Explained Temporary Unloading Insufficient to Sustain KVAT Penalty: Karnataka HC

State of Karnataka Vs SNAM Alloys Private Limited (Karnataka High Court)

Summary: The State challenged the order dated 31.07.2024 passed by the Karnataka Appellate Tribunal in STA No.337/2018, by which the Tribunal allowed the respondent-assessee’s appeal and set aside the penalty levied under Section 53(12) of the Karnataka Value Added Tax Act, 2003. The assessee, a dealer registered under the Pondicherry Value Added Tax Act, 2007 and the Central Sales Tax Act, 1956, had imported tin ingots and cleared them at Kandla Port, Gujarat under Bill of Entry No.7167257 dated 20.10.2016. The goods were being transported by road to Pondicherry. On 07.11.2016, the vehicle was found at the premises of M/s. Oswal Minerals Limited, Yeshwanthpur, Bengaluru, with partial unloading of the goods.

The Commercial Tax Officer (Vigilance)-37 issued a show-cause notice and levied penalty of Rs.12,03,449/- under Section 53(12) of the Act by order dated 12.11.2016, alleging that the goods were unloaded at a place other than the destination mentioned in the accompanying documents. The first appellate authority confirmed the penalty on 30.06.2018. The Tribunal, however, examined the Bill of Entry, Gujarat Form 405 Transit Pass, Gate pass and other accompanying records, together with the explanation offered by the respondent, and found that the movement was a genuine inter-State transport of imported goods destined for Pondicherry for home consumption. It accepted the temporary unloading at Oswal Minerals Limited as a measure for transshipment arising from practical difficulties and found that the Revenue had produced no material establishing an intention to evade tax in Karnataka.