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M/s Hindustan Coca Cola Beverage Pvt. Ltd. Versus The Commissioner, Commercial Taxes

Levy of penalty - seizure of goods being dispatched by the revisionist and a consequential levy of penalty under Section 48(5) of the U.P. VAT Act, 2008 - the revisionist pointed out that during the course of loading and dispatching of consignments, the additional labour inadvertently placed certain consignments and packages meant for a particular truck onto other trucks which upon seizure led to the Department claiming that there was a discrepancy in the "date of manufacture"/"batch number" det .....

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n any evidence or particulars at all. The said conclusion is purely conjectural and based entirely upon the two discrepancies referred to above. - The Court has no hesitation to hold that the imposition of penalty upon the assessee on account of a discrepancy in the batch numbers and date of manufacture was clearly unjustified and unwarranted in the facts and circumstances of the case. The orders of the assessing authority, the first appellate authority as also that of the Tribunal sustainin .....

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ion No. 126 of 2016; Sales/Trade Tax Revision No. 127 of 2016; Sales/Trade Tax Revision No. 128 of 2016; Sales/Trade Tax Revision No. 131 of 2016; Sales/Trade Tax Revision No. 124 of 2016 and Sales/Trade Tax Revision No. 129 of 2016 JUDGMENT Hon'ble Yashwant Varma, J. This batch of commercial tax revisions lays challenge to the order of the Tribunal dated 15 January 2016 upholding the imposition of penalty upon the revisionist-assessee. The proceedings themselves pertain to Assessment Year 2 .....

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d beverages. It is registered both under the VAT Act as well as the Central Sales Tax Act, 1956. It was its case that during the peak summer months there is a heightened demand for soft drinks as a result of which the revisionist is compelled to engage additional contract labour on a temporary basis at its factory at Dasna, District Ghaziabad. This labour, the revisionist submits, is engaged for loading and dispatching of consignments to its various stockists and distributors situate across the .....

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ft drinks and beverages. As was contended before the authorities below and a submission which was reiterated before this Court, learned counsel for the revisionist pointed out that during the course of loading and dispatching of consignments, the additional labour inadvertently placed certain consignments and packages meant for a particular truck onto other trucks which upon seizure led to the Department claiming that there was a discrepancy in the "date of manufacture"/"batch num .....

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the decision of the first appellate authority the revisionist preferred Second Appeals before the Tribunal which dismissed as many as six appeals by a common judgment and order dated 15 January 2016. To view the facts in a clearer perspective, the details of the revisions, details of the second appeals, the value of consignments, the amount of penalty imposed and moneys deposited, may be viewed from the following chart: - S. N o. CTR NO. Second Appeal No. Order of the Tribunal A.Y. Consig. Amou .....

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shy; Penalty @ 40% on 93,000/­ 5 123/2016 440/2013 15/01/16 2009­10 1,86,000/­ 46,500/­ 46,500/­ Penalty @ 25% on 1,86,000/­ 6 125/2016 445/2013 15/01/16 2009­10 2,00,000/­ 80,000/­ 80,000/­ Penalty @ 8% on 15,000/­ 7 126/2016 441/2013 15/01/16 2009­10 1,35,210/­ 26,926/­ 26,926/­ Penalty @ 25% on 26,926/­ & 8% on 40,450 8 127/2016 442/2013 15/01/16 2009­10 96,600/­ 24,150/­ 24,150/­ Penalty @ 25% on 96,000/­ .....

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d thereunder required or obliged the revisionist to disclose the "date of manufacture" or the "batch number" of the soft drinks. He submitted that a discrepancy in the details falling under the aforementioned two heads did not justify the imposition of penalty. It was his submission that the articles in question were duly recorded and reflected in the Books of Account and carried a uniform rate of tax. It was submitted that there was no intention to evade payment of tax and t .....

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l submitted that the same came to be rendered upon a writ petition challenging an order of seizure. The Court, he submitted, was not considering the issue of imposition of penalty at all. Elaborating his submissions, learned counsel contended that admittedly the power of seizure is exercised on a prima facie satisfaction whereas in the case of imposition of penalty, it must be found that the omission on the part of the assessee is aimed at evasion of tax. Further, it was submitted that in Jagatj .....

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istinguishing features and backdrop in which Jagatjit came to be decided, in the submission of the learned counsel for the revisionist, was duly noted by a learned Single Judge of this Court in Commissioner of Trade Tax Vs. Central Distillery And Breweries Ltd., Meerut [1998 U.P.T.C.1218] which had proceeded to hold that a discrepancy in "batch numbers" would not justify a seizure of goods. Learned counsel further submitted that the imposition of penalty merely on an allegation of a di .....

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. Ltd. 2005 NTN (28). Learned counsel then lastly drew the attention of the Court to a judgment rendered by the Tribunal inter partes on 9 May 2012 wherein an imposition of penalty in identical circumstances was set aside by the Tribunal while recording that neither the VAT Act nor the Rules framed thereunder required a disclosure of "batch numbers" and consequentially held that penalty had been wrongly imposed. He submitted that apart from the fact that the said judgment rendered by t .....

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sions of the Rules. He submitted that the assessing authority had recorded a categorical finding that the action of the revisionist was clearly aimed at evasion of tax and that the consignment of goods without a proper recordal in the Books of Accounts was clear and apparent. It was his submission that irrespective of the reasons assigned by the Tribunal, in light of the conclusion so recorded by the assessing authority, the imposition of penalty was clearly justified. It is these rival submissi .....

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rical staff is also present and that tax invoices are generated only after the goods have been loaded. The second reason which weighed with the Tribunal in refusing to accept the explanation proferred by the revisionist was that this discrepancy had occurred on more than one occasion. It held that the repetitive character of the discrepancies was an indicator of the fact that the stock register was not being maintained in accordance with the provisions of the Act. It then referred to the statuto .....

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ceeded to uphold the orders passed by the assessing uthority as well as the first appellate authority. Section 48 of the VAT Act confers a power upon an authorized officer to seize goods in circumstances enumerated in sub section (1). The same reads as under: " Section 48. Power to seize goods.- (1) An officer authorised under sub-section (1) of section 45 shall have the powers to seize any goods - i. which are found in a dealer's place of business, vehicle, vessel or any other building .....

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aining to value of goods, as the case may be, containing value of goods undervalued to the extent more than fifty percent of the value of goods prevalent at the relevant time in the local market area where the said transaction had taken place, with intention to evade payment of tax." The power to impose penalty stands enshrined in sub section (5) which reads as follows: "(5) If such authority, after taking into consideration the explanation, if any, of the dealer or, as the case may be .....

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prevalent at the relevant time in the local market area where the said transaction had taken place, with intention to evade payment of tax, it shall pass an order imposing a penalty not exceeding forty per cent of the value of such goods, as he deems fit." Section 54 which stands enshrined in Chapter VIII of the VAT Act enumerates the circumstances in which penalty would be imposed and also prescribes the amount of penalty which may be levied. Undisputedly, it is Item (14) which is relevan .....

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f this Act; 40% of value of goods The requirements of tax invoices are set forth in Rule 44 reads as follows: "Rule 44. Requirements of tax invoice, sale invoice, bill, cash memo and purchase invoice.-(1) Every tax invoice referred to in sub-section (1) of section 22 shall contain name and complete address of the selling dealer, name and address of its branch or depot from where goods are sold, Taxpayer's identification Number of selling dealer, tax invoice serial No., date of issue, si .....

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5) of section 48. A deconstruction of sub section (1) would indicate that an assesse faces the specter of seizure in the following circumstances: - (a) where the officer has reason to believe that goods belonging to the dealer, (b) are not accounted for by the dealer in his accounts, registers or other documents. In terms of sub section (5) the authority proceeds to levy penalty upon being satisfied that- (a) the goods were omitted from being shown in the accounts; or (b) the goods are not trace .....

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ods were sold (c) Taxpayers Identification Number (TIN) of the selling dealer (d) Tax invoice number and date of issue (e) Signature of the person authenticating the tax invoice (f) name and address of the purchasing dealer (g) TIN number of the purchasing dealer (h) a description of the goods (i) quantity or measure of the goods (j) value of the goods (k) rate of tax (l) amount of tax charged (m) total amount of tax invoice (n) signature of the person issuing the tax invoice. As would be more t .....

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facture. There case simply is that the batch numbers/date of manufacture did not in some cases tally with the goods actually loaded upon a particular vehicle. In the opinion of this Court, when sections 48 and 54 speak of "wrong particulars" in a document or a transportation of goods "in contravention of any provision of this Act", it must necessarily relate to an omission or wrong mention of a particular mandated to be disclosed and mentioned under the provisions of the VAT .....

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and the only allegation was of a discrepancy/disconnect between the particulars finding mention in the tax invoice and the actual goods found on a vehicle. The Court at this stage must also note a submission advanced by the learned standing counsel to the effect that some tax invoices had also not been pre-authenticated as required under the provisions of Rule 44, a fact which finds mention in the order of the assessing authority. As is evident from the order of the Tribunal, the Court finds th .....

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now proceeds to deal with the primary issue which pivots around the provisions of section 48 (5). A close reading of sub section (5) establishes that while it sets out the circumstances in which penalty may be imposed [clauses (a) to (e) as extracted and deconstructed above] all the clauses are qualified and circumscribed by the words "with intention to evade payment of tax". The phrase "with intention to evade payment of tax" flows and attaches to each of the circumstance w .....

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ned would establish that no material or evidence was referred to or relied upon which may have even remotely established intent to evade payment of tax. The charge in this regard against the revisionist also does not find legs to stand on when one bears in mind the fact that all the articles of a particular consignment would bear the same rate of tax irrespective of the date of manufacture or batch number. Insofar as the recitals in the order of the assessing authority in this respect is concern .....

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rther notes that the Tribunal while coming to the conclusion that the stock register was not properly maintained does not rely upon any evidence or particulars at all. The said conclusion is purely conjectural and based entirely upon the two discrepancies referred to above. The other aspect which cannot be lost sight of by this Court is the order of the Tribunal itself made in respect of similar proceedings relating to Assessment Year 2010-11. While it is true that the principles of res judicata .....

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was not applicable or for that matter distinguishable. The last issue which then remains is whether Jagatjit is an authority for the proposition that a discrepancy in batch numbers was a circumstance relevant for imposition of penalty. The Tribunal has proceeded on the basis that Jagatjit does lay down this law. It is trite to note that a judgment is not to be read as Euclid's theorems. One of the primary rules of interpretation of judgments and which has been repeatedly so recognised is th .....

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by a learned Judge of the Court upon a difference of opinion between two learned Judges constituting a Bench of the Court. The issue in Jagatjit was whether the Court while exercising its powers under Article 226 of the Constitution should interfere with an order of seizure of goods. This is evident from the following extracts of the judgment:- "11. The question, therefore, for consideration is whether on the facts of the case any ground for interference by this Court was made out in exerc .....

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pugned orders of seizure and the order demanding security to the extent of ₹ 3,708 were liable to be quashed." The second aspect of the case as noted above and which needs to be underlined is that Jagatjit was dealing with a case of seizure and not imposition of penalty. In fact the learned Judge in Jagatjit itself noted the distinction between the power to seize and levy penalty in the following terms: - "21. ............................The test for imposition of penalty is more .....

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IMFL under the U.P. Excise Act and the absence of any such similar requirement under the VAT Act or the Rules. As noted above, no such requirement stands placed upon the revisionist under the VAT Act. In fact the authorities themselves noted that the requirement of mentioning the date of manufacture and batch number was one which stood imposed by virtue of the provisions of a separate statute. In view of the above, this Court is of the firm view that Jagatjit is not an authority for the proposit .....

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mmissioner of Sales Tax, 1993 U.P.T.C. 368 and M/s. Great Glen Distilleries & Wineries v. Commissioner of Sales Tax 1995 U.P.T.C. 699 that the seizure of goods was not justified in cases where there is merely a difference of batch number of the goods. The learned Standing Counsel placed reliance on M/s. Jagatjit Industries Ltd. v. State of U.P., 1997 U.P.T.C. 1011 in which the question was whether on the facts of that case the High Court should exercised its jurisdiction under Article 226 of .....

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terms of Section 10(2) of the Act and the Tribunal has recorded a finding of fact that the goods were duly recorded in the books of account of the dealer. This finding is not open to challenge in the present revision petition." The issue as to whether a discrepancy in the batch number would be sufficient to warrant the imposition of a penalty, as the learned Judge noted, had been negatived in Great Glen and other judgments. This is what the learned Judge observed in Great Glen: - "7. . .....

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d the Rules. The purpose is to ensure proper recovery of sales tax. The batch number of a product has no relevance whatsoever, so far as sales tax is concerned. The goods being carried were cases of Ritz whisky and what was material was the number of cases and the bottles and the value thereof. The difference in batch number did not effect these things and the contention of the learned Standing Counsel that the difference in the batch did make the goods different is thoroughly unacceptable." .....

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