TaxTMI 
TaxTMI 
2009 (2) TMI 779
X X X X Extracts X X X X
X X X X Extracts X X X X
....the VAT Act") by STO/CS, AS, order dated June 26, 2007 passed by STO/CS, AS imposing penalty of Rs. 11,70,000 under section 77 of the VAT Act for violation of the statutory provision. The revisional orders dated October 8, 2007 and April 29, 2008 passed by the Assistant Commissioner of Sales Tax, Central Section, Asansol (in short, "the ACST/CS, AS") and Deputy Commissioner of Sales Tax, Central Section, Asansol (in short, "the DCST/CS, AS") have also been challenged. The petitioner-company is registered under the VAT Act as well as under the Central Sales Tax Act. The petitioner-company received an order from G.S. Atwal & Company (Engineers) Private Limited (pro forma respondent No. 1) for supply of one unit cabin assembly (in short, "disputed item") for Komatsu HD 465 Dump Trucks for its Sharishatali Coal Mining Project (ICML), Kapista, Panuria, Burdwan, West Bengal. The unit price of the said disputed item was shown at Rs. 39 lakhs and the total price inclusive of all taxes and duties was shown at Rs. 40.56 lakhs. It was stipulated in the said order that delivery should be made within sixty days from the date of order, i.e., April 20, 2007. Accordingly, the disputed it....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tatutory provision. Representatives of the petitioner-company, as has been claimed in this petition, met STO/CS, AS on June 18, 2007 as per the direction contained in the detention order dated June 15, 2007 along with tax invoice No. 309904070 dated June 16, 2007 which was undisputedly raised after returning from the office of CTO/CS, AS on June 16, 2007. In response to the notice issued on June 16, 2007, the petitioner-company filed written objection on June 25, 2007 explaining the position and the circumstances under which the consignment was despatched and the reason regarding absence of tax invoice was also explained therein. The matter was duly heard on June 25, 2007 as the representatives of the petitioner-company insisted on early hearing of the matter. The order was kept reserved by STO/CS, AS on that date. On the following day, i.e., June 26, 2007, STO/ CS, AS passed an order considering all the points raised in the written explanation dated June 25, 2007 and held that there was violation of the statutory provision and accordingly he imposed a penalty of Rs. 11,70,000 on the saleable value of the disputed item. Demand notice in form 61 was issued on June 26, 2007 directing....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stration certificate. It was also admitted by him that the question of non-production of tax invoice was raised by STO/CS, AS but since the representatives of the petitioner-company were under the impression that the missing document would require to be produced on June 18, 2007 they did not carry with them the tax invoice in question (which was, in fact, not even raised till that time). Had the concerned authority waited till June 18, 2007, the said document could have been very well produced before the STO/CS, AS. In fact, it was not even mentioned by STO/CS, AS on June 16, 2007 that because of their presence on June 16, 2007, no hearing would be taken on June 18, 2007. On June 18, 2007, the representatives of the petitionercompany met STO/CS, AS for production of the missing tax invoice but no hearing was taken up on that date and no order was passed. The concerned authority on June 25, 2007 passed a detailed order but unfortunately he did not mention that the representatives of the petitioner-company met him on June 18, 2007 along with the tax invoice in question. It was, however, admitted by STO/CS, AS that a photocopy of the tax invoice bearing serial No. 309904070 dated J....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and the billable delivery note while transporting the disputed item, there had been substantial compliance of the requirement of the provision of rule 107 of the VAT Rules. Violation, if any, was purely technical and venial in nature. There was no reason to seize the disputed item in view of the fact that from the documents produced by the driver of the vehicle at the time of interception of the disputed item, it could very well be verified that the transportation of the disputed item was being made in pursuance of an order placed on the petitioner-company by the purchasing company namely pro forma respondent No. 1 and there was the least possibility of evasion of tax. The learned senior advocate further contested the observation made by the revisional authorities that forty-eight hours time before seizure of the goods would need to be allowed only in respect of cases where interception is made within a notified area. He drew our attention to the observations made by the revisional authorities (both by ACST/CS, AS and DCST/CS, AS) which are reproduced hereinbelow: "(I) The question of allowing forty-eight hours time period after detention for producing any document is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....by him that the penalty could be imposed only when the mens rea is established. All violations do not attract imposition of penalty. In support of his submission, he relied on the decision of the honourable Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa [1970] 25 STC 211, judgments of the Calcutta High Court in the cases of Kodak India Limited v. Deputy Commissioner of Commercial Taxes, Midnapore Circle [2003] 131 STC 491; [2003] 41 STA 132, Jagadish Prasad Kedia v. State of West Bengal [1989] 75 STC 397, decision of the West Bengal Taxation Tribunal in the case of Cal-Cox Syndicate Pvt. Ltd. v. A.C.C.T., Kharagpur Range [2009] 19 VST 108; [2008] 51 STA 122 and on the point of seizure, learned senior advocate relied on the decision of this Tribunal in the case of Patton Electro Ltd. v. Assistant Commissioner, Commercial Taxes, Central Section [2009] 20 VST 700; [2007] 49 STA 38. The learned senior advocate also drew our attention to an unreported decision of the honourable Calcutta High Court in the case of Lalit Kumar Khetawat v. Sales Tax Officer, Duburdih Check-post, Burdwan, West Bengal (WPTT No. 227 of 2008, order dated October 4, 2008) but with regard....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment of the journey, the petitioners were aware that violation of the provision was taking place. It was also stressed by the learned State Representative that the disputed item was intercepted on road on June 15, 2007 and upon interception, the driver of the vehicle failed to produce the requisite tax invoice. The petitioners did not care to produce the said tax invoice after interception or before seizure made on June 16, 2007. The tax invoice was raised only after the representatives of the petitioner-company met the concerned STO/CS, AS on June 16, 2007. It was, therefore, contended by the learned State Representative that the tax invoice in question might not have been raised had there been no interception by STO/CS, AS. The billable delivery note as produced by the driver of the vehicle along with the consignment note could not be treated as a substitute for tax invoice since it did not indicate the value of the disputed item and the tax levied thereon. Moreover, the said billable delivery note is not a document listed in rule 107 of the VAT Rules. Sub-rule (5) of rule 107 of the VAT Rules prescribes that on the failure of producing documents as per requirement of the rule th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the petitioner-company or not. The fact remained that there was violation and since it is a civil offence, question of mens rea cannot be linked with this seizure and subsequent imposition of penalty. The authorities concerned were under obligation only to ascertain whether there was any violation or not and the facts and circumstances of the case amply proved that there had been violation and, therefore, there was nothing improper on the part of the authorities concerned to seize the disputed item and impose penalty thereafter. It was also submitted by him that the provisions of the VAT Act and Rules do not provide any opportunity that a consignor would send goods to its consignee without any supporting document. On the contrary, rule 91 of the VAT Rules has made it abundantly clear that every registered dealer incurring liability to pay tax under the VAT Act shall issue tax invoice when he sells taxable goods. It was contended by him that there was no application on the part of the driver of the vehicle seeking time for production of the tax invoice and rule 107 also does not specifically mention that such time should be allowed for production of the documents which were not prep....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ignment which was transported from Mumbai to Kolkata through air. An employee of the petitionercompany was sent to the airport for releasing twenty boxes of Remestyp injection along with a filled up way-bill. The concerned authorities of the Commercial Taxes Directorate asked for the way-bill in respect of the second stock transfer note for ninety boxes. Since the said way-bill was not with the employee of the petitioner-company, no such way-bill could be produced by him. Goods were not released and kept in the custody of the airport authority and in fact, no claim was made for releasing the goods covered by the second stock transfer note as well as way-bill was not produced by the representative of the petitioner-company. Concerned authorities of the Sales Tax Directorate seized the goods and handed over a seizure receipt along with the ground of seizure to the said employee. A show-cause notice was issued proposing imposition of penalty. An application was filed by the petitioner-company before the West Bengal Taxation Tribunal (in short, "the Tribunal") challenging the seizure. The Tribunal did not, however, entertain the petitioner's application and dismissed the same. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecessary documents is a condition precedent to a valid seizure of such goods. It further observed "that the fact that such a condition is a mandatory one is made clear from the proviso which says that the period of forty-eight hours must be very strictly construed and from such period shall be excluded Sunday or any other holiday declared under the Negotiable Instruments Act. In the instant case, the seizure has taken place within virtually one hour and ten minutes of the arrival of the goods and the requirement of giving forty-eight hours time to produce the document, which is also a statutory requirement, has been totally ignored. Apart from that, section 68 is linked up with section 70 and the provision of section 70 can only be resorted to provided there is a contravention of section 68. The opening words of section 68 are that the said section has been enacted in order to ensure that there is no evasion of taxes. Ultimately, honourable Calcutta High Court held "this court holds that since there is no attempt on the part of the petitioner to evade the payment of taxes and in view of the finding of the Tribunal that there may be a bona fide mistake, the imposition of penalty ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Commercial Tax Officer was justified. Thereafter, they went on to consider whether penalty could be imposed depending on the facts and circumstances of the said case and proper satisfaction being arrived at by the authorities that the petitioner had intended to evade payment of taxes and ultimately remanded the matter back to the Tribunal to consider the documents produced by the said petitioner in the light of rule 214C of the West Bengal Sales Tax Rules, 1995 (in short, "1995 Rules"). Incidentally, it may be mentioned here that rule 214C of the 1995 Rules prescribe restrictions and conditions for transport of any consignment of goods by any person, casual dealer or dealer from any place in West Bengal referred to in sub-section (1) of section 68 to any place outside West Bengal. In this particular case, the petitioner did not produce documents prescribed under rule 107 of the VAT Rules. The provision of rule 107 is identical to the provision of rule 214B of the 1995 Rules and not rule 214C. The honourable judges, therefore, did not consider the provision of rule 214B of the 1995 Rules. Moreover, the said judgment of the honourable Calcutta High Court did not lay down any principl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on January 21, 1997 giving therein all the details of the particulars of the consignment. Permit was issued accordingly. The goods were seized immediately upon arrival at the check-post without allowing any opportunity to produce the permit. During the course of imposition of penalty, such permit was produced but was not accepted on the ground that the permit could not be produced before seizure. At the material point of time, the provision under the 1994 Act was that the importers should be allowed twenty four hours time for production of the permit if the importer failed to produce such permit at the time of interception. Considering the facts and circumstances of the case, the honourable Calcutta High Court declared the seizure as invalid and also set aside the penalty proceedings initiated against the said petitioner. In the case of Associated Polymer Industries [2007] 49 STA 208 (WBTT), the petitioner was bringing back a Vermeer navigator machine (in short, "the machine") from outside the State of West Bengal for the purpose of executing works contract. For non-production of way-bill, said machine was seized by the authorities concerned of Duburdih check-post. Upon appre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ry but also unsustainable-both under the fact and law". In these facts and circumstances, this Tribunal set aside the order of detention as well as order of imposition of penalty under section 72 of the 1994 Act. It appears to us that the facts of this case are not identical to the facts of the instant case. In the case of Patton Electro Ltd. v. Assistant Commissioner, Commercial Taxes, Central Section [2009] 20 VST 700 (WBTT); [2007] 49 STA 38, the petitioner challenged the order passed by the Additional Commissioner of Commercial Taxes and Deputy Commissioner of Commercial Taxes affirming the order of imposition of penalty by the Assistant Commissioner of Commercial Taxes, Central Section, in connection to a seizure case where the seizure had been made for non-production of way-bill. The propriety of seizure was not questioned. Considering the facts and circumstances of the case, the order of imposition of penalty was set aside. Other cases as relied upon by the learned senior advocate appearing on behalf of the petitioner-company are regarding general principles to be followed for the purpose of levy of penalty for contravention of statutory requirements. Most important of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....if the person bringing, importing or receiving or carrying such goods fails to furnish such particulars in such form, or such document, as may be prescribed under section 73, or section 81, shall thereafter seize such goods together with any container or other materials for the packing of such goods: Provided that in computing the period of detention not exceeding forty-eight hours, Sunday or a public holiday declared under the Negotiable Instrument Act, 1881 (26 of 1881) shall be excluded: (2) and (3) . . ." Rule 107 of the VAT Rules is the relevant rule which has prescribed procedure for transporting consignment of goods from one place in West Bengal to another place in West Bengal. Relevant provisions of rule 107 are quoted as below: "107. Restrictions on, and conditions for, transport of any consignment of goods from one place in West Bengal to another place in West Bengal.-(1) Every dealer, casual dealer or any other person shall, while transporting any consignment of goods, other than those specified in Schedule A, but including raw jute by a goods vehicle or, as a load carried by any person, of value exceeding rupees twenty five thousand despatched from any place in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....documents referred to in sub-rule (1) have not been produced by the driver or person in-charge of the road vehicle or person carrying the load before him; or (b) to (d) . . . Such authority shall prepare a report in the presence of the driver or person in-charge of the vehicle or the person carrying the load, as the case may be and get such report countersigned by him, or where the driver or person in-charge of the vehicle or the person carrying the load is not available for any reason, such authority shall prepare a report in the presence of one witness after explaining to him the contents of the report and get the report countersigned by him and shall, for reasons to be recorded in writing, seize such consignment of goods under section 76." It may be noticed that nothing has been prescribed under this rule for providing time for production of documents whereas a specific time-limit of forty-eight hours has been prescribed under sub-rule (3) of rule 103. It would be easier to compare the relevant provisions of rule 103 if the same is quoted hereunder. Rule 103 of the West Bengal Value Added Tax Rules, 2005 (hereinafter referred to as, "the VAT Rules") is the relevant r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in-charge may request the Sales Tax Officer or Assistant Sales Tax Officer of such check-post in writing stating therein the reason for not being in possession of such way-bill and to allow him time for presentation of the way-bill. (3) On the request of the driver or person in-charge of the vehicle made under sub-rule (2), the Sales Tax Officer or Assistant Sales Tax Officer of the check-post, shall allow time, not exceeding forty-eight hours from the entry of such vehicle, to enable him to present the way-bill in form No. 50 before the expiry of the time allowed by him, and the vehicle with such consignment of goods shall, subject to the provisions of sub-rule (6), remain detained till the time of presentation of such way-bill or the expiry of the time allowed, whichever is earlier. (4) After the way-bill is presented under sub-rule (1) or sub-rule (3) the Sales Tax Officer or Assistant Sales Tax Officer of a check-post shall, subject to the provisions of rule 120, endorse the way-bill and record in the entry register, the particulars of the consignment of goods and of the way-bill related thereto and allow the vehicle to move. (5) . . . (6) If any dealer, casual deal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uch time-frame has been provided under rule 107. Rule 103 of the VAT Rules has prescribed procedure for transporting consignment of goods by road from any place outside West Bengal across or beyond a check-post in West Bengal whereas rule 107 has prescribed procedure for transporting consignment of goods from one place in West Bengal to another place in West Bengal. Under rule 103, the goods are being brought into West Bengal or imported into West Bengal mainly by a consignee. The goods are despatched from outside West Bengal. Way-bill is issued to the person bringing or importing the goods into West Bengal and he is responsible for production of the way-bill at the check-post. Since two parties are involved and one of which is from outside West Bengal, the rule-making authority has taken into consideration the possibility of communication gap between these two parties and, therefore, made a provision for allowing forty-eight hours time from the time of detention for production of the way-bill and other documents and that too upon making a prayer in writing. On the contrary, the prescription under rule 107 relates to consignors who are supposed to hand over the requisite documen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....document and being satisfied with the genuineness of the document may not impose any penalty for such infraction. In case of a document which existed but was not carried by the driver or transporter's agent, the concerned dealer is to explain why the document was not carried along with the consignment and pray for time to produce the said existing document. Next question is whether provision for production of the documents as per requirement of rule 107 of the VAT Rules is directory in nature or mandatory. To come to a decision as to whether the provision under rule 107 of the VAT Rules is mandatory or directory, one should take into consideration the objective such provision seeks to achieve. Provision under rule 107 imposes certain restrictions for regulation of transportation of goods from any place in West Bengal to another place in West Bengal and it has also prescribed certain specific documents which the driver or person in-charge of the vehicle is supposed to carry and produce those documents before the authorities at the time of interception/detention on its way to the destination. Sub-rule (5) of rule 107 specifically spells out that in the event of non-prod....
X X X X Extracts X X X X
X X X X Extracts X X X X
....red dealers and invoice or bill or cash memo in case of unregistered dealers is to be mandatorily raised and sent along with the consignment. Keeping in mind the aforesaid observation of the honourable apex court and considering what the provisions of section 73, section 76 of the VAT Act and rule 107 of the VAT Rules seek to achieve, we would like to state that the provision under rule 107 of the VAT Rules requiring making over of tax invoice or invoice or bill or cash memorandum as the case may be is mandatory in nature. Next question is whether violation of the provision of rule 107 of the VAT Rules attracts penalty under section 77 of the VAT Act. In earlier paragraph, we have analysed the reasons as to why the provision of rule 107 should be treated as mandatory. We have already stated that all these regulatory measures are anti-evasion measures. Sub-section (1) of section 77 does not contemplate any other procedure except to levy penalty if the required proof and the documents as referred to in rule 107 of the VAT Rules are not produced for verification of the authorities concerned to ascertain whether there has been contravention of section 73 or not. In view of the afore....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ble Supreme Court in deciding cases and taking decisions as regards imposition of penalty. The honourable apex court in the said judgment also observed that, ". . . penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. . ." (emphasis Here italicised. supplied). In a recent decision in Guljag Industries v. Commercial Taxes Officer reported in [2007] 9 VST 1, the honourable Supreme Court has reiterated that in case of failure to comply with the mandatory statutory obligation there is no question of proving of intention or mens rea. The honourable apex court upheld imposition of penalty under the provisions of the Rajasthan Sales Tax Act as the defaulting dealers could not prove any kind of special circumstances justifying for production of blank declarations. The honourable apex court was of the view that the declarations were kept blank so that they could be utilized for any subsequent consignment as and when required. But it would not be out of place to mention that honourable apex court considered the possible effect of the i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....52 and 54). The principles so extracted are given hereinbelow: "(A) Mens rea is an essential or sine qua non for criminal offence. (B) A straitjacket formula of mens rea cannot be blindly followed in each and every case. The scheme of a particular statute may be diluted in a given case. (C) If, from the scheme, object and words used in the statute, it appears that the proceedings for imposition of the penalty are adjudicatory in nature, in contradistinction to criminal or quasicriminal proceedings, the determination is of the breach of the civil obligation by the offender. The word 'penalty' by itself will not be determinative to conclude the nature of proceedings being criminal or quasi-criminal. The relevant consideration being the nature of the functions being discharged by the authority and the determination of the liability of the contravener and delinquency. (D) Mens rea is not essential element for imposing penalty for breach of civil obligations or liability. (E) There can be two distinct liabilities, civil and criminal, under the same Act." Keeping in mind all these observations as quoted hereinbefore, we are of the view that mens rea is no....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt two provisions which cannot be reconciled with each other, they should be so interpreted that, if possible, effect should be given to both. This is what is known as the rule of harmonious construction" (Venkataramana Devaru v. State of Mysore AIR 1958 SC 255). Keeping the aforementioned rules of construction in mind, this Tribunal had the scope of examining the ambit of the provision of section 77 along with the proviso to it in the case of Cargil India (P) Ltd. v. Sales Tax Officer, Kharagpur Range [2010] 32 VST 256 (WBTT) (Case Nos. 47 and 48 of 2007) and observed in its order dated April 3, 2008 as below: "We, thus hold that the provisions contained in the proviso to section 77(1) of the VAT Act as amended on and from August 1, 2006, are directory and the authorities competent to impose penalty have also the liberty and discretion to deviate from the proviso in exceptional cases after recording appropriate reasons for such deviation or departure. However, they cannot exceed the maximum limit set by the main part of section 77(1) of the VAT Act (at page 271 supra)." In this particular case, as we have already discussed, the disputed item was despatched on June 14, 200....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ommenced from one area in Bardhaman district and was to be terminated at a place within the same district. It does not take a long time to cover such a distance. So the question of shortage of time at the disposal of the petitioner-company's hand as claimed does not appear to us to be convincing. On the contrary, we are constrained to hold that the petitioner-company took an advantage of the short distance and since there is no check-post in between two such places, it was thought by the petitioner-company that the transportation would be completed without being detected or intercepted by the authorities concerned. In this backdrop, we are in agreement with the learned State Representative that had this not been intercepted, there was every possibility of the tax invoice not being raised leading to evasion of due taxes. Even that apart, the petitionercompany, in our opinion, acted in conscious disregard of its obligations. Considering, therefore, the facts and circumstances of the case, we hold the seizure to be a valid one. Value of the disputed items as disclosed in the tax invoice raised subsequently is Rs. 39 lakhs. This value was accepted by the CTO/GS, AS and according....