Rajasthan High Court - Jaipur
Commercial Taxes Officer, Ae Zone-I ... vs . M/S. Shyam Agency on 26 August, 2014
Author: Alok Sharma
Bench: Alok Sharma
IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JAIPUR BENCH ORDER Commercial Taxes Officer, AE Zone-I Jaipur Vs. M/s. Shyam Agency (S.B. Sales Tax (VAT) Revision Petition No.42/2014) Sales Tax Revision Petition under Section 84 of the Rajasthan Valu Added Tax Act, 2003 read with Section 86 of the Rajasthan Sales Tax Act, 1994. Date of Order: August 26th, 2014. PRESENT HON'BLE MR. JUSTICE ALOK SHARMA Mr. J.P. Meena, OIC for the petitioner. Mr. Mahesh Gupta, for respondent. BY THE COURT:
REPORTABLE This is a Section 84 of the Rajsthan Value Added Tax Act, 2003 (hereinafter `the 2003 Act') sales tax Revision Petition against the order dated 19-9-2013 passed by the Rajasthan Tax Board, Ajmer (hereinafter `the Board'). Thereby the appeal filed by the petitioner department (hereinafter `the department') against the order dated 22-2-2012 passed by the Dy. Commissioner (Appeals) has been dismissed.
The facts of the case are that the respondent assessee (hereinafter `the assessee') is engaged in the business of branded confectionery Priyagold TM Toffito Mango cream toffee. The business premises of the assessee was inspected by the assessing authority on 16-9-2010, wherein it was found that the assessee had paid tax at the rate of 4% on branded confectionery, which according to revenue was taxable at 12.5%. Notice to show cause resulted. Reply was filed by the assessee, but found unsatisfactory. The Assessing Officer vide order dated 28-2-2011 held the assessee liable to pay differential tax of 8.5% over the tax of 4% already paid and also held it liable to pay interest under section 55 of the 2003 Act. Penalty under Section 61 of the 2003 Act was also levied. The assessee appealed under Section 82 of the 2003 Act against the order dated 28-2-2011 before the Dy. Commissioner (Appeals). The Dy. Commissioner (Appeals) vide order dated 22-2-2012 while upholding levy of additional tax and interest, set aside the order of penalty under Section 61 of the 2003 Act. Dissatisfied with the order dated 22-2-2012 both the department and the assessee preferred further appeals under Section 83 of the 2003 Act to the Board. The Board vide order dated 19-9-2013 has dismissed departmental appeal relying upon the judgment of the Hon'ble Supreme Court in case of Shree Krishna Electricals Vs. State of Tamilnadu [(2009)11 SCC 687] as had the Deputy Commissioner (Appeals) in setting aside the levy of penalty under Section 61 of the 2003 Act against the assessee. Hence this revision petition.
The officer in-charge, present in the court in absence of the department's advocate owing to advocates' strike, has submitted that payment of tax on goods sold claimed at the rate of 4% ad valorem by the assessee as against the tax due at the rate of 12.5% as found by the assessing officer, has been negated by the first appellate authority as also Tax Board and the sale of the goods in issue found to be exigible to tax @ 12.5%/ 14% ad valorem. According to him this indicates that the assessee had deliberately and intentionally short paid the tax in an attempt at evasion. It has been submitted that consequently the pre conditions for operation of Section 61 of the 2003 Act were fulfilled and that the Dy. Commissioner (Appeals) and the Tax Board vide orders dated 22-2-2012 and 19-9-2013 have wrongly interfered with the levy of penalty by the assessing authority. It has been submitted that the very fact that the assessee was found liable to pay additional tax of 8.5% on the sale of its goods establishes that the assessee was liable to pay the statutory penalty without anything more such as the intent/ mens-rea of the assessee to evade tax due was not required to be established. It has been submitted that penalty under Section 61 of the 2003 Act is attracted as soon as there is contravention of the obligation to pay tax due as penalty imposed under the Act of 2003 for tax delinquence is remedial and coercive in nature and cannot be equated with the penalty for an offence where men-rea is essential. In support of the contention reference has been made to the decision of the Hon'ble Apex Court in the case of Guljag Industries Vs. CTO [2007 (8) Vat Reporter Part-4, page 87] and R.S. Joshi Vs. Ajit Mills [AIR 1977 SC 2279].
Heard the officer in-charge and perused the impugned order dated 19-9-2013 passed by the Tax Board. Considered.
There is no substance in the argument of the officer incharge that penalty under Section 61 of the 2003 is automatic on short payment of tax due being found. Section 61(1) of the 2003 Act delineates the situations in which avoidance/ evasion of tax through acts of concealing and misleading or 'in any other manner (underlining mine) can be visited with penalty. It reads as under:-
61. Penalty for avoidance or evasion of tax. (1) where any dealer has concealed any particulars from any return furnished by him or has deliberately furnished inaccurate particulars therein or has concealed any transaction of sale or purchase from his accounts, registers or documents required to be maintained by him under this Act or has avoided or evaded tax in any other manner, the assessing authority or any officer not below the rank of an Assistant Commercial Taxes Officer as may be authorised by the Commissioner, may direct that such dealer shall pay by way of penalty, in addition to the tax payable by him under this Act, a sum equal to two times of the amount of tax avoided or evaded.
The department apparently drops its anchor in the general words in the later part of Section 61 in so far as they provide that "or has avoided or evaded tax in any other manner". Advocating a literal interpretation of the aforesaid words, the OIC would submit that where the tax leviable on an assessee is finally found to be in excess of tax actually paid, penalty without anything more would be leviable. The department thus propogates an open ended interpretation of the general words "or any other manner" in the later part of Section 61 of the 2003 Act. However the principle of ejusdem generis would require the words in issue i.e. "or has avoided or evaded tax in any other manner" to be interpreted in a limited manner with reference to the three conditions for the levy of penalty earlier detailed in Section 61 of the 2003 Act prior to the general words. The principle of ejusdem generis mandates that where general words follow words which constitute a class by themselves, such general words have to be construed in a limited manner with reference to the specific words preceding them. For applicability of the principle of ejusdem generis reference to the judgment of Hon'ble Supreme Court in the case of M/s. Siddeshwari Cotton Mills (P) Ltd. Vs. Union of India [(1989)2 SCC 458] and Asstt.CCE Vs. Ramdev Toabacco Company [(1991)2 SCC 119] would suffice. In both the aforesaid judgments the Hon'ble Supreme Court has limited the reach of a later general word "other" to situations similar to those covered by the specific words/ situations detailed immediately prior thereto in the section under consideration before the court. In the case at hand under Section 61 of the Act of 2003 a penalty can be levied for avoidance or evasion of tax where (i) any dealer has concealed any particulars from any return furnished by him, or (ii) has deliberately furnished inaccurate particulars therein, or (iii) has concealed any transaction of sale or purchase from his accounts register or document required to be maintained by him under the 2003 Act. The aforesaid three situations for levy of penalty constitute a class by themselves, inasmuch as they provide for levy of penalty in cases of active concealment and deliberate misinformation by the assessee (fraud). In such a situation the words in the later part of Section 61 of the 2003 Act "has avoided or evaded tax in any other manner" cannot be construed as an open-ended power to levy penalty but have to be limited to levy of penalty in situations similar/ akin to those detailed in (i) and (ii) above. That is, where the assessee is held to have deliberately sought to defraud the revenue by its fraudulent act/ conduct. This would include a reckless, malafide and mischievous classification of goods for a rate of tax which no reasonable man could conceivably assert. The words "any other manner" in the later part of Section 61 of the 2003 Act would therefore mandate specific finding of deliberate wrong doing attributable to the assessee to defraud the department and without that the assessee could not be made liable to penalty under Section 61 of the 2003 Act. The sequitur is that where the liability of tax or additional liability of tax is visited upon an assessee on the basis of a bonafide dispute as to liability/ classification being decided in favour of sales tax authorities and against the assessee, without any deliberate fraudulent act/ reckless and malafide claims as to classification being attributed to assessee, it would not be liable to penalty under Section 61 of the 2003 Act.
Further a reading of section 61 of the 2003 Act indicates that penalty is conditional upon the circumstances detailed in Section 61 of the 2003 Act being found and is discretionary in nature. For this conclusion, the words of importance in Section 61 aforesaid are may direct that such dealer shall pay by way of penalty. May direct makes it evident that penalty under Section 61 is discretionary in nature if the obtaining circumstances in which tax due was not paid satisfy the conditions set therein. In the case of Bharjatiya Steel Industries Vs. CST [(2008)11 SCC 617] the Hon'ble Supreme Court has held that where discretion for levy of penalty is provided under a statute it follows mens-rea has to be found prior to the levy of penalty. Further in the case of Shree Krishna Electricals (supra) the Hon'ble Supreme Court observed that where certain items which are not included in the turnover are disclosed in the dealer's own account books and the assessing authorities includes these items in the dealer's turnover disallowing the exemption penalty cannot be imposed. The purport of the aforesaid conclusion of the Hon'ble Supreme Court is that where there is no deliberate attempt at concealment of tax and where the transaction in issue is disclosed in the account books of the assessee, subsequent interpretation by the assessing authority or courts as to liability on account of tax going against the assessee on claims laid by the department cannot entail the assessee being visited with the liability to pay penalty. In the case of Maruti Suzuki Limited Vs. CCE [(2009)9 SCC 193] the Hon'ble Supreme Court has held that where liability in law to pay tax is based on interpretation of the charging provision, it would not entail the assessee being visited with penalty only because of the assessee's failure in litigation on the question of interpretation of the charging section. In the aforesaid case, the Hon'ble Supreme Court noted that albeit the appellant Maruti Suzuki had failed in appeals before it, yet the department would not impose penalty on the company on that count alone.
I find no substance in the argument of the officer in charge based on the judgment in case of Guljag Industries (supra). The said case was adjudicated in an absolutely different contextual situation relating to levy of penalty under Section 78(5) of the 1994 Act. The wording of Section 78(5) of the Act of 1994 and the nature of penalty thereunder is wholly distinct and different from the wording and nature of Section 61 of the 2003 Act. As stated herein above, penalty under Section 61 of the 2003 Act is discretionary and contingent upon fulfillment of the pre-conditions detailed in the provision. No such discretion has been conferred on the assessing authority under Section 78(5) of the Act of 1994, in cases where empty or incomplete disclosure forms required to accompany the goods in transit were held by the Hon'ble Supreme Court to entail a presumption of mens-rea to evade tax.
Reference to the judgment in case of R.S. Joshi Vs. Ajit Mills Ltd. [AIR 1977 SC 2279] and the principle enunciated therein on the facts of that case before the Hon'ble Apex Court are inapposite to the facts in issue and legal question in the present revision petition. The Hon'ble Supreme Court in the case of Bharjatiya Steel Industries (supra) has held that it could not be argued that in no circumstance absence of mens-rea could be brought as a defence against levy of penalty, as where assessing authority has been conferred the discretionary jurisdiction to levy penalty it follows by necessary implication that it may not levy penalty if the circumstances of a case so warrant. It was further held that on the aforesaid proposition it followed that existence of mens-rea was a relevant factor for exercise of discretion by the statutory authority for the purpose of levying penaltyif the language of the governing statute so warranted. It is another matter that the Hon'ble Supreme Court there upon found that in the facts of the case before it existence of mens-rea on the part of appellant Bharjatiya Steel Industries was established. Where the ratio decidendi of a case has to be deduced, the relief granted or refused by the Hon'ble Apex court in the specific facts of a case before it is less relevant than the legal principle enunciated by the court.
Penalty for non payment or short payment of excise duty can be levied under Section 11-AC of the Central Excise Act, 1944 (hereinafter `the 1944 Act'). Section 11-AC (1)(a) of the 1944 Act provides that penalty for short levy or non levy of duty in certain cases. It interalia provides that where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded by reasons of fraud or collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of this Act or other rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under Section 11-A shall also be liable to pay a penalty equal to the duty so determined.
The language of Section 11-AC (1)(a) is in someways similar to that of Section 61 of the 2003 Act, inasmuch as while first specifically detailing the occasions for levy of penalty, it also later provides a general ground for the levy of penalty, i.e. "contravention of any of the provision of this Act or rules made thereunder". Specific situations for levy of penalty are therefore followed by a power to levy penalty generally for contravention of the provisions of the Act or rules made thereunder. While interpreting the penalty provision of Section 11-AC of the 1944 Act, the Hon'ble Supreme Court in the case of Commissioner of Central Excise Vapi Vs. Kisan Mouldings Limited [(2010)15 SCC 100] has held that where a mistake in the non payment/ short payment of tax was bona fide and there was no apparent intention to evade tax by the assessee imposition of penalty under Section 11-AC would not be justified.
Reverting to the facts of the present case, the Tax Board has held that during the period relevant to assessment of tax as against the assessee under the 2003 Act, it was an admitted fact that all sale transactions conducted by the assessee in the year relevant to levy of tax in the State of Rajasthan were indicated in its books of accounts and also duly invoiced. There was no attempt to defraud the revenue by any concealment or misinformation. No finding of reckless/ malafide classification sought with regard to the goods sold has been arrived at. The dispute between the assessee and the revenue was bonafide and related merely to the issue of classification and consequent rate of tax under the 2003 Act leviable on the sale of goods by the assessee i.e. Priyagold TM Toffito Mengo Cream Toffee. The dispute was therefore a bonafide one as to the interpretation/ classification of the products sold by the assessee for the purpose of levy of tax. Such a dispute did not supply any of the pre conditions for levy of penalty under Section 61 of the 2003 Act. The Tax Board has, for the principle on which penalty can be levied, relied upon the judgment of the Hon'ble Supreme Court in the case of Shree Krishna Electricals (supra). Oddly the revision petition does not even have a whisper of a reason for the purported inapplicability of the aforesaid judgment to the matter in issue before the Tax Board. Quite apparently, the petitioning revenue department seeks to overlook the facts of the case and the clear enunciation of law by the Hon'ble Supreme Court in the case of Shree Krishna Electricals (supra) as also elsewhere and mechanically agitate this misdirected revision petition. The question of law as sought to be agitated stands already settled by the judgment of the Hon'ble Supreme Court in the cases of Bharjatiya Steel Industries (supra) and Shree Krishna Electricals (supra).
I find no force in the revision petition. Accordingly, dismissed.
(Alok Sharma),J.
arn/ All corrections made in the order have been incorporated in the order being emailed.
Arun Kumar Sharma, Private Secretary.