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2006 DIGILAW 4428 (PNJ)

Makin Paper Mills v. State of Punjab

2006-11-29

ADARSH KUMAR GOEL, RAJESH BINDAL

body2006
JUDGMENT This petition has been filed against show cause notices dated 24.9.2005 (Annexure P-1) and 27.9.2005 (Annexure P-3) and further proceedings taken in pursuant thereto. 2. Case set out in the petition is that the petitioner is a dealer registered under the provisions of Punjab Value Added Tax Act, 2005 (for short "the State Act") and Central Sales Tax Act, 1956 at Ludhiana. It is engaged in manufacturing of paper and allied items. On 23.9.2005, the petitioner sold a consignment of paper to a Delhi dealer and goods were loaded on Truck No. HR- 38L-2685. In transit, the consignment was intrcepted and detained on 24.9.2005 by respondent No. 2, the Excise & Taxation Officer-cum-Assistant Director (Investigation), Patiala under Section 51(6)(a)(b) read with explanation under Section 51(7)(d) of the Act and show cause notice Annexure P-1 was issued proposing to levy penalty for evading tax on the ground that the petitioner had given wrong description of goods in the bill. The petitioner gave reply and relied upon RG-1 Register maintained under the provisions of Central Excise Act, 1944. He submitted that consignment carried correct description being paper on which 1% C.S.T. was leviable as against the same being cardboard as suggested by the detaining authority attracting rate of tax @ 4%. Another consignment was detained on 27.9.2005 in respect of which show cause notice Annexure P-3 was given to the petitioner on the same ground. The petitioner submitted reply on 30.9.2005. Two consignments of the petitioner were released on bank guarantee and the matter was pending before the Check Post Officer. 3. The case of the petitioner is that show cause notices given were illegal as the Check Post Officer could exercise the jurisdiction only when there was any attempt at evasion of tax. The petitioner was sending such consignments in the course of business regularly and even during assessment proceedings classification of the said commodity was accepted as paper as against the cardboard and thus no question of any attempt at evasion arose. Reliance has been placed on the order of the Assessing Authority Annexure P-4, wherein tax has been assessed at the rate of 1% in respect of the turnover of the petitioner for the same item. 4. Reliance has been placed on the order of the Assessing Authority Annexure P-4, wherein tax has been assessed at the rate of 1% in respect of the turnover of the petitioner for the same item. 4. In reply, apart from raising an objection to the entertainment of the petition at the stage of notice in view of the judgments of Honble Supreme Court in Siliguri Municipality and others v. Amalender Dass and others, 1984(146) ITR 624; Union of India and others v. Oswal Woollen Mills Ltd. and others, 1985(154) ITR 135 and P. Radhakrishan Naidu v. Govt. of Andhra Pradesh, 1977(1) SCC 561. It is further stated that the goods comprised in the consignment being card board, higher rate of tax was attracted and since the petitioner was transporting the goods by misdescription of card board as paper, attempt to evade was patent. 5. The fact that the assessing authority has accepted the description of goods as duplex paper, taxable at the rate of 1% CST before and even after the detention of the consignment by the Check Post Officer, has not been disputed. It is stated that stand of the assessing authority was wrong and stand of the checking officer was correct. It is further submitted that Check Post Officer could check the description of goods, whereas assessing authority had not actually seen the goods during assessment. 6. We have considered the rival submissions and perused the record. 7. As regards the objection as to availability of alternative remedy, the matter was gone into in the connected matter decided by this Court on 22.11.2006 being Xcell Automation v. State of Punjab and others, 2007(2) R.C.R.(Civil) 158, CWP No. 4603 of 2005 and after referring to the judgments of the Honble Supreme Court in State of U.P. v. Mohammad Nooh, AIR 1958 SC 86 and Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and others, AIR 1999 SC 22, it was held that if on undisputed facts, an authority was shown to have assumed jurisdiction which it did not possess, bar of alternative remedy was not absolute. In the present case, for the reasons recorded in later part of the judgment, we are of the view that exercise of power to impose penalty at the check post was without jurisdiction. 8. In the present case, for the reasons recorded in later part of the judgment, we are of the view that exercise of power to impose penalty at the check post was without jurisdiction. 8. Coming to the merits, it may be observed that provisions to check and detain goods at a check post to prevent evasion of tax have already been upheld as being necessary to check evasion with a view to enforce the charging provision under the Punjab VAT Act, 2005 with reference to entry 54 of List-II of the 7th Schedule of the Constitution. We have also noticed that mere conferring of such drastic power did not mean that power could be used arbitrarily. Invocation of such powers is called for for checking evasion when a person either conceals relevant information, gives misleading information or acts in any other clandestine way or where from the available information itself, attempt to evade tax is patent. The said power has to be exercised with caution and not as a substitute for ordinary assessment or penalty as separately provided for under the Act. Exercise of power may some time be overlapping and mere alternative procedure is not conclusive for not exercising the said powers, where it is clear that either there is evasion there being deficiency in documents, inaccurate declaration having been made about description, value and contents of goods or otherwise but where there may be bona fide dispute about interpretation of law, about taxability or otherwise, summary power of imposing penalty at the check post is not intended to be exercised. 9. In Xcell Automation (supra), after referring to the judgments in The Check Post Officer, Coimbatore etc. v. M/s. K.P. Abdulla and Bros., AIR 1971 SC 792 : 27 STC 1; M/s. Sodhi Transport Co. and another etc. v. State of U.P. and another etc., AIR 1986 SC 1099 : 62 STC 381; Delite Carriers (Regd.) v. State of Haryana and others, 1990(77) STC 170 (SC); Mool Chand Chuni Lal v. Shri Manmohan Singh, Assistant Excise and Taxation Officer, Octroi Incharge, Shambhu Barrier, District Patiala and another, 1977(40) STC 238 (P&H) and Amrit Banaspati Company Limited v. State of Punjab and others, 2001(122) STC 323 (P&H), (on the issue of vires of provisions relating to inspection of goods in transit); The Cement Marketing Co. of India Ltd. v. The Asstt. of India Ltd. v. The Asstt. Commissioner of Sales Tax, Indore and others, AIR 1980 Supreme Court 346, para 5; Automobile Products of India Limited v. State of Karnataka, 1991(81) STC 414 (Karnataka); Orient Paper and Industries Limited and another v. State of Orissa and others, 1995(97) STC 490 (Orissa); Utkal Galvanisers Limited v. Commissioner of Commercial Taxes, Orissa and others, 1997(104) STC 222 (Orissa); Shahnas Trading Co. and others v. State of Kerala and others, 2002(127) STC 1 (SC); Parry and Company Limited v. Commissioner of Sales Tax, U.P. Lucknow, 2004(138) STC 437 (All.); United Polymer Industries v. State of Punjab and others, 2006(146) STC 571 (P&H); Commissioner of Sales Tax and another v. P.T. Enterprises and another, 2000(117) STC 315 (on the issue of jurisdiction of the Check Post Officer); State of Haryana and others v. Sant Lal and another, 1993(4) SCC 380; Tripura Goods Transport Association and another v. Commissioner of Taxes and others, AIR 1999 SC 719; Saral Kumar v. State of Haryanan and others, 2000(118) STC 17 (SC); State of Rajasthan and another v. D.P. Metals, AIR 2001 SC 3076; Swastic Roadways and another v. State of M.P. and others, 2004(3) SCC 640; A.B.C. (India) Ltd. v. State of Assam and another, 2005(6) SCC 424; M/s. Krishna Bus Service Private Limited v. The State of Haryana and others, AIR 1985 SC 165, (provisions for records to be maintained by carrying and forwarding agents and detention of transport vehicles); The Comptroller and Auditor General of India, Gian Prakash, New Delhi and another v. K.S. Jagannathan and another, AIR 1987 SC 537; Lucknow Development Authority v. M.K. Gupta, AIR 1994 SC 787; Tata Cellular v. Union of India, AIR 1996 SC 11; Common Cause, A Registered Society v. Union of India, AIR 1999 SC 2979; Union of India and another v. S.B. Vohra and others, AIR 2004 SC 1402 para 25, and (judicial review by High Court under Article 226), position was summed up as under :- (1) Exercise of power at the check post, to be valid, should have reasonable nexus with the attempt at evasion. (2) Straight-jacket approach is not called for and each instance of exercise of power has to be seen in the light of individual facts. (2) Straight-jacket approach is not called for and each instance of exercise of power has to be seen in the light of individual facts. Neither exercise of power can be restricted, wherever required for checking attempt at evasion nor can be extended to areas where there was no attempt at evasion. (3) In an appropriate case, the writ court may examine the exercise of power and interfere if exercise of power is found to be arbitrary, mala fide and without nexus with attempt at evasion. (4) If there are disputed questions and there is reasonable nexus of exercise of power with attempt at evasion, writ petition against imposition of penalty at the check post cannot be entertained. (5) Where relevant documents are duly produced but a bona fide plea against taxability is raised and there is neither mis-declaration nor concealment, exercise of power of imposing penalty at the check post on the ground of attempt at evasion may not be called for. 10. In the present case, the assessing authority itself having upheld the stand of the petitioner, even after detention of goods, it could not be held that the petitioner was attempting to evade tax by wrong description of goods in the bill, which were described by the petitioner as paper and which ought to be declared as cardboard, according to the view taken by the check post authority. Though, we do not express any final opinion on this issue, which may, if necessary, be gone into in appropriate proceedings, contention raised by the assessee could not be rejected as frivolous or mala fide so as to infer attempt at evasion. A bona fide contention raised cannot be equated to attempt at evasion. Thus, invocation of jurisdiction to imposed penalty at the check post was not called for. For the above reasons, this petition is allowed, impugned notices Annexure P-1 dated 24.9.2005 and Annexure P-3 dated 27.9.2005 are quashed. Petition allowed.