Rajasthan VAT Act Enacted To Provide Remedy For Loss Of Revenue & Not To Punish Offender For Committing Economic Offence: High Court

The court added that breach would attract levy of penalty whenever the goods in movement have travelled with an incomplete form.

A division bench of Justice Pankaj Bhandari and Justice Anoop Kumar Dhand, while placing reliance in Guljag Industries v. Commercial Taxes Officer [2007 (7) SCC 269] observed,

"Even the Hon'ble Apex Court has held that provisions have been enacted to provide remedy for loss of revenue and it is not enacted to punish the offender for committing economic offence and, therefore, mens rea is not an essential ingredient for contravention of such provision. The breach would attract levy of penalty whenever the goods in movement have travelled with an incomplete form."

Facts

The Assessing Officer found that the assessee sold mustard oil against declaration Form-C to the firms of Bihar. The assessee also claimed the refund as contemplated under Section 17(2) of the RVAT Act, 2003. During inquiry, it was found that the declaration Form-C by the assessee, was fake and forged and it was also found that a racket was using false, fake and forged declaration forms.

Assessee was asked to show cause and subsequently, the Assessing Officer imposed tax, interest and penalty under Section 61 of the Act in the assessment order dated 31.03.2010. Thereafter, on appeal filed by assessee, the Deputy Commissioner (Appeals) Commercial Tax Department, Bharatpur (Raj.), upheld the order on 11.02.2011.

Further, on 09.05.2017, Rajasthan Tax Board, Ajmer allowed the appeal filed by the respondent - assessee and set aside the penalty imposed under Section 61 of the RVAT Act, 2003. Aggrieved by this, in the present case, the petitioner-Assistant Commissioner, Commercial Taxes has challenged the Tax Board order under Section 84 of RVAT Act, 2003 r/w Section 86 of the Rajasthan Sales Tax Act, 1994.

Observations

The court dealt with the issue -'Whether the Rajasthan Tax Board has committed an error of law in setting aside the order of imposition of penalty despite the fact that the tax and interest imposed by the petitioner- Assistant Commissioner Commercial Tax has been upheld and the Form-C was found to be fake and forged?'

The court observed that the very purpose of prescribing filing of Forms-C: firstly, is that there should not be any evasion of Tax by a Selling Dealer and evasion of tax from where the actual sales are effected; and secondly, the Purchasing Dealer should also suppress such purchase once he is issued Forms-C to the Selling Dealers.

The court opined that the liberal approach of the Tax Board was not justified, looking to the Scheme of the Act and the Rules in this regard. It is also a settled rule for interpretation that where the Statute is penal in character, it must be construed and followed, added the court.

It was observed by the court that the Assessee has miserably failed to prove before all the Authorities that he acted bonafidely upon the Forms-C submitted by the Dealers of the other States.

Further, the court pursued that under section 61 of the RVAT Act, 2003, penalty can be levied for avoidance or evasion of tax where (i) any Dealer has concealed any particulars from any returns furnished by him; or (ii) has deliberately furnished inaccurate particulars therein; and (iii) has concealed any transaction of sale or purchase from its accounts, registers or documents required to be maintained by him under the RVAT Act of 2003.

Moreover, the court observed that the Tax Board has neither recorded any cogent finding on merits of the case before setting aside the penalty, nor it has considered the provisions of section 61 of the RVAT Act, 2003, more particularly, when the fact was proved before all the Authorities that Forms-C submitted by the Assessee were forged and fake to avoid payment of Tax.

The court also opined that the penalty was rightly imposed upon the Assessee by the Authorities as Assessee furnished inaccurate particulars and he also concealed the transactions of sale and purchase to avoid the payment of Tax. Therefore, the Assessee is liable to pay penalty u/s 61 of the RVAT Act, 2003, ordered the court.

The court ruled,

"In the result, the instant Sales Tax (VAT) revision petition stands allowed, the order dated 09.05.2017 passed by the Rajasthan Tax Board, Ajmer, in Appeal No. 1403/2011/Bharatpur, is quashed and set-aside and the Assessee shall be liable to pay the amount of penalty as per the Order dated 31.03.2010 passed by the Assessing Authority."

The court also rejected the cases relied by the Assessees i.e. first the Tata Shree Bhagawati Oil Industries, Bharatpur of Rajasthan Tax Board on the ground that the same has no binding effect and is not a precedent law binding upon the Constitutional Courts of Law and second C.T.O., Jodhpur v. M/s. Kohinoor Industries, Jodhpur as it was not applicable looking at the peculiar facts of this case as the genuineness of Form-C was proved to be forged and fake..

Arguments

The counsel for the petitioner submitted that the Tax Board without recording any findings, upheld the findings recorded by the Assessing Authority. Counsel submitted that after thorough inquiry it was proved before the Assessing Authority and the Deputy Commissioner that the Form-C was found to be forged and fake and the Assessee was held liable to pay tax, interest and penalty. Thus, there was no occasion available with the Tax Board to set aside the penalty imposed upon the Assessee, he added. Lastly, counsel argued that the order dated 09.05.2017 passed by the Tax Board warrants interference of this Court.

The respondent's counsel submitted that the goods were purchased by the Assessee from the businessmen of other States and the Assessee was not aware that the Forms-C were bogus, fabricated and fake. Hence, the Assessee cannot be held liable to pay any kind of penalty, he argued. Lastly, counsel submitted that the Tax Board has not committed any illegality in passing the order dated 09.05.2017 and the Tax Board has rightly set aside the aforesaid penalty

Adv. Punit Singhvi with Adv. Ayush Singh appeared for the petitioner, while Adv. Anurag Kalavatiya appeared for the respondents.

Case Title: Assistant Commissioner, Commercial Taxes, Circle-A, Bharatpur Rajasthan v. M/s C.P. Agro Industries Roopwas, Bharatpur, Rajasthan

Citation: 2022 LiveLaw (Raj) 64