TMI Blog2014 (11) TMI 120X X X X Extracts X X X X X X X X Extracts X X X X ..... r. - STO has levied VAT at 13.5 per cent to the tune of ₹ 1,89,000 in the order passed under sub-section (5) of section 74 of the OVAT Act and opposite-party No. 2-revisional authority also confirmed such levy of VAT. Section 74(5) does not contemplate levy of VAT. It contemplates imposition of penalty only. However, sub-section (7) of section 74 provides that subject to the Rules as may be prescribed, the officer-in-charge of the check-post or barrier or the officer authorized under sub-section (3) may release the goods to the owner of the goods or to any person duly authorized by such owner on payment of penalty imposed under sub-section (5) in addition to tax payable thereon. A conjoint reading of sub-sections (5) and (7) of section 74 of the OVAT Act makes it dear that only on payment of the penalty imposed under subsection (5) in addition to the tax payable the prescribed authority may release the goods. It needs no emphasis that quantification of penalty depends on determination of tax. Unless, tax is determined first, no penalty can be quantified as contemplated in section 74(5). Any other interpretation shall render sub-section (5) of section 74 redundant - Decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out that the consignment is not scrap spring leaf but spring leaf set in good condition to be used in different heavy vehicles. The petitioner was required to show cause as to why penalty as provided under section 74(5) of the OVAT Act, i.e., five times of the tax leviable on such goods or 20 per centum of the value of the goods whichever is higher shall not be realized. In response to the said show-cause notice dated August 24, 2011, the petitioner by letter dated August 25, 2011 represented to the STO that it has complied with the provisions of section 74(2) and section 74(3) of the OVAT Act. All the required statutory documents were produced by the driver of the vehicle before the STO for verification and those were found to be in order. The materials carried in the truck were raw materials and after processing both mechanically and chemically, those would be sold in the market. The STO was intimated that the said goods were purchased by the selling dealer in auction sales of scrap, spring leaf in loose as well as assembled conditions. The petitioner has purchased the goods in course of inter-State sales and has paid the Central sales tax. Despite the above, the STO in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Pati, learned counsel, submitted that unless the goods are put to test through mechanical means, it is not possible to find out the status of the goods. The goods do not have the required strength and hardness which is essentially required for use in heavy automobile vehicles. It was submitted that during the course of hearing of the revision petition on September 8, 2011, opposite-party No. 2 also wanted to know the source of purchase of the goods of the selling dealer. Accordingly, the petitioner put its best effort and on September 12, 2011 produced the documents in support of purchase made by the selling dealer from Four Star Alloys, Jamshedpur, vide tax invoice No. 131/11-12 dated August 14, 2011. The said Four Star Alloys have also purchased spring leaf obsolete scraps in auction from Tata Motors Limited, Jamshedpur vide tax invoice No. 2118800613 dated June 21, 2011. The technical committee constituted by opposite-party No. 2 did not allow the petitioner to have his say and inspection was done in absence of the petitioner violating the principles of natural justice. Opposite-party No. 2 in a perfunctory manner has confirmed the order dated August 27, 2011 and has not tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ete and the said postulation is absent in the case of the petitioner. In the event, the defect or omission is remedied, penalty under section 74(5) is not imposable. The petitioner has not been served with any statutory notice in form VAT-405 as prescribed in terms of rule 80(12) of the OVAT Rules. Opposite-party No. 3 has imposed penalty on the petitioner without recording reasons and without coming to the conclusion about the mala fide intention of the petitioner by bringing any materials on record. 5. Per contra, Mr. R. P. Kar, learned standing counsel appearing on behalf of the Revenue, submitted that various contentions raised by the petitioner with regard to the alleged procedural irregularities committed by the STO and not acting in accordance with section 74 of the OVAT Act read with rules 79 and 80 of the OVAT Rules were taken in the earlier writ petition bearing W. P. (C) No. 23516 of 2011. This court after hearing the learned counsel for the parties, disposed of the said writ petition, giving liberty to the petitioner to approach the revisional authority and the revisional authority was directed to find out the status of the goods, i.e., as to whether those were old ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uiry as he may deem fit, may impose, for possession or movement of goods (in transit), whether seized or not, in violation of the provisions of clause (a) of sub-section (2) or for submission of false or forged documents or way-bill either covering the entire goods or a part of the goods carried, a penalty equal to five times of the tax leviable on such goods, or twenty per centum of the value of the goods, whichever is higher, in such manner as may be prescribed. (underlined for emphasis) 9. Section 74(5) of the OVAT Act prescribes that the officer-in-charge of the check-post or barrier or the officer authorized under sub-section (3), after giving the driver or person in-charge of the goods, a reasonable opportunity of being heard and holding such enquiry as he may deem fit, may impose penalty, as prescribed under the said sub-section, for possession or movement of goods (in transit), whether seized or not upon fulfilment of any of the following conditions:- (i) in violation of the provisions of clause (a) of sub-section (2), or (ii) for submission of false or forged documents or way-bills either covering the entire goods or part of the goods carried. 10. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with 216 nos. of spring leaf sets which are auto parts and are in good condition. Further all the 216 sets of spring leafs which are found to be unused and can be used in different heavy vehicles in its present form. It is also examined by a competent person who happens to be auto mechanic and revealed that all spring leafs loaded in the instant vehicle are of good condition and can be readily used in heavy vehicles. No trace of scrap material (scrap spring patti) is found loaded in the instant vehicle. Since the goods are found to be auto parts, but the invoice and way-bill in support of the consignment disclose the goods to be scrap spring patti. Hence, systematic arrangements of documents have been done by the dealer to evade tax. Responding the show-cause notice issued under section 74(5) of the OVAT Act 2004, the dealer-partner Sri Rajesh Rajuka filed the compliance on dated August 26, 2011. As stated in his written submission, the goods in question are raw material for the dealer-firm and the documents carried by the driver of the vehicle are genuine. The dealer has neither denied the fact that the said goods are auto parts, i.e., spring leafs in sets. Explanation as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minal deception, use of false representation to gain unjust advantage ; dishonest artifice or trick. According to Halsbury's Laws of England, a representation is deemed to have been false, and therefore a misrepresentation, if it was at the material date false in substance and in fact. Section 17 of the Contract Act defines fraud as act committed by a party to a contract with intent to deceive another. From dictionary meaning or even otherwise fraud arises out of deliberate active role of representator about a fact which he knows to be untrue yet he succeeds in misleading the representee by making him believe it to be true. The representation to become fraudulent must be of fact with knowledge that it was false... 16. The contention of Mr. Pati that since the driver has produced various documents covered under clause (a) of sub-section (2) of section 74 and thereby has not violated the said provision, the STO is not justified in taking action under section 74(5) of the OVAT Act and passing the order under annexure 5 is not sustainable in law for the reasons stated above. Further, since the case of opposite-parties is not that the goods carried in the vehicle are not f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt disclose the goods to be 16 MT of scrap spring patti purchased from M/s. Lokenath Traders, South Sinthee Road, Kolkata and the value of the goods was ₹ 3,26,400. On verification, the STO found 216 sets of spring leafs which are auto parts and were in good condition to be used and can be used in different heavy vehicles in its present form. No trace of scrap materials (scrap spring patti) was found loaded in the vehicle in question. Therefore, show-cause notice was issued under section 74(5) of the OVAT Act for imposition of five times penalty of the tax leviable on such goods or 20 per centum of the value of the goods whichever is higher for the reason of false declaration of the description of goods in the documents produced at the checkgate. In the show-cause reply, the petitioner has explained that those were scrap materials. According to the STO, in the show-cause reply, the petitioner has never denied the fact that the goods are auto parts, i.e., spring leaf in sets. Further observation of the STO is that the selling dealer deals in automobile spare parts along with machinery parts and heavy earth moving equipments and is not a trader of scrap goods. He is of the opin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voice of the seller, consignment note of the transporter, etc., is scrap spring patti. This has been done with obvious mala fide intention of not paying due tax to the State exchequer at the right time. All the three members of the constituted technical committee are of the unanimous view that the goods carried in the vehicle bearing No. OR-14-U8398 are new spring leaf sets. Thus the expert view goes against the petitioner's contention that those alleged goods are scrap spring patti. Hence the mens rea of the petitioner is found fully established. The checkgate officer is also justified in enhancing the value of the goods loaded in the vehicle to ₹ 14,00,000 after through enquiry of the market rate since the price of new one is definitely going to be much higher than the price of scrap material which have been disclosed in the tax invoice and way-bill. This has been done with active involvement of the instant petitioner. Thus the enhancement of price to ₹ 14,00,000 by the STO is sustained. Moreover, the STO of the checkgate is justified in imposing penalty as contemplated under section 74(5) of the OVAT Act. Hence, the demand of VAT at 13.5 per cent to the tune of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inction between scrap material and new material. In the instant case, the expert committee have made elaborate study and examination of materials concerned and gave their report. 22. The Constitution Bench of the honourable Supreme Court in University of Mysore and H. H. Anniah Gowda v. C. D. Govinda Rao AIR 1965 SC 491 (V52 C 80) held as follows:- . . .Boards of appointments are nominated by the Universities and when recommendations made by them and the appointments following on them, are challenged before courts, normally the courts should be slow to interfere with the opinions expressed by the experts. There is no allegation about mala fides against the experts who constituted the present Board ; and so, we think, it would normally be wise and safe for the courts to leave the decisions of academic matters to experts who are more familiar with the problems they face than the courts generally can be. . . 23. Thus, the finding of the technical committee is binding on the petitioner as well as opposite-party-Commercial Tax Authorities. The fact finding authorities have rightly held that actually the goods in question loaded in the vehicle are new spring leaf sets w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty only. However, sub-section (7) of section 74 provides that subject to the Rules as may be prescribed, the officer-in-charge of the check-post or barrier or the officer authorized under sub-section (3) may release the goods to the owner of the goods or to any person duly authorized by such owner on payment of penalty imposed under sub-section (5) in addition to tax payable thereon. 30. A conjoint reading of sub-sections (5) and (7) of section 74 of the OVAT Act makes it dear that only on payment of the penalty imposed under subsection (5) in addition to the tax payable the prescribed authority may release the goods. It needs no emphasis that quantification of penalty depends on determination of tax. Unless, tax is determined first, no penalty can be quantified as contemplated in section 74(5). Any other interpretation shall render sub-section (5) of section 74 redundant. 31. In that view of the matter, opposite-party No. 2-revisional authority is justified to hold that the petitioner is required to pay tax and penalty and the vehicle bearing registration No. OR-14-U-8398 can only be released after realisation of the demanded dues under the OVAT Act to the tune of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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