2008 (4) TMI 686
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....action and a common impugned order in this case. The case of the petitioners is that petitioner No. 3, which is a manufacturer of PTA at its Haldia Plant has various customers to whom the PTA is sold and in this case there was a sale agreement between petitioner No. 2 and petitioner No. 3, under which petitioner No. 2 intended to purchase PTA from petitioner No. 3 for supplying/selling to polyester producers in various parts of India. By the said sale agreement dated December 8, 2005, petitioner No. 3 agreed to sell and petitioner No. 2 agreed to purchase PTA from the Haldia Plant of petitioner No. 3 in West Bengal and it is provided in the said agreement that the sale of PTA will take place at the factory gate of petitioner No. 3 at Haldia. In the said agreement it is also provided that petitioner No. 3 is to make necessary arrangement for transportation of PTA with insurance during transit from Haldia to the destination specified by petitioner No. 2 and that from the time of dispatch of PTA from the plant of petitioner No. 3 at Haldia till the delivery of the goods as specified by petitioner No. 2 all risk of loss, damage or deterioration to the goods is solely lying with and ....
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....he check gate. The petitioners' case is, initially gate passes were issued but on subsequent verification by the sales tax and entry tax authority at the check gate, it was alleged by the said authority that about 84 bags of PTA were not covered by any of the invoices disclosed by the drivers and thereupon, notices under section 74(8) of the Orissa Value Added Tax Act, 2004 (OVAT Act) were issued on each of the trucks. By the said notices, petitioner No. 1 was called upon to appear before the Sales Tax Officer to pay taxes and penalty under the OVAT Act towards alleged excess bags of PTA which were carried in those vehicles but were not covered by valid documents. It is admitted by the petitioner that entire consignment was not covered by documents produced by the drivers of the trucks. Their case is that lapse in the matter of production of documents was due to the carelessness and fatigue of the drivers of the vehicles, as some of the invoices which were in the drivers possession had not been produced before the authority although the entire quantity which has been carried was supported by invoices. According to the petitioners, the said invoices would show that the sale o....
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....t covered by any documents, the sale of those bags cannot be covered by the provisions of the CST Act. Each of those 84 bags of unaccounted PTA comprising 1,050 kgs., were loaded in four vehicles not supported by any documents and accordingly notices were issued under section 74(8) of the OVAT Act. It has also been highlighted that at the time of checking of vehicles on January 13, 2006 and January 14, 2006 the drivers stated that they do not have any documents relating to excess PTA loaded in the vehicles. In the absence of such documents, the finding of the taxing authority cannot be said to be erroneous. It is also stated that the consignments, which were supported by valid documents being in course of inter-State trade, cannot wipe out the liability of the petitioners under OVAT Act in respect of the consignments, which have been carried surreptitiously and without having any documents. It is stated that the explanation which is submitted relating to non-submission of documents at the time of detection militates against the concept of equity and fair play and is not acceptable. It was also submitted that the documents were subsequently introduced through the lawyer on Januar....
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....ed declaration form or way bill duly filled in and signed by the consignor of goods carried; (b) stop the vehicle or carrier at every check-post or barrier set up under sub-section (1) or at any other place when so required by an officer authorised by the Commissioner in this behalf; (c) produce all the documents, including the prescribed way bill relating to the goods, before the officer-in-charge of the check-post or barrier or the authorised officer; (d) give all the information in his possession relating to the goods; (e) allow the inspection of the goods or search of the vehicle by the officer-in-charge of the check-post or barrier or the authorised officer. (3) Where any goods are in transit within the territory of the State, an officer authorised by the Commissioner in this behalf may stop the vehicle or the carrier or the person carrying such goods, for inspection, at any place within his jurisdiction and the provisions of sub-section (2) shall apply mutatis mutandis for such inspection. (4) Where any goods in transit are without documents, or are not supported by documents as referred to in sub-section (2), or documents produced appear to be false ....
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.... after affording an opportunity of being heard to such driver or person-in-charge of the goods or the carrier, may impose a penalty on him as provided under sub-section (5). (9) Where a transporter, while transporting goods, is found to be in collusion or is likely to be in collusion with a dealer to avoid or evade tax, the officer-in-charge of the check-post or barrier or the officer authorised under sub-section (3) shall detain the vehicle or carrier of such transporter and, after affording him an opportunity of being heard and with the approval in writing of the Commissioner, may seize and confiscate such vehicle or carrier. (10) When a vehicle or boat carrying goods, coming from any place outside the State and bound for any other place outside the State, passes through the State, the driver or other person-in-charge of such vehicle or boat shall,- (a) declare, in such form and manner before the officer-in-charge of the first check-post or barrier, as the case may be, after his entry into the State, that the goods under transport shall not be unloaded, delivered or sold inside the State; (b) obtain, in the prescribed manner, a transit pass in such form containing suc....
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....s in the prescribed manner to recover such tax an penalty: Provided that,- (i) before taking any action for confiscation of the goods, the officer shall give the driver or the person-in-charge of the vehicle or boat, as the case may be, an opportunity of being heard and, if necessary, may make an enquiry in the manner prescribed; and (ii) Where the goods under transport are not available at the time of seizure of the vehicle or boat, as the case may be, the officer may detain the vehicle or boat until such penalty and tax are paid and shall take or cause to be taken any steps he may consider proper for the temporary safe custody of the vehicle or boat, and the registered owner or the person having possession or control of such vehicle or boat and the driver or boatman, as the case may be, thereof shall be bound to comply with orders and directions as the said officer may, in respect of the movement of such vehicle or boat, issue for giving effect to such seizure. (12) Where the goods seized are of a perishable nature they shall be sold in the prescribed manner. (13) Where any goods seized under this section are sold, the sale proceeds thereof, after deduction of the ....
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....petitioner has relied on a few judgments in support of his contention, which are to be considered now. The learned counsel relied on a decision of the Supreme Court in the case of State of Madhya Pradesh v. Chhotabhai Jethabhai Patel and Co. reported in AIR 1972 SC 971 and referred to rules of interpretation of statute formulated in Chhotabhai AIR 1972 SC 971 and expressed in paragraph 10 of the Report as follows: "It is settled law that where two constructions of a legislative provision are possible one consistent with the constitutionality of the measure impugned and the other offending the same, the court will lean towards the first if it be compatible with the object and purpose of the impugned Act, the mischief which it sought to prevent ascertaining from relevant factors its true scope and meaning." Relying on the aforesaid proposition, the learned counsel urged that in the instant case if the construction which is advanced by the petitioner is not followed, namely, that no tax is leviable on the transaction in question under the OVAT Act, the provision of the OVAT Act will have to be declared ultra vires the Constitution. Instead of doing that the court should accept t....
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.... were considering the distinction between a lease and an agreement to grant lease. In that context section 18(1) of the Bombay Rents, Hotel and Lodging House Rates (Control) Act, 1947 came up for consideration. While considering the said section, the learned Judges found that the provisions of section 18(1) are penal in nature. Thereupon the learned Judges held that in a penal statute it is a well-settled rule of construction that where two possible and reasonable constructions are available, the court must lean towards the one which exempts the subject from penalty rather than the one which imposes it. But while doing so, the Court must not stretch the meaning of an expression used by the Legislature in order to carry out the intention of the Legislature. In formulating the aforesaid principles, learned Judges of the Supreme Court referred to the formulation by Lord Mac\millan in L. & N.E. Rly. Co. v. Berriman reported in [1946] AC 278, where the learned Law Lord has laid down the principles which such a degree of precision as it deserves to be quoted and which I do: "Where penalties for infringement are imposed it is not legitimate to stretch the language of a rule, however be....
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.... may, by notification, direct the establishment of a check-post. This is clear from section 74(1) of the said Act. The argument advanced by the learned counsel for the petitioner that tax cannot be imposed for violation of the provisions of section 74 and sub-sections thereof as the same is beyond the competence of State Legislature cannot be accepted in view of the clear law laid down in D.P. Metals [2001] 124 STC 611 (SC); [2002] 1 SCC 279, see para 30 at page 299 of the Report (para 29 at page 634 of STC). Interpreting section 78(5) of the Rajasthan Sales Tax Act in D.P. Metals [2001] 124 STC 611 (SC); [2002] 1 SCC 279 the learned three-judge Bench of the honourable Supreme Court held that penalty under section 78(5) is leviable under two circumstances. (a) where there is non-compliance with section 78(2)(a), namely, where documents mentioned in that clause are not carried. (b) where false or forged documents or declaration was submitted. In the instant case, section 74(5) is almost similarly worded. But there is one vital variation which will be pointed out later. Here, there is an infraction of both section 74(1)(a) and 74(1)(c) inasmuch as admittedly all the docum....
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....e on him for possession or movement of goods, whether seized or not, in violation of the provisions of clause (a) of sub-section (2) or for submission of false or forged documents or declaration, a penalty equal to thirty per cent of the value of such goods." On a close comparison of the aforesaid provisions, it would show that apart from broad similarity on the structure of the said sub-section, there is a vital difference which is relevant at the time of imposition of penalty. In the Rajasthan Act, the statutory language used is that the authority "shall impose on him for possession or movement of goods whether seized or not" . . . "penalty equal to thirty per cent of the value of such goods". But in section 74(5) of the OVAT Act, the language used is that the officer-incharge of the check-post "may impose for possession or movement of goods (in transit) whether seized or not, . . . penalty equal to five times of the tax leviable on such goods or twenty per centum of the value of goods, whichever is higher". Therefore, in the OVAT Act, discretion is left with the authority in the matter of imposition of penalty. Therefore, it is wrong to say that penalty is automatic an....
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.... those cases where blank/incomplete form 18A/18C had accompanied the goods in movement. This appears clearly from paragraph 27 at page 34 of the Report. In fact, the honourable Supreme Court made it very clear by making the following observation at page 34 of the Report and which I quote: ". . . We make it clear that our judgment is basically confined to cases where blank/incomplete form 18A/18C had accompanied the goods in movement. Whatever we have stated above is in the context of the incomplete form 18A/18C travelling along with the goods in movement . . . ." About the other civil appeal, namely, Civil Appeal No. 5240 of 2005 with which there is some factual similarity with the present case, the honourable Supreme Court said that the "said appeals stand on a different footing" (para 27, page 34 of the report) and the said "appeals " shall be decided in the light of the judgment of this court in D. P. Metals [2001] 124 STC 611 (SC); [2002] 1 SCC 279. Therefore, the decision in Guljag Industries [2007] 9 VST 1 (SC) cannot be applied to the facts of this case in view of the distinction made in the judgment by the honourable Supreme Court itself. The present case is governed ....
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....ecause it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute." Following the aforesaid principles, this court holds that imposition of penalty in the facts and circumstances of the case is not a proper exercise of the discretion by the authority concerned. Therefore, the imposition of penalty is quashed. But this court holds that in an appropriate case, penalty can be imposed and this court accepts the Revenue's interpretation of section 74(14) of the OVAT Act that 74(14) applies only to tax-free goods under the OVAT Act. Any other interpretation will defeat the purpose of the Act in enacting section 74 of the OVAT Act. The next issue that remains to be considered relates....
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.... unless such presumption/assumption has any statutory basis. Unless the statute empowers the authority to draw such a presumption of sale, no levy under section 9 of the OVAT Act can be imposed on the basis of an assumption/ presumption made by the Revenue authority on a "likelihood of sale or evasion of tax". Section 74 which has been extracted hereinabove in detail, clearly contemplates establishment of check-posts and inspection of goods while in transit. Under sub-sections (1) and (2), the list of documents that driver or person-in-charge of the vehicle must hold is enumerated. Under subsection (3), power is vested in an authorised officer to stop the vehicle in which goods are in "transit within the territory of the State" for inspection. Sub-section (4) thereafter applies to goods which are in transit (within the territory of State) and where it is found that the goods have been transported without documents or not supported by the relevant documents. In such a case the authorised officer is given authority to direct the driver or the person-in-charge of the goods or carrier not to part with the goods in any manner and may also effect seizure of the goods for reasons to be....
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....inct category of transactions. The first category being goods which are "in transit within the territory of the State" and in the event the authorised officer finds that the goods are not covered with necessary documentation, the officer has the authority to impose "penalty" alone. On the other hand, when a vehicle comes along with the "goods from any place outside the State and is bound for any other place outside the State". In the present case the goods were admittedly purchased at Haldia in the State of West Bengal and the vehicles were carrying the said goods to Maharashtra. In such cases, the "presumption that the goods were sold within the State" would only arise when the driver or the person-in-charge of the vehicle fails to deliver the transit pass obtained at the point of entry at the last check-post or barrier before his exit from the State and it is only in such situation that an officer under sub-section (11) who is in-charge of the check post or last barrier (exit point) who has the right to inspect the documents as well as the goods and if he finds the same not to be in order and finds any goods missing from the vehicle, the "presumption" of sub-clause (c) of sub-sec....
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....the Revenue on a judgment of the honourable Allahabad High Court in the case of Gopal Agency v. State of Uttar Pradesh [1987] 65 STC 323. The facts in the said case is that the petitioner engaged trucks for carrying coal from the State of Bihar and Bengal to the State of Madhya Pradesh and its trucks travel through the State of Uttar Pradesh. The trucks which had been granted transit passes under the Sales Tax Rules, reached the check-post after a delay of 15 days and other trucks failed to reach even within the stipulated time and date. The Sales Tax Officer issued show cause notice and levied "penalty " under the relevant section of the Act, since no explanation was given to the show cause notice. The challenge to the provision under which penalty was levied was negatived by the honourable single Judge of the Allahabad High Court, holding that the said provision had been enacted by the Uttar Pradesh Legislature to prevent evasion of such tax and therefore, authorised imposing penalty on any person who otherwise acts in contravention of the provision of the Acts and Rules. This judgment does not provide any assistance to the Revenue in their attempt to justify to levy the "tax"....