IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH.
VATAP No. 12 of 2009
Date of Decision: 7.12.2009.
M/s Vardhman Industries Ltd.
..........Appellant
Versus
The State of Punjab and Another
..........Respondents
CORAM: HON'BLE MR.JUSTICE M.M.KUMAR
HON'BLE MR.JUSTICE JASWANT SINGH.
Present: Mr. K.L.Goyal, Senior Advocate with
Mr. Manoj Rohilla,Advocate for the Appellants.
Mr. Piyush Kant Jain,Addl.A.G.Punjab for the respondents.
1. To be referred to the Reporter or not ?
2. Whether the judgement should be reported in the Digest ?
JASWANT SINGH,J.
This order shall dispose of seven VAT Appeals bearing Nos.
VATAP 12, 13,14,15,16,17 and 19 of 2009, involving common question of
law and similar facts, filed by the appellant-assessee under Section 68(2) of
the Punjab Value Added Tax Act,2005 (for short VAT Act) against the
common order dated 3.10.2008 (Annexure A/8) passed by the Tribunal
whereby seven Appeal Nos.(VAT) 186-192 of 2007-08 filed by the
appellant-assessee were dismissed. Facts are being noticed from VATAP
No.12 of 2009.
The appellant-assessee is engaged in the manufacturing and
sale of iron and steel goods with its manufacturing unit at Beopar (Rajpura)
District Patiala and its registered office at GT Road, Sahnewal, District
Ludhiana. Appellant-assessee is registered under the Punjab General Sales
VATAP No. 12 of 2009 2
Tax Act,1948 (for short PGST Act) and Central Sales Tax Act,1956 (for
short the CST Act) and subsequently under the VAT Act. It has also been
granted exemption from payment of tax for a period of seven years w.e.f.
27.3.2000 to 26.3.2007 for an amount of Rs.28,50,58,500/- vide its
exemption certificate dated 27.7.2001 (Annexure A/1). Subsequent to the
enforcement of VAT Act w.e.f. 1.4.2004 it was granted an entitlement
certificate for tax exemption subject to the un-utilised maximum of
Rs.19,57,82,271/- for the remaining period w.e.f. 1.4.2005 to 26.3.2007
vide entitlement certificate dated 13.6.2005 (Annexure A/2).
It is claimed that goods were sold by the appellant-assesee
(consignor) to consignee- M/s Misbah Fabrication, Hari Singh Street,
Srinagar vide invoice no.3858 dated 26.3.2007 and earmarked for loading in
truck no. JK03A 1334 vide GR No. 2075 dated 26.3.2007 in the name of
Kaka Transport. The truck bearing No. JK03A 1334 reported at ICC
Madhopur on 30.3.2007. It is not disputed that the required documents as
envisaged under sub section (2) of Section 51 of the VAT Act were
presented at the ICC Center, however, the goods were detained by the
officer in charge under sub section (6) (a) of Section 51 of the VAT Act by
doubting the genuineness of the transaction/documents as the arrival and
reporting of the vehicles at the ICC Center had been after four days of the
date of invoice. Similarly, in the connected six appeals six other trucks
containing goods were also detained since those vehicles had also taken
four to ten days from the date of invoice i.e. 26.3.1997 in covering a
distance of about 250 kilometers from Rajpura to Madhopur. It was
therefore, found that the invoices were ante dated to evade tax. Matter was
reported to the designated officer/AETC, who issued notices in all the cases
VATAP No. 12 of 2009 3
and conducted an enquiry. AETC found that there was an attempt to evade
tax and accordingly exercising power under clause (b) of sub section (7) of
Section 51 of the VAT Act imposed penalty vide order dated 13.4.2007
(Annexure A/5). The appeal filed before the DETC -cum- Joint Director
Investigation, Jalandhar Division, was also dismissed vide order dated
9.8.2007 (Annexure A/6). Similar penalties were imposed in the connected
appeals vide identical order dated 13.4.2007 and the separate appeals filed
were also dismissed vide order dated 9.8.2007. All the appeals arising out of
the orders dated 13.4.2007 and 9.8.2007 were dismissed by the Tribunal
vide impugned common order dated 3.10.2008 (Annexure A/8).
The appellant-assesee has filed the present appeals proposing to
raise the following substantial questions of law:-
“(i) Whether the Designated Officer at ICC can impose
any penalty u/s 51(7)(b) of the Punjab Vat Act 2005 for
an offence committed (if any) under the Central Sales
Tax Act,1956?
(ii)Whether, after the goods are voluntarily reported at
the ICC, before exit of the goods from Punjab State,
the ICC authorities are authorised to make an enquiry
regarding alleged evasion of tax, which is in the
domain of the Assessing Authority where penalty u/s
56 can be imposed, if any offence is committed?
(iii)Whether the sale of goods where bills have been
issued on 26.3.2007 is complete when the goods are
earmarked or delivered to the vehicles for its onward
transmission, even if the movement of the goods has
VATAP No. 12 of 2009 4taken place on a later date?”
At the time of hearing issue no.(iii) was re-phrased as “Whether
it could be said that there was an attempt to evade or avoid payment of tax
by mere delayed movement of goods when the sale invoices/bills had been
issued on 26.3.2007, goods were earmarked and goods receipts issued to the
vehicles for their onward transmission to the consignees on the same date”.
Learned counsel for the appellant-company has argued that the
goods were voluntarily reported at ICC Center and all the statutory
documents required under sub section (2) of Section 51 of the VAT Act
were produced there and therefore the designated officer/AETC could not
legally exercise jurisdiction under clause (b) of sub section (7) of Section
51 and impose penalty for alleged attempt to evade tax which otherwise falls
within the exclusive domain of the assessing authority under Section 56 of
the VAT Act, if any such alleged offence is committed. He further argued
that when the sale of goods had taken place and sale invoices had been
issued on 26.3.2007 and the goods had been earmarked and delivered to the
transporter vide valid goods receipt for their onward transmission to the
consignee, then in such a situation merely because the movement of the
goods had taken place at a later date could not give rise to a presumption
that there was an attempt to evade tax incurring any penalty under section
51(7)(b) of the VAT Act. Learned counsel further argued that the
transactions in dispute were inter state sales and assuming for the sake of
arguments that there was any attempt to evade central sales tax, even then
keeping in view the provisions of Section 51(7)(b) of the VAT Act, the
designated officer/AETC could not exercise jurisdiction under said
provision as no tax was due under the VAT Act.
VATAP No. 12 of 2009 5
Per contra learned Additional Advocate General appearing for
the respondent State has argued that the Tribunal being the final authority
regarding determination of questions of facts and the Tribunal having
determined that there was an attempt to evade tax by ante dating the
bills/sale invoices, there was no occasion for this Court to interfere under
Section 68(2) of the VAT Act. Learned counsel in support of the findings
argued that the fact of issue of 136 bills on 26.3.2007 i.e. the last date before
the expiry of exemption certificate coupled with late movement of goods
raises an unimpeachable presumption that there was an attempt to evade
tax. Learned counsel by referring to Section 9 of CST Act further argued
that the power and authority to administer and realise central sales tax has
been vested in the State authorities and therefore, in view of the attempt to
evade central sales tax by the assessee-company, the designated
officer/AETC had the jurisdiction under Section 51(7)(b) of the VAT Act to
impose penalty.
Having heard learned counsel for the parties and giving our
thoughtful considerations to the rival submissions we are of the considered
opinion that these appeals deserve to be allowed in favour of the appellant-
assessee and against the revenue.
Before embarking upon to decide the issues, it would be
relevant to refer to provisions of Section 51(7)(b) of the VAT Act, which are
reproduced hereunder:-
“51(7)(b) The designated officer shall, before
conducting the enquiry, serve a notice on the consignor
or consignee of the goods detained under clause (a) of
sub-section (6) and given him an opportunity of being
VATAP No. 12 of 2009 6
heard and if, after the enquiry, such officer finds that
there has been an attempt to avoid or evade the tax due
or likely to be due under this Act, he shall, by order
impose on the consignor or consignee of the goods, a
penalty which shall be equal to thirty percent of the
value of the goods. In case he finds otherwise, he shall
order release of the goods and the vehicle, if not
already released, after recording reasons in writing and
shall decide the matter finally within a period of
fourteen days from the commencement of the enquiry
proceedings.”
A plain reading of clause(b) of sub section (7) of Section 51 of
the VAT Act makes it clear that the designated officer can impose a penalty
equal to 30% of the value of the goods either on the consignor or consignee
of the goods if he, after enquiry, finds that there is an attempt to avoid or
evade tax due or likely to be due under the Act (the Act is defined under
sub section (1) of Section 1 to mean the Punjab Value Added Tax
Act,2005). However, before conducting the enquiry the officer is required to
serve a notice on the consignor or consignee of the goods detained under
Section 51(6)(a) of the VAT Act and give him opportunity of being heard.
It is not disputed that the appellant company was entitled to tax
exemption for a period of seven years w.e.f. 27.3.2000 to 26.3.2007 for an
amount of Rs.28,50,58,500/-, whichever was earlier. It is also not in dispute
that on 26.3.2007 the appellant company even after the sale of goods worth
the value stated in 136 sale invoices dated 26.3.2007 had an amount of
unavailed/un-utlised exemption limit of tax to its credit. It is also not
VATAP No. 12 of 2009 7
disputed that truck bearing no.JK03A 1334 had on its own reported at the
ICC Center on 30.3.2007 and had submitted all the statutory documents to
the officer incharge of the center as required under sub section (2) of
Section 51 of the VAT Act (likewise all the trucks involved in the
connected appeals had also reported at the ICC Center and submitted the
required documents). The officer incharge of ICC Center by exercising the
powers under sub section (6)(a) of Section 51 of the VAT Act detained the
goods since he had reasons to suspect that there was an attempt to evade
payment of tax on the ground that there was movement of goods after a
delay of four days. It is also apparent that the detaining officer had
submitted the proceedings alongwith the concerned record to the designated
officer/AETC for conducting necessary enquiry and passing of an
appropriate order under clause (b) of sub section (7) of Section 51 of the
VAT Act. The appellant-assessee to the notice issued took the stand that the
goods had been sold on 26.3.2007 in pursuance of purchase orders and
accordingly sale invoices had been issued, goods earmarked for clearance
and goods receipt issued in the name of two local truck unions on the same
day for onward transmission of goods. Since the assessee company enjoyed
the exemption on the date of the sale, therefore, no tax was payable and
hence there was no question of any attempt to evade tax. The assessee
company also produced an inspection report dated 27.3.2007 of the Excise
Authorities indicating the clearance of certain goods and issue of last bill
bearing no.3886 dated 26.3.2007. It cannot be disputed that the goods
detained in all the connected appeals were sold vide invoices bearing
numbers prior to bill no.3886 dated 26.3.2007. Therefore, this inspection
report dated 27.3.2007 from the Excise record completely demolishes the
VATAP No. 12 of 2009 8
stand of the revenue that the bills/ sale invoices had been ante dated with a
view to avoid payment of tax.
It is further apparent that the assessee company has after
26.3.2007 sold and dispatched goods and has paid tax on the same. It is a
different matter that number of such transactions is quite small in
comparison to the sale transactions entered upon on 26.3.2007. No evidence
has been led by the revenue to show that the consignees or purchase orders
or the goods receipts relating to transaction on 26.3.2007 are fictitious. It
has also not been shown that there is any statutory requirement laying down
that the goods have to be moved and reported within a particular time frame
before any ICC Center after the issue of sale invoice or goods receipt. It is
also not disputed that movement of goods in pursuance of 136 sale invoices
dated 26.3.2007 except the seven involved in the present appeals were
cleared by the ICC Centers where also the movement of goods was delayed.
The explanation put forth by the assessee for delayed movement is that there
was non-availability of the trucks at the time the goods were earmarked to
them by the truck union while issuing the goods receipts. Three is nothing
which prevented the assessee company from maximizing the exhaustion of
its exemption limit to pay tax by 26.3.2007 provided there were genuine
purchase orders and goods available for sale. The authorities, merely on
account of delayed movement of goods, in the face of the explanation put
forth by the assessee, and in the absence of any material on record, in our
considered opinion, cannot draw the only irresistible inference that there
was an attempt to evade payment of tax. The assessing authority has based
its finding of attempt to evade tax simply on the basis of its presumption and
suspicion. It is well settled that strong suspicion, strange coincidences and
VATAP No. 12 of 2009 9
grave doubts cannot take place of legal proof to sustain a finding of fact
(refer to (1978) 4 SCC 65 State of Kerala v. M.M. Mathhew). Therefore,
the delayed movement of goods by itself is not sufficient to conclude that
there was an attempt to evade payment of tax or the bills/sale invoices were
ante dated. Hence, the findings recorded by the Tribunal/authorities under
the VAT Act are based on no evidence and are liable to be set aside.
Accordingly, the re-phrased question of law no.(iii) is answered in favour of
the appellant-assessee and against the revenue. In view of the fact that
question of law no.(iii) has been answered in favour of the assessee, we do
not consider it necessary to decide the remaining proposed questions of law.
Accordingly, the appeal(s) are allowed and the impugned order dated
3.10.2008 (Annexure A/8) passed by the Tribunal is set aside and the
appellant-assessee is held entitled to the refund of amount of penalty
deposited, if any.
A photocopy of this order be placed on the files of all the
connected appeals.
(M.M.Kumar) (Jaswant Singh)
Judge Judge
7.12.2009.
joshi
1. VATAP No.12 M/s Vardhman Industries Ltd.v. State of Punjab and another
2. VATAP No.13 M/s Vardhman Industries Ltd.v. State of Punjab and another
3. VATAP No.14 M/s Vardhman Industries Ltd.v. State of Punjab and another
4. VATAP No.15 M/s Vardhman Industries Ltd.v. State of Punjab and another
5. VATAP No.16 M/s Vardhman Industries Ltd.v. State of Punjab and another
6. VATAP No.17 M/s Vardhman Industries Ltd.v. State of Punjab and another
7. VATAP No.19 M/s Vardhman Industries Ltd.v. State of Punjab and another