State of Punjab vs Genus Overseas Electronics Limited

Ajay Kumar Mittal, J.—This appeal has been preferred by the State 1 u/s 68 of the Punjab Value Added Tax Act, 2005 (in short, "the Act") against the order dated January 10, 2013, annexure A6, passed by the Value Added Tax Tribunal, Punjab (in short, "the Tribunal"), in Appeal No. 228 of 2012 filed by the respondent u/s 62 of the Act, proposing to raise the following substantial questions of law:

"(1) Whether the order passed by the Tribunal is sustainable in law?

(2) Whether the Tribunal was justified in setting aside the penalty order with direction to the Assistant Excise and Taxation Commissioner to refer the case to the Assessing Authority for considering the rate of tax applicable to the goods without ascertaining as to whether those goods are available with the assessee or not?

(3) Whether the Tribunal has wrongly applied the judgment in the case of Xcell Automation Vs. Government of Punjab and Another, to the facts of the present case?"

A few facts relevant for the decision of the controversy involved, as narrated in the appeal may be noticed. Vehicle No. UA-07P-2004 driven by Shri Mohammed Ali son of Shri Mehmood Ali loaded with inverters reached at the ICC Centre, Shambhu (Import), District Patiala on April 29, 2007. The driver presented the documents before the Excise and Taxation Officer (ETO) on duty which showed 100 pieces of inverters (600 VA) and 613 pieces of UPS (600 VA), (800 VA) and (400VA). However, on physical verification of the goods, it was actually found that those were all 713 pieces of inverters out of which 17 were big pieces and the remaining, were small in capacity. The statement of the driver was recorded. The officer felt that since the description of the goods mentioned on the documents did not match with the actual goods, the covering documents could not be accepted to be genuine and proper and also there was evasion of tax, because inverters were taxable at the rate of 12.50 per cent whereas the UPSs were taxable at the rate of four per cent. The driver of the vehicle could not explain the position. The goods were detained u/s 51(6)(a) of the Act for verification from the books of account of the dealer. Notice was issued to the owner to appear before the detaining officer on May 1, 2007 along with their books of account. The Assistant Excise and Taxation Commissioner (AETC) after examining the documents and the entire record imposed a penalty of Rs. 7,54,726 u/s 51(7)(b) of the Act vide order dated May 24, 2007, annexure Al. Aggrieved by the order, the respondent filed appeal u/s 62 of the Act before the Deputy Excise and Taxation Commissioner (DETC). Vide order dated August 26, 2009, annexure A2, the DETC remanded the case to the AETC for passing a fresh order. The AETC vide order dated April 21, 2010, annexure A3, again imposed penalty of the same amount. The respondent again filed appeal before the DETC who vide order dated August 19, 2011, annexure A4, remanded the case to the AETC for deciding the matter afresh keeping in view judgment of the Tribunal in Appeal No. 305 of 2010. The respondent instead filed appeal before the Tribunal and also challenged the remand orders passed by the DETC. Vide order dated January 10, 2013, annexure A6, the Tribunal disposed of the appeal by directing the AETC to refer the case to the assessing authority for deciding the rate of tax applicable to the goods who would be at liberty to obtain expert opinion in respect of the device. However, the orders passed by the DETC were set aside. The Tribunal also held that the officers carrying out checking in exercise of powers conferred upon them u/s 51 of the Act could not go into the disputed question of taxability. Hence the present appeal by the appellant-State.

We have heard learned counsel for the appellants-State and perused the record.

The learned counsel for the appellants submitted that the Tribunal had erred in canceling the penalty as the dealer had transported inverters and not UPSs. The dealer was, thus, liable to pay tax at the rate of 12.5 per cent whereas the tax on the UPSs was leviable at the rate of four per cent.

After hearing learned counsel for the appellant-State, we do not find any merit in the contention.

The Tribunal while canceling the penalty vide order dated January 10, 2013, annexure A6, had held as under:

"Mr. K.L. Goyal, learned senior advocate appearing on behalf of the appellant-dealer, submitted that while entering into the territory of Punjab, the driver of the vehicle has voluntarily reported the goods at the ICC, Shambhu (Import) and in view of Goyal Motor Parts Vs. State of Punjab and Another, the goods were actually UPS and not inverters. It is for the Assessing Authority to determine as to whether or not the goods in question are UPS or inverters. The learned State counsel has argued on the lines of the impugned order.

I have well considered these submissions.

In paragraphs 18 and 23 of the judgment delivered in Goyal Motor Parts Vs. State of Punjab and Another, their Lordships of honourable Punjab and Haryana High Courts have observed as under:

''18. The product being sold by the appellant, i.e., Microtec UPS-EB 600, Microtec UPS-EB 850 and Microtec UPS-EB 1400 were sent for testing to the Indian Institute of Technology (IIT), Delhi. As per the certificate issued by the Department of Electrical Engineering, Indian Institute of Technology (IIT), Delhi, the aforementioned products were UPS. Similar was the report given by the Punjab Engineering College, Chandigarh. A perusal of the certificate issued by these institutes makes it abundantly clear that during testing, the devices fulfilled all the conditions of uninterrupted power supply. There was no rebooting under different conditions when the device was put to use on UPS mode. This device could be used both as inverters as well as in computers. Thus, in our considered view would fall within sub-entry (27) of entry 60 of Schedule B attached to the VAT Act and would not fall under the residuary entry and thus, would be taxable at the rate of four per cent and not at the rate of 12.5 per cent.

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In view of the above, we hold that the goods in question sold by the appellant fulfill all the conditions of an UPS and hence they are taxable at the rate of four per cent.''

In Goyal Motor Parts Vs. State of Punjab and Another, the assessee had claimed UPS taxation at four per cent whereas the assessing officer levied it at 12.5 per cent. The DETC (A), while relying on the reports of technical experts held that the goods in question are UPS and taxable at four per cent. On further appeal, the Tribunal brushed aside the reports of the technical experts of the Engineering Department of IIT and the Punjab Engineering College, who categorically opined that the goods in question were UPS. It has held that the order of the Tribunal was not sustainable. In paragraph No. 18 of the judgment rendered in Goyal Motor Parts Vs. State of Punjab and Another, it has been observed that ''there was no rebooting under different conditions when the device was put to use on UPS made. This device could be used both as inverters as well as in computers. Thus, in our considered view would fall within sub-entry 27 of entry 60 of Schedule B attached to the VAT Act and would not fall under the residuary entry and thus, would be taxable at four per cent and not at 12.5 per cent.'' Adverting to the instant one, there is nothing on the record to show that the device under dispute was either put to use on UPS mode and on being done so, there was no rebooting under different conditions or that this device could be used both as inverters as well as the computers. In the absence of any expert opinion of any institute of the repute of Indian Institute of Technology, Delhi, it is very difficult to say that the device in question could be used as inverter as well as in computer. There is no gainsaying the fact that the question with regards to the rate of tax applicable to the goods in question can only be decided by the assessing authority of the appellant dealer in view of the Xcell Automation Vs. Government of Punjab and Another, The nature of transaction can be determined only by the assessing authority. The penalty has been imposed on the solitary ground that the goods are actually inverters and not UPS. It is only the Assessing Authority who can decide this question. On being determined the nature of goods, the rate of tax as applicable thereto would be decided. The officers carrying out checking on the roadside in exercise of powers conferred upon them u/s 51 of the Punjab Value Added Tax Act, 2005 cannot go into the disputed question of taxability. Consequently, the orders passed by both the authorities below are set aside and let the AETC, ICC Shambhu (Import), District Patiala, Punjab, to refer the matter to the Assessing Authority of M/s. Shri Durga Enterprises, Bharat Nagar, Near PNB, Ferozepur Road, Ludhiana, to look into the transaction and take appropriate action, if required. The Assessing authority of this firm before deciding the rate of tax applicable to the goods in question would be at liberty to obtain expert opinion in respect of the device. Accordingly, this appeal is disposed of."

The Tribunal had come to the conclusion that the nature of the transaction can be determined by the Assessing Authority. The Assessing Authority shall adjudicate whether the goods were actually inverters or UPS. Furthermore, the officers who are authorised to carry out checking on the roadside in exercise of powers conferred u/s 51 of the Act cannot delve into the disputed question of nature of item and the rate of tax applicable thereto. No error could be pointed out in the approach of the Tribunal which may warrant interference by this court.

Accordingly, no substantial question of law arises. Consequently, finding no merit in the appeal, the same is hereby dismissed. In view of the dismissal of the appeal, the application for condonation of delay in filing the appeal is left open.