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IN THE HIGH COURT OF ALLAHABAD
ABDUL MOIN, J.
Durga Steel Rolling Mills Thru.Partner Amit Arora – Appellant
Versus
Commissioner Of Commercial Taxes U.P.Lucknow –Respondent
Sales/Trade Tax Revision No.39 of 2021, Sales/Trade Tax Revision No.40 of 2021
Decided on : 15-03-2024
SALES/TRADE TAX - Imposition of Penalty - Section 54(1)(2) of the U.P. VAT Act, 2008 - Summary of Acts and Sections: Section 54(1)(2) of the U.P. VAT Act, 2008 - The court discussed the provisions of Section 54(1)(2) of the U.P. VAT Act, 2008 and the essential pre-requisite conditions for imposition of penalty, the basis for imposing penalty under best judgment assessment, and the justification for the amount of penalty imposed. The court held that mens-rea is an essential pre-requisite condition for imposition of penalty, penalty cannot be imposed where the assessment is made on the basis of best judgment assessment, and the imposition of penalty of 7 times the total tax imposed towards alleged concealed turnover was not justified.
Fact of the Case:
The revisionist challenged the judgment and order passed by the Commercial Tax Tribunal, Lucknow in Second Appeal No. 50 of 2017. The revisionist was assessed for payment of tax, and a penalty was imposed under Section 54(1)(2) of the U.P. VAT Act, 2008. The revisionist contended that there was no finding of deliberate concealment or evasion of tax, and mens-rea is essential for imposing the penalty.
Finding of the Court:
The court found that there was no finding of deliberate concealment or evasion of tax, and mens-rea is an essential pre-requisite condition for imposition of penalty. The court also held that penalty cannot be imposed where the assessment is made on the basis of best judgment assessment, and the imposition of penalty of 7 times the total tax imposed towards alleged concealed turnover was not justified.
Issues: The issues involved were whether mens-rea is an essential pre-requisite condition for imposition of penalty under Section 54(1)(2) of the U.P. VAT Act, 2008, whether penalty can be imposed where the assessment is made on the basis of best judgment assessment, and whether the imposition of penalty of 7 times the total tax imposed towards alleged concealed turnover was justified.
Ratio Decidendi: The court held that mens-rea is an essential pre-requisite condition for imposition of penalty, penalty cannot be imposed where the assessment is made on the basis of best judgment assessment, and the imposition of penalty of 7 times the total tax imposed towards alleged concealed turnover was not justified.
Final Decision: The revision was allowed, and the judgment and order passed by the Commercial Tax Tribunal, Lucknow in Second Appeal No. 50 of 2017 was set aside.
JUDGMENT :
1. Heard Shri Mudit Agarwal, learned counsel for the revisionist and Shri Sanjay Sarin, learned Additional Chief Standing Counsel appearing for the respondent.
2. Learned counsels appearing for the parties contend that the issue involved in SALES/TRADE TAX REVISION No. -40 of 2021 and SALES/TRADE TAX REVISION No. -39 of 2021 are the same. As such, the Court proceeds to hear and decide both the revisions together. For convenience, facts of SALES/TRADE TAX REVISION No. -40 of 2021 are being taken.
3. This Court vide the order dated 17.08.2021 had admitted the revision. However the questions of law were not framed.
4. Both the learned counsels state that the questions of law which would be relevant for deciding the controversy involved in the instant revision would be as follows:
"(I) Whether the men-rea on the part of the assessee is an essential pre-requisite condition for imposition of penalty under Section 54(1)(2) of the U.P. VAT Act, 2008?
(II) Whether penalty under Section 54(1)(2) of the Act can be imposed where the assessment is made on the basis of Best Judgment Assessment?
(IV) Whether imposition of penalty of 7 times the total tax imposed towards alleged concealed turnover was justified when the express provision of Section 54(1)(2) of the Act provides for imposition of a maximum penalty of 3 times of concealed turnover?"
5. Shri Mudit Agarwal, learned counsel for the revisionist states that although a counter affidavit has been filed in the revision but he does not intend to file any reply thereto and wants to argue the matter finally.
6. As such the Court proceeds to hear and decide the matter finally.
7. The instant revision has been filed challenging the judgment and order dated 06.04.2021 passed by the learned Commercial Tax Tribunal, Bench-2, Lucknow (hereinafter referred to as learned Tribunal) in Second Appeal No. 50 of 2017.
8. The case set forth by learned counsel for the revisionist is that a survey took place on the premises of the revisionist on 23.12.2008. The stock is alleged to have been noted by the surveyors on the basis of presumption. The stock was found to be recorded more in the books of accounts of the revisionist vis a vis the physical stock. An assessment order dated 30.10.2010, a copy of which is annexure 1 to the revision, was passed against the revisionist under the provisions of Section 28(2) of the U.P. V.A.T. Act, 2008 (hereinafter referred to as the Act, 2008). By the said assessment order the disputed demand was indicated as Rs 12,44,653/-. Being aggrieved, the revisionist filed a first appeal. The learned appellate authority, vide the order dated 27.06.2012, a copy of which is annexure 2 to the revision, reduced the disputed demand by Rs 6,21,875/-and thus a demand of Rs 6,22,778/-remained. Still being aggrieved, the revisionist filed an appeal before the learned Tribunal and at the same time the Department also filed an appeal. Both the appeals were clubbed together and were decided vide common judgment and order dated 22.06.2016, a copy of which is annexure 3 to the revision, whereby the appeal of the revisionist was partly allowed while the appeal of the department was dismissed. While allowing the appeal, learned Tribunal gave a relief to the revisionist of Rs 3,25,625/-thus assessing the tax liable to be paid by the revisionist at Rs 2,46,250/-as stated by Shri Mudit Agarwal, learned counsel for the revisionist.
9. Shri Agarwal states that the judgment and order dated 22.06.2016 passed by the learned Tribunal attained finality as it was not challenged by the revisionist rather the revisionist acquiesced to the said order and has paid the aforesaid amount of Rs 2,46,250/-.
10. It is contended that during pendency of the aforesaid proceedings, a notice dated 30.01.2013 under Section 54(1)(2) of the Act, 2008, a copy of which is annexure 4 to the revision, had been issued to the revisionist. The revisionist filed his reply. Vide order dated 08.05.2013, a copy of which is annexure 5 to
Mens-rea is an essential pre-requisite condition for imposition of penalty under Section 54(1)(2) of the U.P. VAT Act, 2008.
The filing of revised returns after the initiation of penalty proceedings lacked bona fide and did not absolve the petitioner from liability under Section 40(2) of the JVAT Act.
Assessments beyond five years are invalid without proper notice, and best judgment assessments require rejection of returns, which was not adhered to in this case.
Penalties for false documentation under Section 7-A(2) of the AP GST Act are valid, and revisions under Section 22(1) cannot address factual disputes.
The main legal point established is that penalty can be imposed for deliberate fraud or misinformation by the Assessee under Section 61 of the RVAT Act, 2003.
The main legal point established in the judgment is that Section 61 of the RVAT Act, 2003 allows for the levy of penalty in cases of active concealment and deliberate fraud or misinformation by the A....
Intention to evade tax must be established for imposing penalties under tax laws; previous acceptance of similar submissions indicates no intent to evade.
The court established that valid documentation and absence of intent to evade tax are crucial for imposing penalties under tax law.
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