C.T.O., Ward-B, Udaipur vs M/S Soni Marketing, Udaipur ... on 7 August, 2025

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Rajasthan High Court - Jodhpur

C.T.O., Ward-B, Udaipur vs M/S Soni Marketing, Udaipur ... on 7 August, 2025

1. The instant civil revision petition under Section 84 of the Rajasthan Value Added Tax Act, 2003 has been preferred on behalf of the Commercial Taxes Department being aggrieved of the judgment and order dated 06.06.2013 passed by the Rajasthan Tax Board, Ajmer in Appeal No.2231/2011/Udaipur, whereby the appeal preferred by the Revenue was dismissed and the order dated 27.06.2011 passed by the Deputy Commissioner (Appeals), Commercial Taxes Department, Udaipur in Appeal No.137/VAT/10- 11 was affirmed.

2. Briefly stated, facts of the case are that the Assessing Authority while assessing the tax of the respondent firm for the Assessment Year 2007-08 found that the assessee firm had purchased branded potato chips, namely, Uncle Chips, Lays etc., from the M/s Pepsico India Holding Pvt. Ltd. and sold the same by (Downloaded on 14/08/2025 at 09:23:12 PM) [2025:RJ-JD:35678] (2 of 9) [CR-222/2013] collecting tax at the rate of 4%, whereas the branded chips are taxable at the rate of 12.5%, therefore, differential tax of Rs.5,41,120/-, penalty under Section 61 of the RVAT Act amounting to Rs.10,82,240/- (double of the alleged evaded tax amount) and interest of Rs.1,62,336/- was imposed vide order dated 31.03.2010 and since the assessee had not submitted form VAT-10 and VAT-10A at the relevant time, therefore, penalty amounting to Rs.36,910/- was also imposed vide the same order.

3. Being aggrieved of the order passed by the Assessing Authority, the assessee preferred an appeal under Section 82 of the RAVT Act before the Deputy Commissioner (Appeals), Udaipur, which was partly allowed vide order dated 27.06.2011. The appellate authority held that the potato chips sold by the assessee under the names Uncle Chips, Lays etc. are branded chips and they do not come under the entry No.107 of Schedule IV under Section 4 of the RVAT Act and thus, the imposition of differential tax at the rate of 8.5% (12.5% - 4%) was justified, however, since the entire sale was recorded in the account books of the assessee, therefore, there appeared not intention on part of the assessee to evade tax, therefore, the imposition of penalty was set aside.

4. Being aggrieved of the order passed by the appellate authority, the Revenue preferred an appeal before the learned Tax Board, Ajmer, which came to be dismissed vide order dated 06.06.2013 and it was held that the appellate authority has committed no legal error in setting aside the penalty under (Downloaded on 14/08/2025 at 09:23:12 PM) [2025:RJ-JD:35678] (3 of 9) [CR-222/2013] Section 61 of the RAVT Act and further the imposition of penalty under Section 58 of the RVAT Act was also set aside holding that the same was imposed without issuing any summon.

5. Being aggrieved of the orders passed by the appellate authority and the Tax Board, the Revenue has preferred the instant revision petition.

6. Learned counsel for the petitioner submits that the learned Tax Board has committed grave error in upholding the decision of the appellate authority without considering the fact and legal aspects of the matter. He submits that the law is very much clear that the tax rate applicable on the branded potato chips is 12.5% and assessee deliberately collected tax at the rate of 4% in order to evade tax, therefore, the imposition of penalty was perfectly justified. He further submits that since the assessee failed to submit the requisite forms VAT-10 and VAT-10A within the stipulated period, therefore, he was certainly liable to pay penalty under Section 58 of the RVAT Act. He, therefore, prays for acceptance of the revision petition.

7. Per contra, learned counsel for the respondent assessee submits that it is an admitted position that the assessee had recorded the entire sale in question in his books of accounts and there is nothing on record to show that there was any intent to evade tax. The assessee was under the bonafide belief that the product sold by him was taxable at the rate of 4% as such, not having a guilty animus, therefore, the imposition of penalty upon (Downloaded on 14/08/2025 at 09:23:12 PM) [2025:RJ-JD:35678] (4 of 9) [CR-222/2013] it was not at all justified and therefore, it was rightly set asided by the appellate authority and the said decision was further upheld by the Tax Board. He, therefore, submits that no interference is called for in the concurrent findings of two competent forums. In support of his contentions, learned counsel placed reliance on the judgments rendered in the case of Shree Krishna Electricals Vs. State of Tamil Nadu and another: (2009) 11 SCC 687; Assistant Commissioner, Anti-Evasion Vs. Agarwal Aluminium & Company: (2013) 60 VST 141 (Raj.) and Commercial Taxes Officer Vs. Shyam Agency : (2015) 78 VST 75 (Raj.) and Lord Venketshwara Caterers Vs. Comm Taxes Officer, Anti Evasion, Zone-I : [MANU/RH/0444/2007].

8. Heard learned counsel for the parties and perused the material placed on the record.

9. The respondent assessee purchased the branded potato chips under the brand names Uncle Chips and Lays from M/s. Pepsico India Holding Pvt. Ltd. and sold the same by collecting the tax at the rate of 4%, however, since the sold chips being branded do not come under the Entry No.107 of Schedule IV RVAT Act, 2003, which includes Processed or preserved vegetables and fruits, pickle, fruit squash, fruit juice when sold loose, sharbat and thandai, therefore, the tax applicable thereon would be 12.5%. The said position of law is not disputed even by the respondent assessee, however, his contention is that at the relevant point of time, he was under the bonafide belief that the tax applicable on the goods sold by him would be 4% and therefore, he collected (Downloaded on 14/08/2025 at 09:23:12 PM) [2025:RJ-JD:35678] (5 of 9) [CR-222/2013] the tax at that rate. It is not the case of the Revenue that the assessee has concealed any transactions of sale or purchase from his accounts, registers or documents required to be maintained by him under this Act, rather the entire sale has been duly recorded in the books of accounts maintained by the respondent-assessee. A penalty under Section 61 of the RVAT Act, 2003 cannot be imposed on the assessee unless the Revenue establishes that there is deliberateness n the part of the assessee or concsious concealment of taxable turnover with the purpose to avoid of evade the tax and such penalty cannot be imposed merely because the contention of the assessee that the goods concerned were taxable at a lower rate is not found acceptable by the Revenue. Something more is required to be done by the Revenue to bring on record such material which after being confronted to the assessee and his explanation with regard to the same being decided, clearly points out that he carried a malafide intention of evading tax and concealed such taxable turnover and sale from the Revenue and collected less tax without any reasonable cause.

10. In the case at hand no such material is available on record to establish the assessee having guilty animus or mens rea to evade tax. In such circumstances, the appellate authority has rightly concluded that the assessee had no intention to evade tax and thus, while allowing the appeal in part, the imposition of penalty was set aside, whereas the order to recover the differential tax was maintained. The learned Tax Board while deciding the appeal preferred on behalf of the Revenue concurred with the view of the appellate authority. The learned Tax Board further concluded that (Downloaded on 14/08/2025 at 09:23:12 PM) [2025:RJ-JD:35678] (6 of 9) [CR-222/2013] the summons available on record have not mention of imposition of penalty under Section 58 of the RVAT Act, and as per Section 65 of the RVAT Act, 2003, no penalty under the said Act shall be imposed unless a reasonable opportunity of being heard is afforded to the dealer or the person concerned, therefore, imposition of said penalty was held illegal and the same was set aside.

11. The Hon'ble Apex Court in the case of Shree Krishna Electricals Vs. State of Tamil Nadu and another (supra) had an occasion to consider identical issue and held that if entries have been incorporated in the books of accounts where certain items are not included in the turnover, are disclosed in the dealers' own account and the AO includes such items in the dealers' turnover disallowing exemption, penalty cannot be imposed. The relevant Para 7 of this judgment reads as under:-

"7. So far as the question of penalty is concerned the items which were not included in the turnover were found incorporated in the appellant's accounts books. Where certain items which are not included in the turnover are disclosed in the dealers' own account books and the assessing authorities includes these items in the dealers' turnover disallowing the exemption penalty cannot be imposed. The penalty levied stands set aside."

12. In the case of Commercial Taxes Officer Vs. Shyam Agency (supra), this Court following the analogy drawn in the (Downloaded on 14/08/2025 at 09:23:13 PM) [2025:RJ-JD:35678] (7 of 9) [CR-222/2013] case of Shree Krishna Electricals Vs. State of Tamil Nadu and another (supra), held in Para 12 as under:-

"12.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 (Downloaded on 14/08/2025 at 09:23:13 PM) [2025:RJ-JD:35678] (8 of 9) [CR-222/2013] 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)."

13. This Court again, in the case of Assistant Commissioner, Anti-Evasion Vs. Agarwal Aluminium & Company (supra), dealing a case where there was dispute about classification of entries observed in Para 29 as under:-

"29. So far as question of penalty under section 61 is concerned, the appellate authorities below appear to be justified in holding that the penalty under section 61 of the Act could not be imposed upon the assessee since the assessee had disclosed all the relevant particulars in its returns and relevant documents, vouchers and books of accounts and has not withheld any vital information from the Department nor furnished any inaccurate particular to the assessing authority, which is sine qua non for imposition of penalty under section 61 of the Act. Mere raising of contention by the assessee that it was liable to pay lesser rate of tax of four per cent treating the commodity as 'metal mesh', which contention has not found favour at all with the Departmental authorities or even this court, it does not necessarily mean that the assessee was guilty of concealing any material information or furnishing inaccurate particulars in its returns. Therefore, the deletion of penalty by the appellate authorities under section 61 of the Act deserves to be upheld and for this reason the revision petitions filed by the Revenue are also liable to be dismissed."

14. As stated earlier, admittedly, it is not a case where the assessee was not paying any tax. The claim was that it falls in the (Downloaded on 14/08/2025 at 09:23:13 PM) [2025:RJ-JD:35678] (9 of 9) [CR-222/2013] category where rate of tax is applicable @ 4% only whereas the claim of the Revenue was that it is taxable on account of falling in different entry @ 12.5% but admittedly all the transactions stood recorded, disclosed and the respondent-assessee paid due tax @4% on the entire goods.

15. Taking note of the facts noticed above and the judgments referred to hereinbefore, this court is of the considered view that merely because a higher rate of tax has been made applicable, does not call for imposition of penalty under Section 61 of the RVAT Act, 2003 as there was no deliberateness or intent on the part of the assessee to evade tax, which is sine qua non for imposition of such penalty. This court concur with the view of the appellate authority which has further been affirmed by the Tax Board. Accordingly, I do not find any perversity or ambiguity in the order impugned so as to call for interference.

16. Resultantly, the instant Sales Tax Revision preferred on behalf of the Revenue is dismissed as being devoid of merit.

17. All pending applications are disposed of.

(FARJAND ALI),J 241-Pramod/-

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Rajasthan High Court - Jodhpur