Lundbeck India Private Limited vs Additional Commissioner of Commercial Taxes

N. Kumar, J.—This appeal is filed challenging the order passed by the revisional authority who has interfered with the appellate order and held that the order passed by the appellate authority is not only erroneous, but it is prejudicial to the interest of the Revenue. The consignment is film coated tablets (medicines). Interception of this consignment was made by the check-post authority at the airport, Bangalore on January 15, 2005. The driver of the goods vehicle submitted the documents like airway bill of Jet Airways. Xerox copy of the letter dated January 15, 2005 or M/s. Bangalore Pharmaceutical and Research Laboratory (Pvt.) Ltd., Jayanagar, Bangalore and challan of M/s. Groversons Shipping Services Pvt. Ltd., Mumbai, bills of entry for home consumption, invoices from. M/s. H. Lundbeck A/S Denmark and declaration of Lund-beck India Pvt. Ltd. That these documents are either copies or Xerox of the originals. The airway bill indicated the consignment from Mumbai to Bangalore in favour of Bangalore Pharmaceutical and Research Laboratory (Pvt.) Ltd. It shows the account of Lundbeck India Pvt. Ltd. This document shows that the consignment is for the above party, viz., Bangalore Pharmaceutical and Research Laboratory (Pvt.) Ltd. The bills of entry shows that the consignment is in favour of Lundbeck India Pvt. Ltd. The invoices from M/s. H. "Lundbeck A/H Denmark shows the buyer as M/s. Lundbeck India Pvt. Ltd., Bangalore. The declaration of M/s. Lundbeck India Pvt. Ltd., Bangalore, shows that the passing of production credit in regard to the goods covered under the bills of entry.

In spite of production of such documents, the check-post authority held the goods were imported by Lundbeck India Pvt. Limited, Bangalore from M/s. H. Lundbeck A/H Denmark. Though the documents mentioned at Sl. Nos. 1 to 7 were produced for checking, they were not relating to transport of goods to Bangalore Pharmaceutical and Research Laboratory (Pvt.) Ltd. According to him, no document was produced in support of transportation of the goods to M/s. Bangalore Pharmaceutical and Research Laboratory (Pvt.) Ltd. In the letter, M/s. Lundbeck India Pvt. Ltd., admitted that the driver of the vehicle has failed to collect the delivery challan/declaration. Because of that, according to the Check-post Officer, there was no document for transporting the said goods to Bangalore Pharmaceutical and Research Laboratory (Pvt.) Ltd., and therefore, according to him, it is a clear violation of section 28A(2) of the Karnataka Sales Tax Act, 1957 (hereinafter referred to as, "the KST Act", for short). Therefore, they proceeded to levy the penalty of Rs. 20,93,687 u/s 28A(4)(b) of the KST Act. Aggrieved by the said order, the assessee preferred the appeal.

The appellate authority held that section 28A(1) of the KST Act was enacted to prevent or check evasion of tax by establishing check-post or barrier. The plain language employed in the section as well as in its intendment does not clothe the check-post officer with jurisdiction to make an assessment as long as the documents carried in the vehicle satisfy the requirement of the prescription made under sub-section (2) of section 28A of the Act or the Rules made under the Act.

A perusal of the show-cause notice would indicate the prescribed documents that are required for a transaction to be imported from outside the country were carried with the goods vehicle. The only discrepancy noticed was between the documents relating to import which indicated the person who had made the purchase and discharged the goods from the customs barriers of India and the goods vehicle record which disclosed that the delivery was not to be made to the person who has purchased the goods in the course of import, but to some other person, i.e., M/s. Bangalore Pharmaceutical and Research Laboratory (Pvt.) Ltd. The said discrepancies cannot clothe the respondent with jurisdiction to something which he was not accepted, but to do under the provisions of section 28A of the KST Act. His job was to ascertain whether the prescribed documents accompanied the vehicle and the goods which in turn were liable to tax under the Act. Anything else he did, would be without jurisdiction and that on account of his total misdirection, there was improper exercise of jurisdiction. Therefore, the order passed by the check-post officer levying penalty was set aside.

The Additional Commissioner of Commercial Taxes purporting to exercise his power u/s 22A(1) of the KST Act initiated suo motu revisional proceedings on the ground that the order passed by the appellate authority is erroneous and prejudicial to the Revenue.

The revisional authority held that the check-post authority did not interpret the nature of transaction involved between the parties. All that he wanted which, is as per law and in fact it is his duty also according to law to insist for documents and verify the documents as to the correctness according to law to a allow the goods vehicle for onward movement. The assessee failed his test and therefore he has faced penal consequence according to law. With too many documents, it cannot be expected from a check-post authority to think on the lines of the appellate authority to exonerate from the charge of violation of law u/s 28A(2) and thereby attempt evasion of tax by inference due to contravention of law and held the documents provided all the information required and thereby there is no violation of law by overlooking the actual contravention of law. Therefore, he set aside the order of the appellate authority and restored the original order of the check-post authority.

Section 28A of the KST Act reads thus:

28A. Establishment of check-post or barrier and inspection of goods while in transit.--(1) ....

(2) The owner or person in-charge of a goods vehicle or a boat shall--

(a) ....

(b) carry with him a bill of sale or a delivery note obtained from the prescribed authority or such other documents, containing such particulars as may be prescribed, in respect of the goods other than those mentioned in sub-clause (c) carried in the goods vehicle or boat.

As is clear from the aforesaid section, the owner or the person in-charge of a goods vehicle shall carry with him a bill of sale or a delivery note obtained from the prescribed authority or such other documents, containing such particulars as may be prescribed, in respect of the goods other than those mentioned in sub-clause (c) carried in the goods vehicle or boat.

Clause (c) says--carry with him in addition to a bill of sale, a delivery note obtained from such authority containing such particulars as may be prescribed.

A reading of the aforesaid provision makes it very clear that the goods should accompany valid documents. In the instant case, the documents which were being carried with the goods are listed. The validity of any of those documents are not in dispute. It is on the ground of discrepancies, the check-post officer has imposed the penalty. As long as the goods which are carried are accompanied by valid documents as prescribed under law, merely because there are some discrepancies and the check-post officer is unable to understand the implications or what is written in the said documents, that does not confer any right on him to impose penalty. At the same time, the law does not require in whose name the said documents should be in existence. They are all left to the parties. Those documents are required by the Department to levy tax, if tax is attracted under the provisions of the Act. Once those particulars are available from the said documents, the requirement of law is fully met. Unfortunately, the check-post officer has proceeded to levy penalty on the ground that there is discrepancies between the invoice where the consignee''s name is shown as Lundbeck India Private Limited, whereas in the airway bill, the consignee''s name is shown as Bangalore Pharmaceutical and Research Laboratory (Pvt.) Ltd., and therefore has proceeded to levy the tax, which is illegal and rightly the appellate authority was justified in setting aside the said order. The said order was in no way prejudicial to the Revenue, much less erroneous and the revisional authority committed serious error in invoking his jurisdiction to interfere with an order which was neither erroneous nor prejudicial to the Revenue. In that view of the matter, the impugned order cannot be sustained. Hence we pass the following:

ORDER

The appeal is allowed.

The impugned order is hereby set aside.

The order passed by the Appellate Commissioner is restored.