In one of my cases namely M/s Shree Ganesh Roller Flour Mills Vs. The State of Punjab. Appeal No. 38 of 2015 decided on 10.09.2015 it has been decided by Punjab VAT Tribunal that mere bonafide mistake in calculating reversal of ITC does not attract penalty. The matter remanded back to DETC(A) for passing a speaking order considering the observations of the Tribunal.

Facts: A penalty u/s 56 of the Punjab VAT Act, 2005 was imposed on the ground that lesser reversal of input tax credit on account of manufacturing of tax free goods was made. The appellant agreed with the reversal but contended that the mistake in calculating the reversal was bonafide and it was a mistake on the part of his accountant that lesser reversals were made. Despite bonafide mistake the Designated Officer levied the penalty @ 200% of the amount of reversal not done.

The first appellate authority dismissed the appeal.

On further appeal to the Tribunal  it is held as under:

“Having given my thoughtful consideration to the rival contentions, it may be observed that it is the case of the appellant from the very beginning that the appellant had changed the counsel who did not allow the correct ITC to be carried forward and did not make correct calculations. on coming to know about the mistake, the appellant voluntarily came forward for reversal of the correct ITC and to remove the mistake. The Designated officer has reversed input tax credit of Rs.3,76,8371- u/s 13(4) of the Act and has not allowed to carry forward the input tax credit on the same amount.

He had also taken the plea before the Deputy Excise and Taxation Commissioner in the grounds of appeal as under:-,

5. “That the dealer has voluntarily come forward and shown correct input tax to be reversed on manufacturing of tax free goods in vat -20 submitted at the time of assessment so no penal action is warranted under section-56.”

Having perused the grounds of appeal, it transpires that the First Appellate Authority did not take pains to ponder over the arguments as. Raised by the appellant before him, but dismissed the appeal with one line order (arguments of the counsel for the appellant against levy of penalty U/s 56 of the Act are not tenable). The First Appellate Authority has not passed a reasoned order after taking into consideration the contentions raised by the appellant that he does not deny the tax liability from the very beginning and did not challenge the same before the First Appellate Authority. Nothing has been discussed, if the mistake on the part of the counsel was intentienal and on account of concealment of facts. As such, the order passed by the Deputy Excise and Taxation commissioner being non speaking needs to be given a relook in the light of the discussions made above.

Resultantly, I accept the appeal, set-aside the impugned order passed by the Deputy Excise and Taxation commissioner (A) on 23.12.2014 with a direction to pass a speaking order after taking into consideration all the contentions which may be raised by the appellant before him.”

Full Judgement is as under:

VALUE ADDED TAX TRIBUNAL, PUNJAB, CHANDIGARH

BEFORE JUSTICE A N JINDAL, CHAIRMAN

Appeal No. 38 of 2015

Decided on 10.09.2015.

M/s Shree Ganesh Roller Flour Mills

Versus

The State of Punjab.

Present:- Amit Bajaj, Advocate counsel for the appellant.

Mr. N.D.S. Mann, Addl. Advocate General for the State.

Order:

This appeal has arisen out of the order dated 23.12.2014 passed by Deputy Excise and Taxation commissioner, Jalandhar Division, Jalandhar, dismissing the appeal of the appellant against the order dated 29.1.2014 passed by the Excise and Taxation Officer-cum-Designated Officer, Jalandhar creating additional demand to the tune of Rs. 11,30,511/- under the Punjab Value Added Tax Act, 2005.

The appellant firm is engaged in the business of flour mills, the appellant filed annual statement VAT-20 for the year 2009-10. On scrutiny, it was transpired that the assessee had made gross sale of Rs. 18,18,48,545/- and out of gross sale, the dealer had made tax free sales of Rs. 15,64,76,871/- and made gross purchases to the tune of Rs. 15,13,85,232/- out of gross purchases, the apellant had made taxable purchase eligible for ITC to the tune of Rs.8,30,82 ,991- and claimed net ITC of Rs. 21,94,935/- after reversal of ITC on account of manufacturing tax free goods to the tune of Rs. 12,09,130/-, the dealer thus, reversed ITC of Rs. 1209130/- instead of Rs. 29,29,127/-.

After thorough examination, it was found that there was a difference of ITC reversal of Rs. 2,58,388/- and that of ITC carried forward to the next year is Rs. 2,58,722/-. Consequently on this amount, after imposing the penalty, the Excise and Taxation Officer-cum-Assessing Authority created additional demand of Rs. 11,30,511/-. On appeal the Deputy Excise and Taxation Commissioner dismissed the same while stating that “Arguments of the counsel of appellant against levy of penalty u/s 56 of the Act are not tenable.”

The counsel for the appellant has vehemently contended that the order passed by the Deputy Excise and Taxation Commissioner is non speaking. He had raised the contentions regarding the bonafide mistake of the reversal of the ITC at the time of calculation due to the change of the counsel, yet the First Appellate Authority did not make note of the contentions and commented over the same before passing the impugned order. The appellant was actually under a bonafide belief that the reversal  calculations made by his accountant at the time of filing his return were correct. The appellant was never aware of the mis-calculations in calculating reversals, but as soon as he came to know about the mistake, he himself came forward to accept the reversal. In such circumstances it was unjust for the Designated Officer to levy the penalty. The appellant being a layman was completely dependent on the person said to be expert in law and accounts The appellant should not suffer for the fault on the part of his counsel. He has also placed reliance on the judgment delivered in the case of M/s CIT Ahmedabad vs Reiiance Petroproducts (P) Ltd (2010) 189 TAXMAN 322 (SC) wherein the Apex Court observed as under:-

“The revenue contended that since the assessee had claimed excessive deductions knowing that they were incorrect, it amounted to concealment of income. It was argued that the falsehood in accounts can take either of the two forms: (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one’s income as well as furnishing of inaccurate particulars of income. Such contention could not be accepted as the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the revenue, that, by itself, would not attract the penalty under section 271(1)(c). If the contention of the revenue was accepted, then in case of every return where the claim made was not accepted by the Assessing Officer for any reason, the assessee would invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature. [Para 10].

Therefore, the appeal filed by the revenue had no merits and was to be dismissed.”

The counsel for the appellant has urged that the law settled by supreme court in the above noted case equally applies to the facts of the present case. He has also urged that penalty should not be attracted as the appellant has not concealed any sale or purchase or suppressed any material facts from the returns filed by it. The only error was as to wrong calculation of the reversal. Hence the penalty imposed on the appellant deserves to be quashed. Lastly, it has been contended that the mistake in itc reversal was due to bonafide mistake, thus does not attract penarty as it does not fall in any of the parameters set out by Section 56 of the Act.

To the contrary, Mr. N.D.S.Mann, AAG has urged that the Act of the appellant amounts to concealment and suppression of facts resultlng into higher claim of the ITC.. therefore, the penalty imposed on the appellant is correct.

Having given my thoughtful consideration to the rival contentions, it may be observed that it is the case of the appellant from the very beginning that the appellant had changed the counsel who did not allow the correct ITC to be carried forward and did not make correct calculations. on coming to know about the mistake, the appellant voluntarily came forward for reversal of the correct ITC and to remove the mistake. The Designated officer has reversed input tax credit of Rs.3,76,8371- u/s 13(4) of the Act and has not allowed to carry forward the input tax credit on the same amount.

He had also taken the plea before the Deputy Excise and Taxation Commissioner in the grounds of appeal as under:-,

  1. “That the dealer has voluntarily come forward and shown correct input tax to be reversed on manufacturing of tax free goods in vat -20 submitted at the time of assessment so no penal action is warranted under section-56.”

Having perused the grounds of appeal, it transpires that the First Appellate Authority did not take pains to ponder over the arguments as. Raised by the appellant before him, but dismissed the appeal with one line order (arguments of the counsel for the appellant against levy of penalty U/s 56 of the Act are not tenable). The First Appellate Authority has not passed a reasoned order after taking into consideration the contentions raised by the appellant that he does not deny the tax liability from the very beginning and did not challenge the same before the First Appellate Authority. Nothing has been discussed, if the mistake on the part of the counsel was intentienal and on account of concealment of facts. As such, the order passed by the Deputy Excise and Taxation commissioner being non speaking needs to be given a relook in the light of the discussions made above.

Resultantly, I accept the appeal, set-aside the impugned order passed by the Deputy Excise and Taxation commissioner (A) on 23.12.2014 with a direction to pass a speaking order after taking into consideration all the contentions which may be raised by the appellant before him.

(Justice A.N. Jindal)

Chairman, VAT Tribunal, Punjab

Chandigarh – Dated:10.11.2015                   

Note: Whether fit for reporting: Yes.

——————-

(Author – Amit Bajaj Advocate, Bajaj & Bajaj Advocates, 128, Sangam complex, Milap chowk, Jalandhar City (Punjab), Email: amitbajajadvocate@hotmail.com , M +919815243335)

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