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Judgment
This judgment will dispose of C.W.P. Nos. 14997,15031, 15114,15137 and 15436 of 2005.
Facts have been taken from C. W. P. No. 14997 of 2005.
This petition seeks quashing of notices, annexures P 7 to P 10, issued u/s 51 of the Punjab Value Added Tax Act, 2005 by respondent No. 3, the Excise & Taxation Officer-cum-Detaining Officer, I.C.C. (Export), Mehmadpur (Shamboo), District Patiala and respondent No. 4, the Assistant Excise & Taxation Commissioner, I.C.C. (Export), Mehmadpur (Shamboo), District Patiala.
Case set out in the petition is that the petitioners are dealers, registered under the provisions of the Punjab Value Added Tax Act, 2005 (for short, "the Act") and engaged in the manufacture and sale of mink blankets. The petitioner sent a consignment of mink blankets on September 2, 2005 under an invoice addressed to a Kota dealer. When the consignment was being transported from Jalandhar - place of business of the petitioners to the place of consignee at Kota, the goods were intercepted by respondent No. 3 on the ground that goods were taxable but no tax had been charged in the bill and thus there was an attempt at evasion of tax.
Case of the petitioners is that invocation of jurisdiction to impose penalty at the check-post was not called for as in the Schedule "A" prescribed u/s 16 of the Act, list of tax-free goods carried an entry "textile fabric including terry towels" at serial No. 52 while only the relevant entry in the list of the taxable goods prescribed u/s 8 of the Act in Schedule "B" is at serial No. 5 "bed sheets, pillow covers and other made ups". It was submitted that the case of the petitioner is that the textile fabric included blankets as per interpretation given to the term "textile" in the judgments of the honourable Supreme Court in Union of India (UOI) and Others Vs. Gujarat Woollen Felt Mills, , Delhi Cloth & General Mills Co. Ltd. v. State of Rajasthan [1980] 46 STC 256 Fenoplast v. State of A. P. [1999] 114 STC 559 Porritts & Spencer (Asia) Ltd. v. State of Haryana 1978] 42 STC 433(P&h) Innamuri Gopalan and Others Vs. State of Andhra Pradesh and Another, ;Filterco v. Commissioner of Sales Tax, Madhya Pradesh [1973] 61 STC 318 Shree Meenakshi Mills Ltd. Vs. Union of India (UOI), , Ess Dee Carpet Enterprises Vs. Union of India (UOI) and Others, and various High Courts in Hoshyar Singh Suresh Chandra Sarees Pvt. Ltd. v. Commissioner, Sales Tax, New Delhi [2004] 136 STC 173 (Del) State of Tamil Nadu v. Madura Coats Ltd. [1996] 100 STC 403 and State of A.P. v. Goodyear India Ltd. [1989] 74 STC 47.
Thus, on behalf of the petitioners, the contention raised is that there could be no question of attempt at evasion where arguable contention was being put forward after producing requisite documents and making full and effective disclosure of the facts without any mis-declaration, misdescription or concealment. It is submitted that the said provision is not meant to be invoked in such a situation at all and invocation of the jurisdiction in such a case is colourable exercise of power and not permissible under the law.
In the reply filed, objection regarding maintainability of the writ petition at this stage, in view of the availability of alternative remedies, was raised in view of the judgments in Transport Corporation of India Ltd. v. State of Andhra Pradesh [1985] 60 STC 14 State of Goa and others Vs. Leukoplast (India) Ltd. etc., and Titaghur Paper Mills Co. Ltd. and Another Vs. State of Orissa and Others, . It is stated that goods in question were clearly covered by Schedule "B" and tax at four per cent was attracted. It was submitted that the term "made ups" in view of Chapter 63 of the Central Excise Tariff Act, 1985 covered blankets also, which is also referred in the invoice accompanying the goods. Therefore, once an expression "made ups" has been included in Schedule "B" listing taxable goods u/s 8 of the Act, tax was clearly attracted, which was sought to be evaded by the petitioner treating the said goods as non-taxable.
Learned Counsel for the State pointed out that in the invoice itself asses-see had given the description of the goods with reference to entry 6301 4000 synthetic printed blankets in the Central Excise Tariff Act, which occurs in the chapter of textile made ups.
Learned Counsel for the State also brought to our notice memorandum dated September 16, 2005 issued from the office of the Excise and Taxation Commissioner, Punjab, stating that tax was attracted on blankets. Same view was reiterated in memorandum dated September 29, 2005. Thereafter from October 15, 2005 an amendment was made in Schedule "A" list of tax-free goods at Serial No. 59 to the following effect:
Blankets made of shoddy yarn and shawls.
and Schedule ''B'' was also amended at entry 5 to the following effect:
Bed sheets, pillow covers and other made ups, but excluding blankets made of shoddy yarn and shawls.
We have considered the rival contentions and perused the record.
The question for consideration is whether a case was made out for invoking jurisdiction conferred u/s 51 of the Act for detaining goods being transported to evade tax for which penalty of 30 per cent to 50 per cent of the value of goods was provided and whether bar of availability of alternative remedy ought to be applied.
As regards the objection as to availability of alternative remedy, the matter was gone into in the connected matter decided by this Court on November 22, 2006 being C. W. P. No. 4603 of 2005 (Xcell Automation v. State of Punjab [2007] 5 VST 308 and after referring to the judgments of the honourable Supreme Court in State of U.P. v. Mohammed Nooh AIR 1958 SC 86 and Whirlpool Corporation Vs. Registrar of Trade Marks, Mumbai and Others, , it was held that if on undisputed facts, an authority was shown to have assumed jurisdiction which it did not possess, bar of alternative remedy was not absolute. In the present case, for the reasons recorded in later part of the judgment, we are of the view that the exercise of power to impose penalty at the check-post was without jurisdiction.
Coming to the merits, it may be observed that provisions to check and detain goods at a check-post to prevent evasion of tax have already been upheld as being necessary to check evasion with a view to enforce the charging provision under the Punjab VAT Act, 2005 with reference to entry 54 of List II of the Seventh Schedule to the Constitution. We have also noticed that mere conferring of such drastic power did not mean that power could be used arbitrarily. Invocation of such powers is called for for checking evasion when a person either conceals relevant information, gives misleading information or acts in any other clandestine way or where from the available information itself, attempt to evade tax is patent. The said power has to be exercised with caution and not as a substitute for ordinary assessment or penalty as separately provided for under the Act. Exercise of power may sometime be overlapping and mere alternative procedure is not conclusive for not exercising the said powers, where it is clear that either there is evasion there being deficiency in documents, inaccurate declaration having been made about description, value and contents of goods or otherwise but where there may be bona fide dispute about interpretation of law, about taxability or otherwise, summary power of imposing penalty at the check-post is not intended to be exercised.
In Xcell Automation [2007] 5 VST 308 after referring to the judgments in The Check Post Officer and Others Vs. K.P. Abdulla and Bros., , Sodhi Transport Co. and others Vs. State of U.P. and others, , Delite Carriers (Regd.) Vs. State of Haryana and Others, ; Mool Chand Chuni Lal Vs. Manmohan Singh and Another, and Amrit Banaspati Company limited v. State of Punjab [2001] 122 STC 323 (P & H) (on the issue of vires of provisions relating to inspection of goods in transit); Cement Marketing Co. of India Ltd. Vs. Assistant Commissioner of Sales Tax, Indore and Others, , Automobile Products of India Limited v. State of Karnataka [1991] 81 STC 414 (Kar) Orient Paper & Industries Ltd. v. State ofOrissa [1995] 97 STC 490 (Ori) Utkal Galvanisers Limited v. Commissioner of Commercial Taxes, Orissa [1997] 104 STC 222 (Ori) Shahnas Trading Co. v. State of Kerala [2002] 127 STC 1 (SC) Parry and Company Ltd. Vs. Commissioner of Sales Tax, ; United Polymer Industries Vs. State of Punjab and Others, ; Commissioner of Sales Tax and Another Vs. M/s. P.T. Enterprises and Another, (on the issue of jurisdiction of the Check-post Officer); State of Haryana and Others Vs. Sant Lal and Another, , Tripura Goods Transport Association and Another Vs. Commissioner of Taxes and Others, , Saral Kumar Vs. State of Haryana and Others, ; State of Rajasthan and Another Vs. M/s D.P. Metals, , Commercial Tax Officer and Others Vs. Swastik Roadways and Another, , A.B.C. (India) Ltd. Vs. State of Assam and Another, and Krishna Bus Service Pvt. Ltd. Vs. State of Haryana and Others, (provisions for records to be maintained by carrying and forwarding agents and detention of transport vehicles); Comptroller and Auditor-general of India, Gian Prakash, New Delhi and Another Vs. K.S. Jagannathan and Another, , Lucknow Development Authority Vs. M.K. Gupta, , Tata Cellular Vs. Union of India, , Common Cause, A Registered Society Vs. Union of India and Others, , Union of India (UOI) and Another Vs. S.B. Vohra and Others, , and (judicial review by High Court under Article 226), position was summed up as under:
(1) Exercise of power at the check-post, to be valid, should have reasonable nexus with the attempt at evasion.
(2) Straight-jacket approach is not called for and each instance of exercise of power has to be seen in the light of individual facts. Neither exercise of power can be restricted, wherever required for checking attempt at evasion nor can be extended to areas where there was no attempt at evasion.
(3) In an appropriate case, the writ court may examine the exercise of power and interfere if exercise of power is found to be arbitrary, mala fide and without nexus with attempt at evasion.
(4) If there are disputed questions and there is reasonable nexus of exercise of power with attempt at evasion, writ petition against imposition of penalty at the check-post cannot be entertained.
(5) Where relevant documents are duly produced but a bona fide plea against taxability is raised and there is neither mis-declaration nor concealment, exercise of power of imposing penalty at the check-post on the ground of attempt at evasion may not be called for.
In the present case, in view of the decision of the honourable Supreme Court relied upon by the petitioners, it cannot be held that the contention of the assessee was not a bona fide arguable point. Though, we do not express any final view on merits, which may be gone into in appropriate proceedings, if necessary, we have to observe that merely because the words "made ups" have been mentioned in Schedule "B" of taxable goods, it will not be conclusive of the blankets being covered by such expression even if under the Central Excise Tariff Act, the position may be different. The fact was that the blankets were being treated as tax-free under the Punjab General Sales Tax Act, 1948 which was in force up to March 31, 2005 before the enactment of the VAT Act.
Goods in question were detained on September 2, 2005 which was prior to memorandum in question and the amendment. The fact that the State issued memorandum and amended the Schedules itself shows that there was scope for different interpretations on the relevant date. Learned Counsel for the State has explained that the memorandum and the amendment became necessary on representation of the association.
It cannot be held that on the relevant date the issue was free from difficulty or that the assessee was fully aware of taxability and had no justification to advance an argument that the goods in question were not taxable.
For the above reasons, assumption of jurisdiction by the check-post officer was not called for by drawing an inference that there was any attempt at evasion of tax.
In view of the above, this writ petition is allowed and impugned notices annexures P 7 to P 10 are quashed.