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2014 DIGILAW 47 (JK)

Basu Enterprises, Gangyal, Jammu v. Dy. Commissioner, Commercial Taxes (Appeals), Jammu

2014-02-12

Kossar Ahmad Qureshi

body2014
ORDER 1. This appeal is directed against the order dated 22-06-2007 passed by the Ld. Dy. Commissioner, Commercial Taxes (Appeals) (Appellate Authority), Jammu (herein after called Appellate Authority in short) under section 72 of the VAT Act, 2005, (hereinafter called Act in short) whereby he has confirmed the order of penalty dated 21-12-2005 passed by the Assessing Authority, Commercial Taxes, Circle-Checkpost, Lowermunda (hereinafter called Assessing Authority in short) under section 67(5) and 67(10) of the Act. At the outset I deem desirable to refer to the relevant facts leading to filing of appeal of the appellant before Appellate Authority under section 72 of the Act and before this Tribunal under section 73 of the Act. 2. On 05-12-2005 the driver Gopal Singh approached the office of Assessing Authority Check post Lower Munda for clearance of his vehicle bearing registration No. PB07B-3982 and produced challan of M/S Ajanta Road Carrier, 104-D, Nehru Market, Ware House, Jammu No. 3956 dated 05-12-2005 and bill of M/s Basu Enterprises, Phase-Ill, Gangyal, Jammu bearing Tin No. 01901070471. The contents mentioned on both the documents were B A wire in 253 pieces weighting 12445 kgs and the goods were consigned to M/s Srinagar H/W Store Srinagar, Baghi Ali Mardan Srinagar bearing Tin No. 01642050217. The vehicle was physically checked and was found loaded with barbed wire instead of B.A Wire as mentioned in the documents. 3. The Assessing Authority found the activity of both the consignor and the consignee are registered with the Commercial Tax Deptt for the manufacture of barbed wire with B.A.wire raw material. Thus seized the goods under sub-section (5) of the section 67 on 08-12-2005. The Assessing Authority after served notice required under section 67(5) passed penalty order. The same was challenged before the Ld. Appellate Authority who upheld the same. 4. The appellant submitted that he is registered for manufacture of HB/BA wire, Barbed wire and Chain links fencing etc. He is also duly registered by the Directorate of Industries and is also registered with the Assessing Authority. The Appellant is also registered for grant of remission under SRO 91 dated 16-03-2006 and is availing remission of tax from the Commercial Tax Authorities. Thus the sale of the appellant are not liable to tax. 5. He is also duly registered by the Directorate of Industries and is also registered with the Assessing Authority. The Appellant is also registered for grant of remission under SRO 91 dated 16-03-2006 and is availing remission of tax from the Commercial Tax Authorities. Thus the sale of the appellant are not liable to tax. 5. The appellant submits that he has received an order from M/s New Srinagar Hardware Store, Srinagar for supply of BA wire and another order was received from M/s Bharat General Store, Rajouri for supply of Barbed wire. The two consignments were sent alongwith Bill No. 219 dated 05-12-2005 and 220 dated 05-12-2005 to M/s Janta Road Carrier ware House, Jammu. On 05-12-2005 from the godown of M/s Janta Road Carrier, Ware House, Jammu Gopal Singh owner of truck No. PBO&D-3982 loaded one consignment for M/s Srinagar Hardware Store, Srinagar and carried transported the goods to Srinagar, when Driver reached Lower Munda Checkpost, he presented the documents for clearance to sales tax authorities, there on checking it was found that while the bill is regarding BA Wire actually Barbed wire was found in the truck. Thereon goods were seized and notice under section 67(5) for imposing of penalty and under section 67(10) for furnishing of security were served upon Sh. Gopal singh. Regular reply to said notice was filed by the Manager of Basu Enterprises. It was explained before the Assessing Authority that due to the error of the transporter the goods meant for Bharat General Store, Rajouri have been transported for new Srinagar hardware Store, Srinagar while the goods were meant for New Srinagar Hardware Store Srinagar have been transported to M/s Bharat General Store, Rajouri. It was also stated that the goods sent to M/s Bharat General Store, have been returned by the said party on the grounds that they have placed supply of Barbed wire but the goods sent to them are BA wire. 6. An affidavit of the proprietor of Sh. Naresh Kumar of M/s Janta Road Carrier, Ware House, Jammu was filed, where he admitted that the employee of the transport company has wrongly dispatched/sent barbed wire to Srinagar in truck No. PB&D-3982 to new Srinagar Hardware Store, Srinagar and BA Wire to M/s Bharat General Store, Rajouri. 6. An affidavit of the proprietor of Sh. Naresh Kumar of M/s Janta Road Carrier, Ware House, Jammu was filed, where he admitted that the employee of the transport company has wrongly dispatched/sent barbed wire to Srinagar in truck No. PB&D-3982 to new Srinagar Hardware Store, Srinagar and BA Wire to M/s Bharat General Store, Rajouri. Also admitted in affidavit that Bharat General Store have returned the BA Wire in the same truck o. 3164 JK02M as the goods were not as per his order. The affidavit of Gopal Singh and Driver of vehicle No. 3164 JK02M were also filed before Assessing Authority. But the Assessing Authority without making enquiry has imposed penalty. 7. Further submitted that the appeal filed before the Ld. Appellate Authority has not addressed the issue and without returning finding on the grounds urged in the memorandum of appeal by the appellant disposed of the appeal under section 72 of the Act. 8. Heard counsel for parties at length and given consideration into the matter. Perused the record. 9. The Ld. Counsel for respondents Mr. Amit Gupta has submitted that the orders passed by the Appellate Authority and Assessing Authority are in accordance with law and no need not any interference. 10. The appellant submits that the whole of the proceedings before the Lower Munda Authorities are without Jurisdiction as mandatory conditions provided by the proviso to sub-section 4 of sec 67 which mandates that before seizing, the Authority/ Officer has to record reasons in writing and make inventory of the goods seized but all has not been done by the Assessing Authority. 11. I have gone through the grounds raised by the appellant in the memorandum of Appeal before the Appellate Authority and I have gone through the order passed by the Ld. Appellate Authority as well as the record called from both the Authorities. I have also gone through the grounds of appeal as well, the Ld. Assessing Authority has not passed the order in accordance with the procedure laid down in Section 67. The Assessing Authority was under the mandate, to record reasons in writing before seizure. From the perusal of record, no such order has been passed by the Assessing Authority which is fatal for Revenue. 12. Assessing Authority has not passed the order in accordance with the procedure laid down in Section 67. The Assessing Authority was under the mandate, to record reasons in writing before seizure. From the perusal of record, no such order has been passed by the Assessing Authority which is fatal for Revenue. 12. In order to appreciate the respective contentions the relevant provision in the Act are reproduced hereunder:- "Provided that before seizing, the authority/ officer shall record the reasons in writing and make an inventory of the goods seized a copy of which shall be handed over to the driver or owner of the vehicle or the person incharge of the transport agency or clearing or forwarding agency as the case may be. The seized records shall be impounded, in the prescribed manner and retained so long as their retention may be necessary for the purpose of the Act" 13. The words "Authority/ Officer shall record the reasons in writing before seizer in proviso to sub-section 4 to Section 67 are very significant. It unmistakably lays down before seizure and inventory, Assessing Authority has to record reasons in writing by a written order this is mandatory requirement provided by the statute without sole object of preventing misuse of powers of such seizure. This protects the right of the dealer and is one of the important safeguard provided under the Act. These proceedings are penal in nature and has to be exercised with cafe and caution. 14. The appellant is also registered for grant of remission under SRO 91 dated 16-03-2006 [Refer 2006 (4) JKS JK-435] and is availing remission of tax from the Commercial Taxes Authorities and sales are not liable to tax and there was no need to prepare false bills alleged by the Assessing Authority without conducting proper enquiry. The Assessing Authority should have verified the same from the concerned transport Agency and should have cross-checked the record submitted by the appellant before passing the impugned order. The Assessing Authority was also under the mandate of law to cross-examine the deponents whereby they have narrated that due to error the goods seized was for Bharat General Store, Rajouri not for the new Srinagar Hardware and Bharat General Store has returned the goods which was for New Srinagar Hardware. The Assessing Authority was also under the mandate of law to cross-examine the deponents whereby they have narrated that due to error the goods seized was for Bharat General Store, Rajouri not for the new Srinagar Hardware and Bharat General Store has returned the goods which was for New Srinagar Hardware. The Assessing Authority was duty bound to make enquiry in this record, should have called the Transport Agency for cross examination and should be verified the papers submitted by the appellant before passing the penalty and security order. Mere coming to conclusion that the affidavits filed by the counsel for appellant appear to be an afterthought to cover up the matter. 15. The law on subject is, affidavit is general evidence of facts, till otherwise proved. The Hon'ble Supreme court in Metha Parikh and Co. v. Commissioner of Income Tax has held:- "The cash book of the appellants was accepted and the entries therein were not challenged. No further documents or vouchers in relation to those entries were called for, nor was presence of the deponents of the three affidavits considered necessary by either party. The appellants took it that the affidavits of these parties were enough and neither the AAC, nor the ITO, who was present at the hearing of the appeal before the AAC, considered it necessary to call for them in order to cross-examine them with reference to the statements made by them in their affidavits. Under these circumstances, it was not open to the Revenue to challenge the correctness of the cash entries or the statements made by those deponents in their affidavits..." 16. The affidavit filed by the appellant whereby all the facts were narrated and the Authorities do not cross examine the deponents Inder Singh or Gopal Singh no adverse view against appellant can be taken and penalty has wrongly been imposed. 17. The default committed by the appellant seems to have committed by error as appellant was enjoying the remission of tax under SRO 91 of 2006 was not required to do such type of exercise as per the submissions made by the appellant. There was no mensrea in committing the same as no benefit could be said to accrued to the appellant as the goods sold stands exempted from payment of tax. 18. The Ld. There was no mensrea in committing the same as no benefit could be said to accrued to the appellant as the goods sold stands exempted from payment of tax. 18. The Ld. Assessing Authority has also error in demanding security under section 69 (10) when the appellant is duly registered both for B A wire and Barbed wire and in view of the factual position no security under law could be imposed. 19. That even assuming but not admitting that the default has been committed, the default by unintentional no penalty can be imposed in view of the judgment of the Hon'ble Supreme Court in case titled Hindustan Steel Ltd v. State of Orissa reported in (1972) 83 ITR (SC) in para 5 it was held:- "Under the Act penalty may be imposed for failure to register as a dealer: s. 9(l), r/w s. 25(l)(a) of the Act. But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. Those in charge of the affairs of the company in failing to register the company as a dealer acted in the honest and genuine belief that the company was not a dealer. Granting that they erred, no case for imposing penalty was made out". 20. Those in charge of the affairs of the company in failing to register the company as a dealer acted in the honest and genuine belief that the company was not a dealer. Granting that they erred, no case for imposing penalty was made out". 20. The next contention raised by the counsel for appellant that the Assessing Authority has not made enquiry regarding the documents produced before him by the appellant, supported by an affidavit remain unrebutted as the appellant has also enclosed copy of the Form RJ 23A Part II prescribed under Excise Law for receipt and sale of goods from where it is clear that bill Nos. 219 and 220 both dated 05-12-2005 were issued and that the receipt of goods back from Bharat General Store is duly recorded. But the Assessing and Appellate Authority without making any enquiry has come to conclusion that the affidavits and papers are prepared after thought and is cooked story. The FORM R.G. 23A Part-II under rule 57-A was maintained by the deptt of excise should have been cross checked through proper enquiry, which was never made. The photo copy of affidavits and record form of Excise Deptt shall remain put on the file. The above referred judgment is directly appealable as the Authorities below has not followed the due procedure of law, which is mandatory in nature. 21. For the foregoing reasons and observations made herein above, I would hold that the orders of Ld. Appellate Authority and Assessing Authority are bad and illegal as mandatory conditions provided by proviso to sub-section 4 of Section 67 of the Act, which mandates that before seizing the Authority/Officer has to record reasons in writing and make inventory of the goods seized. But from the perusal of record and order no such condition of recording the reasons in writing before seizure has not been complied with. Also the order has been passed against the spirit of the above referred judgments of Hon'ble Supreme Court and are thus required to be quashed being bad. 22. Accordingly, the appeal of the appellant is accepted and order impugned passed by the Appellate Authority is set aside and order passed by the Assessing Authority is quashed. The record called be sent back forthwith alongwith copy of this order. The appeal file is disposed of and shall be consigned to records.