Power Max vs State of Karnataka and Another

N. Kumar, J.—The assessee has preferred this appeal challenging the order passed by the Additional Commissioner of Commercial Taxes, Zone II setting aside the order passed by the first appellate authority and restoring the order passed by the check-post officer. On September 6, 2006 at 9.00 pm at KPN Speed Parcel and Service Private Limited, Kilari Road, Bangalore, the person in charge of the vehicle did not tender any documents for the movement of 24 carton boxes carried in the vehicle. Suspecting the genuineness of the transaction, G.C. endorsement was issued directing the transporter to inform the responsible person to attend for physical verification and to ascertain the value of the goods in order to impose penalty. Accordingly, the representative of the transporter filed a letter on September 19, 2006 stating that the assessee has received purchase order from M/s. Sarvodaya Electricals, Chennai on September 2, 2006 and has dispatched the goods in vehicle No. 2862 on September 6, 2006 through KPN Speed Parcel and Service Private Limited. The documents are pasted to the parcel and a copy of the said documents were put inside the carton boxes, therefore they requested for physical verification of the goods.

On September 22, 2006 a physical verification was done by opening the carton boxes. During such verification it was noticed no bill was fastened on any of the carton boxes. However, inside one of the boxes bill No. 2862 of September 16, 2006 issued by the assessee in favour of M/s. Sarvodaya Electricals, Chennai, of Rs. 3,99,472 was found. It was kept in between the goods in the carton box which could not be easily traceable. A mahazar was drawn. Therefore, the check-post officer came to the conclusion that it indicates an intention of evasion of tax. With an intention to avoid the collection of bill from the authorities the bill was kept in between the goods in the carton box which is not easily traceable. As per the provisions of the Karnataka Value Added Tax Act, 2003 the goods are required to be accompanied by valid documents and also it is to be tendered when the authority demand for checking, the documents were not produced at the time of checking, therefore the assessee has contravened the provisions of section 53(2) of the Act. Therefore, a show-cause notice on September 22, 2006 was issued after recording the reasons in detail and the total penalty proposed'' was Rs. 1,73,880 on the estimated value of Rs. 4,63,680 after allowing 30 percent discount on MRP price. Notice was served on the transporter on September 22, 2006 and he was granted seven days time to file objections.

Objections were filed. After considering all the objections the check-post officer held that keeping the documents inside the boxes cannot be considered as the goods are accompanied by the valid bill since the documents could not be obtained without opening the box. Therefore, he proceeded to impose a penalty of Rs. 1,73,880.

Aggrieved by the said order the assessee preferred an appeal to the Joint Commissioner of Commercial Taxes. He took a lenient view of the matter and came to the conclusion that the check-post officer has not found any Omission, discrepancies in the quantity of goods. He has not suspected the bona fides of the consignor and the consignee as there is no such finding in the order of penalty. Both of them are registered under the Central Sales Tax Act, 1956. The goods were moving from the State of Karnataka and the sale invoice was found in one of the carton boxes. The invoice stated to have been fastened to one of the carton though was not found, a copy was found inside one of the carton boxes as contended by the assessee. The vehicle was in the custody of the transporter as per the directions of the respondent which implies that the carton boxes were under his custody when the invoice was traced in one of the carton boxes which goes to show that the goods were accompanied by valid invoice at the time of check, as prescribed u/s 53(2) of the Act. Thus he held penalty can be levied if there is a violation of the provisions of section 53(2) or non-compliance of the said provision. But, there was no attempt to evade tax by the assessee. The authority has levied penalty only on the ground of not carrying the tax invoice by the driver of the goods vehicle and therefore, he set aside the order imposing penalty.

The Additional Commissioner of Commercial Taxes by virtue of the power conferred u/s 64(1) of the Act initiated suo motu proceedings and issued a show-cause notice stating the grounds on which he wanted to review the order. The assessee filed objections. After hearing both the parties, after taking notice of section 53, he came to the conclusion that, on a plain reading of section 53(2) it is apparent that the person in-charge of the goods vehicle is duty bound to tender the documents as may be prescribed in respect of the goods carried in the goods vehicle at the time of check. In the instant case, the person in-charge of the goods vehicle has not tendered the documents at all, By not tendering the documents at the time of check there was clear violation of the provisions of section 53(2) and there was clear attempt to evade the taxes payable under the Act and therefore he set aside the order of the appellate authority and restored the order passed by the check-post officer. Aggrieved by the same, the assessee is before us.

The learned counsel for the assessee assailing the impugned order contends that in the first place when the invoice was found in one of the carton box which showed the assessee has paid four percent CST there is no intention to evade tax. Further, the document was with the goods in the vehicle at the time of checking. The checking was done before the vehicle reached the check-post, in fact immediately after the goods were delivered to the carrier. The assessee is a registered dealer. Under these circumstances when no omission is attributed to the assessee, the check-post. authority as well as the revisional authority was not justified in imposing the penalty. He submitted that at worst the goods may fall under clause (c) of sub-section (3) of section 52 and the maximum penalty leviable is 1 1/2 times whereas three times the penalty is imposed and this three times penalty is imposed not on the actual amount as reflected in the invoice but on estimated value. Therefore, he submits the impugned order requires to be interfered with.

Per contra, the learned Government Advocate supported the impugned order.

Section 53 deals with establishment of check-posts and inspection of goods in movement. It reads as under:

Establishment of check-posts and inspection of goods in movement.--(1) If the Government or the Commissioner considers it necessary, with a view to prevent or check evasion of tax under this Act in any place or places in the State, it or he may, by notification, direct the establishment of a check-post or the erection of a barrier, or both, at such place or places as may be notified.

(2) The owner or person in charge of a goods vehicle or a boat, ship or similar vessel shall:

(a) carry with him a goods vehicle record, a trip sheet or a log book, as the case may be; and

(b) carry with him such documents as may be prescribed, or notified by the Commissioner in respect of the goods carried, in the goods vehicle or boat ship or similar vessel; and

(c) report at the first check-post or barrier situated, on the route ordinarily taken from the place in the State, from which the movement of the goods commences to its destination and produce the documents referred to in clauses (a) and (b) before any offer-in-charge of check-post or barrier, or any other officer as may be empowered by the Government in this behalf and obtain the seal of such officer affixed therein, and, in respect of a bill of sale, give one copy thereof and, in respect of a delivery note, give a copy marked as original to such officer and carry and retain with him the other copy until termination of movement of the goods; and

(d) on entering the State limits report at the first situated check-post or barrier and, on leaving the State limits, report at the last situated check-post or barrier and give a declaration containing such particulars as may be prescribed in respect of the goods carried in the goods vehicle or boat ship or similar vessel before any officer-in-charge of the check-post or barrier or any other officer as may be empowered by the Government in this behalf; and

(e) ....

From the material on record it is clear that as contended by the assessee the document pertaining to the goods was not fastened to the carton box, copy of which was not carried on by the driver of the vehicle. It was not tendered by him on being intercepted. In fact they had to open 24 carton boxes and they had to find out with great difficulty the document in one carton. Therefore, there is a clear violation of clause (b) of sub-section (2) of section 53. It is in those circumstances, the revisional authority was fully justified in interfering with the order passed by the Appellate Commissioner who has treated the matter very lightly, ignored the mandatory provisions of law and granted relief to the assessee on the ground that there was no intention to evade tax. Under the scheme of section 53, the Legislature has in detail prescribed a procedure to be followed for carrying goods. The said provisions are mandatory in nature having regard to the language employed in expressing the legislative intention. If those provisions are not complied with there is non-compliance of statutory provision in which event as the provisions do not provide for any intention to evade tax that cannot be read into the section to find out whether a, statutory-contravention is established or not. Once a statutory contravention is established then section 53(12) is attracted which provides for penalty. Unless the case falls under clauses (c) and (d), the penalty to be imposed is not less than two times the tax liability and the maximum is three times. Therefore, the revisional authority was justified in setting aside the order passed by the Appellate Commissioner and restoring the order passed by the check-post officer. The only error which we can make out from the order is in imposing the penalty what is to be taken into consideration is the value of the goods as mentioned in the invoice and not the estimated value. This has not been properly appreciated both by the check-post officer as well as the revisional authority. Only to that extent the assessee is entitled to relief.

The learned counsel for the assessee submitted that it is undisputed that the documents accompanied the goods and that is sufficient compliance of clause (b) of sub-section (2) of section 53. The word used is the owner or person in charge of a goods vehicle shall carry with him the said documents as may be prescribed or notified by the Commissioner in respect of the goods carried in the goods vehicle or boat, ship or similar vessel. The language is clear. There is no scope for interpretation, carrying the documents with the goods is different from carrying the goods with the driver or the owner of the vehicle. Carrying the documents along with the goods do not satisfy the requirement of the section. Documents have to be carried with him, i.e., owner of the goods or the person in charge of the vehicle. The reason is obvious as is clear from clause (c) after he reaches a check-post he is expected to get down from the vehicle, produce before the check-post officer the documents, get a seal affixed, furnish him a copy of the bill and then come to the vehicle and then proceed. If the document is kept inside a carton and if it has to be searched, as the goods which are transported is in more than one carton it would not satisfy the requirement of law. Therefore, we do not see any substance in the said contention. Hence, we pass the following order: (a) Appeal is allowed in part

(b) The imposition of penalty is upheld. However, it shall be restricted to the calculation based on the value of the goods as reflected in the bill.

Sri K.M. Shivayogiswamy, the learned High Court Government Pleader, is permitted to file memo of appearance for respondents within four weeks from today.