2008 (7) TMI 930 - AT - VAT and Sales Tax

Detention orders - failure to produce tax invoice along with the challan - Held that - As per prescription under rule 107(1) of the VAT Rules it was obligatory on the part of the driver of the vehicle to produce the tax invoice on demand. Sub-rule (2) of rule 107 of the VAT Rules also prescribes that a driver should carry with him the documents referred to in sub-rule (1) and other documents of like nature. These two sub-rules should be read simultaneously and in this case we are of the view that there was contravention of the provision of rule 107 of the VAT Rules. Therefore we hold the seizure to be a valid one. Though held that the seizure to be valid do not find that non-production of tax invoice at the time of seizure did lead to any possibility of evasion of tax in the given facts and circumstances of the case. The order dated May 30 2008 of the STO/SGR imposing penalty of Rs. 86, 616 is therefore set aside. The respondent-authorities under our order dated June 13 2008 were directed to release the seized goods on payment of Rs. 50, 000 by the petitioner as security.

Issues Involved:
1. Detention and seizure of the vehicle and goods.
2. Production and acceptance of tax invoice.
3. Imposition of penalty.
4. Validity of the statutory time provided for document production.
5. Evaluation of the intention to evade tax.

Detailed Analysis:

Detention and Seizure of the Vehicle and Goods:
The vehicle carrying 16,040 kgs of Formalin worth Rs. 2,50,224 was intercepted at Ghoshpukur Check Point (GPCP) on May 28, 2008. The driver failed to produce the tax invoice, resulting in the vehicle's detention under rule 107(2) of the West Bengal Value Added Tax Rules, 2005. The goods were subsequently seized on May 29, 2008, under section 76 of the West Bengal Value Added Tax Act, 2003, for contravention of section 73 of the VAT Act.

Production and Acceptance of Tax Invoice:
The driver requested time to produce the tax invoice, which was assured to be available by May 29, 2008. Despite producing the original and duplicate tax invoices on May 29, 2008, the STO/SGR did not accept them, stating that the goods had already been seized. The petitioner argued that the seizure order was backdated to May 28, 2008, to show compliance with the statutory requirement of providing reasonable time for document production.

Imposition of Penalty:
The STO/SGR imposed a penalty of Rs. 86,616 on May 30, 2008, estimating the consignment value at Rs. 2,88,720. The petitioner challenged this order, arguing that the penalty was unjustified as the tax invoice was produced within the stipulated time. The ACCT/SGR confirmed the seizure and penalty orders on June 4, 2008.

Validity of the Statutory Time Provided for Document Production:
The petitioner contended that the statutory forty-eight hours for document production was not honored, as the vehicle was detained on May 28, 2008, and the goods were seized on May 29, 2008. The Tribunal noted that the seizure was valid under rule 107 of the VAT Rules but acknowledged that the petitioner was not given adequate time to produce the tax invoice.

Evaluation of the Intention to Evade Tax:
The petitioner argued that there was no intention to evade taxes, evidenced by the timely production of the tax invoice. The STO/SGR, however, did not consider the tax invoice relevant due to discrepancies in the challan number. The Tribunal observed that the absence of the tax invoice at the time of seizure did not indicate an intention to evade taxes, especially since the sale was duly recorded in the VAT output register.

Conclusion:
The Tribunal upheld the seizure as valid but set aside the penalty of Rs. 86,616, noting that the petitioner was not given reasonable opportunity to produce the tax invoice and that there was no indication of tax evasion. The respondent-authorities were directed to refund the security amount of Rs. 50,000 by October 15, 2008, if deposited by the petitioner. The petition was disposed of with no order as to costs.

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