Durga Steel Rolling Mills Vs Commissioner of Commercial Taxes U. P. Lucknow (Allahabad High Court)
Allahabad High Court held that penalty under Section 54(1)(2) of the U.P. VAT Act, 2008 cannot be imposed in cases, wherein, the assessment is made on the basis of Best Judgement Assessment. Further, also held that men-rea is pre-requisite condition for imposition of penalty u/s. 54(1)(2).
Facts- A survey took place on the premises of the revisionist. 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 was passed against the revisionist under the provisions of Section 28(2) of the U.P. V.A.T. Act, 2008. By the said assessment order the disputed demand was indicated as Rs 12,44,653/-. While allowing the appeal, 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.
During pendency of the aforesaid proceedings, a notice u/s. 54(1)(2) of the Act, 2008 had been issued to the revisionist. Thereafter, an order of penalty was passed whereby the revisionist has been required to pay an amount of Rs 18,65,625/- against the assessed tax of Rs 6,21,875/-. Being aggrieved the revisionist filed an appeal which was rejected vide the order dated 30.09.2016. Still being aggrieved the revisionist filed a second appeal before Tribunal which has also been dismissed. Being aggrieved the instant revision has been filed.
Conclusion- Held that the order imposing penalty on the revisionist based on the assessment order passed under Section 28(2) of 2008 cannot be said to fall within the ambit of any of the eventualities as provided under Section 54(1)(2) of the Act 2008 more particularly it cannot be considered to be an evasion of payment of tax by the dealer / revisionist so as to attract the penalty as has been imposed on the revisionist.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
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 Judgement 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 judgement 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 judgement 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 judgement 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 the revision, an order of penalty was passed whereby the revisionist has been required to pay an amount of Rs 18,65,625/- against the assessed tax of Rs 6,21,875/-. Being aggrieved the revisionist filed an appeal which was rejected vide the order dated 30.09.2016, a copy of which is annexure 7 to the petition. Still being aggrieved the revisionist filed a second appeal before the learned Tribunal which has also been dismissed vide the judgement and order dated 06.04.2021 as annexed to the revision. Being aggrieved the instant revision has been filed.
11. The argument of learned counsel for the revisionist is that a perusal of serial no. 2 of the table, as provided in Section 54(1) of the Act, 2008, would indicate that in order to attract the penalty, a finding has to be specifically recorded that the dealer has concealed the particulars of his turnover or has deliberately furnished inaccurate particulars of such turnover or has submitted a false tax return or has evaded payment of tax which he is liable to pay under the Act and only after such a finding has been recorded by the competent authority can the penalty be imposed.
12. The contention is that a perusal of the order impugned would indicate that no finding of the revisionist having deliberately concealed the particulars of his turnover or having deliberately furnished inaccurate particulars or having deliberately evaded payment of tax has been indicated and consequently the competent authority patently erred in imposing the penalty which aspect has not been considered by the appellate authority as well as by the learned Tribunal while dismissing the second appeal filed by the revisionist vide the judgement and order dated 06.04.2021.
13. Learned counsel for the revisionist also states that the provisions of section 54(1) of the Act, 2008 are akin to the provisions of Section 15A of the UP Sales Tax Act, 1948 renamed as U.P. Trade Tax Act, 1948 with retrospective effect (now repealed).
14. In this regard reliance has been placed on the judgements of this Court in the case of M/s Moti Lal Jawahar Lal vs The Commissioner of Sales Tax, U.P., Lucknow, 2003 NTN (Vol.23) 590, The Commissioner, Sales Tax, U.P., Lucknow vs S/s Shanti Swarup Raj Kumar Katra Naj, Moradabad, STI 1998 ALLAHABAD HIGH COURT 394, The Commissioner of Sales Tax, Uttar Pradesh vs Sanjiv Fabrics, 2010 (9) SCC 630.
15. Placing reliance on the division bench judgement of this Court in the case of S. Flabours vs State of U.P. and another, 2016 (61) NTN DX 100 the argument of learned counsel for the revisionist is that this Court, after considering the provisions of Section 15A of the Trade Tax Act, 1948 (hereinafter referred to as the Act, 1948) has held the said provisions to be akin to Section 54 of the Act, 2008 and has thereafter held that in order to impose penalty, specific finding of concealment or furnishing of wrong particulars of return has to be made and in absence thereto, the order of imposition of penalty cannot be said to be legally sustainable in the eyes of law meaning thereby that mens-rea is a necessary ingredient for imposition of penalty.
16. Reliance has also been placed on the definition of “Tax Evasion” as per Blacks’ Law Dictionary, 8th Edition.
17. No other argument has been raised.
18. On the other hand, Shri Sanjay Sarin, learned Additional Chief Standing Counsel appearing for the respondent argues that none of the aforesaid judgements have considered the full purport of column no. 2 of the table of Section 54 (1) of the Act 2008 in as much as one of the wrong on which the penalty can be imposed, as provided in the table, is the evasion on the part of the dealer for payment of tax which he is liable to pay under the Act.
19. The argument of Shri Sarin is that when the judgement and order dated 22.06.2016 passed by learned Tribunal whereby the revisionist has been assessed for payment of tax of Rs 2,45,250/- has attained finality and the revisionist has also deposited the tax as such the said payment of tax by revisionist would fall within the ambit of being an evasion of payment of tax which the revisionist has been held liable to pay under the provisions of the Act, 2008 and consequently the penalty can validly be imposed on the revisionist which in fact has been been done by means of the order impugned dated 06.04.2021.
20. Shri Sarin however fairly submits that as the amount of tax has been reduced from one stage to another and finally stood at Rs 2,46,250/-consequently three times the aforesaid amount can validly be imposed on the revisionist but in the instant case a still higher amount has been imposed.
21. So far as the judgements of this Court in the case of M/s Moti Lal Jawahar La! (supra), S/s Shanti Swarup Raj Kumar Katra Naj (supra), Sanjiv Fabrics (supra) and S.S. Flabours (supra) are concerned more particularly the division bench judgement of this Court in the case of S. Flabours (supra) the argument of Shri Sarin is that the division bench, although has held that the provisions of Section 15A of the Act, 1948 are pari-materia to provisions of Section 54(1) of the Act 2008, yet the division bench has not considered that there was no provision under the Act 1948 which provided for imposition of penalty where the dealer has evaded payment of tax which he is liable to pay under the said Act and thus it is argued that the said judgement would not be applicable in the facts of the instant case.
22. Heard the counsels for the parties and perused the records.
23. From perusal of the record it emerges that a survey took place at the premises of the revisionist on 23.12.2008. An assessment order dated 30.10.2010 was passed against the revisionist under the provisions of section 28(2) of the Act, 2008 whereby disputed demand was indicated as Rs 12,44,653/-. The revisionist filed the first appeal and the appellate authority vide order dated 27.06.2012 reduced the disputed demand by Rs 6,21,875/- and thus a demand of Rs 6,22,778/- remained. The revisionist as well as the Revenue filed second appeals against the said order dated 27.06.2012. Both the appeals were clubbed together and decided vide judgement and order dated 22.06.2016 by the learned Tribunal whereby the appeal of the revisionist was partly allowed while the appeal of the Revenue was dismissed. While allowing the appeal of the revisionist learned Tribunal has given a relief of Rs 3,25,625/- thus assessing the tax liability to be paid by the revisionist at Rs 2,46,250/-. The said order has attained finality. The amount of tax has also been deposited by the revisionist.
24. During pendency of the aforesaid proceedings, a notice under Section 54(1)(2) of the Act, 2008 was issued to the revisionist. The revisionist filed his reply. Vide the order dated 08.05.2013 an order of penalty has been passed whereby the revisionists has been required to pay an amount of Rs 18,65,625/- against the assessed tax of Rs 6,21,875/-. Being aggrieved the revisionist filed an appeal which has been rejected vide the order dated 30.09.2016. Still being aggrieved, a second appeal was filed before the learned Tribunal which has been dismissed vide judgement and order dated 06.04.2021. Being aggrieved the instant revision has been filed.
25. The argument of learned counsel for the revisionist is that a perusal of serial no. 2 of table as provided in Section 54 (1) of the Act, 2008 would indicate that in order to levy a penalty, a finding has to be specifically recorded that the dealer, in this case the revisionist, has concealed particulars of turnover or has deliberately furnished inaccurate particulars of such turnover or has submitted a false tax return or has avoided payment of tax which he is liable to pay under the Act and only when a specific finding to the said effect has been recorded by the competent authority can the penalty be imposed.
26. The argument of learned counsel for the revisionist is that there has to be a specific finding of mens-rea by the authorities concerned of a deliberate attempt to evade tax and only after such a finding has been recorded can a penalty be imposed and in the absence of such finding the penalty as imposed on the revisionist vide the order impugned dated 08.05.2013 cannot be said to be legal and valid in the eyes of law.
27. In order to consider the arguments of learned counsel for the revisionist as to whether mens-rea would be an essential ingredient in the levy of penalty under Section 54(1)(2) of the Act, 2008 the Court may refer to the provisions of Section 54 of the Act, 2008.
28. For the sake of convenience, the relevant extract of Section 54 of the Act 2008 is reproduced as under:
54. Penalties in certain cases
(1) The assessing authority, if he is satisfied that any dealer or other person, as the case may, has committed the wrong described in column (2) of the table below, it may, after such inquiry, if any, as it may deem necessary and after giving dealer or person reasonable opportunity of being heard, direct that such dealer or person shall, in addition to the tax, if any, payable by him, pay by way of penalty, a sum as provided in column (3) against the same serial no. of the said table:
