M/S VIJAY SOLVEX LTD V. THE COMMERCIAL TAXES OFFICER

STR/287/2008

AI Insights

The case involves Vijay Solvex Ltd., which faced a penalty for alleged tax evasion related to the sale of edible oil and hydrogenated vegetable oil. A survey conducted by the revenue officers at the company's premises revealed discrepancies in the use of tax exemption forms (ST-17) for sales that were not exempt. The initial penalty imposed by the Assessing Officer was contested but ultimately upheld by the Tax Board and the High Court, despite the company's argument that the tax was paid promptly and there was no intention to evade tax.

• Counselvise Citation: [2016] 140 COUNSELVISE.COM (IT) 692447 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 26-10-2016
• Assessment Year: misc
• Other Referred Cases: M/s. Murarilal Ahuja & Sons Vs. Board of Revenue & Ors, C.T.O. Vs. Baran Co-operative Marketing Society Ltd., Asst. Commercial Taxes Officer Vs. Kumawat Udhyog, CTO (A-E), Sriganganagar Vs. M/s. Durgeshwari Food Ltd. Sriganganagar, Commercial Taxes Officer, Special Circle, Pali Vs. Sojat Lime Co., Shree Krishna Electricals Vs. State of Tamil Nadu and Another, The Cement Marketing Co. of India Ltd. Vs. The Assistant Commissioner of Sales Tax, Indore and Others, Guru Nanak Dev University Vs. Sanjay Kumar Katwal and Another, M/s. McDowell and Company Limited Vs. Commercial Tax Officer, Commissioner of Income Tax Vs. Mohd. Mohtram Farooqui, M/s. Grass Field Farms & Resorts Pvt. Ltd v. Dy. CIT Circle-2, Jaipur
• Laws Referred To: Section 65 of the Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: TANVI SAHAI
• Assessee Lawyers: ALKESH SHARMA
• Keywords: Evasion of Tax; Penalty; Sales Tax; Survey; Declaration Form ST-17
• Section: 65

Judgement Text

"1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JAIPUR BENCH, JAIPUR ------------------------------------------------------ S.B. SALES TAX REVISION PETITION NO.287 of 2008 VIJAY SOLVEX LTD. VERSUS THE COMMERCIAL TAXES OFFICER, ANTI EVASION RAJASTHAN 1, JAIPUR JUDGMENT RESERVED ON : 03rd October 2016 JUDGMENT PRONOUNCED ON : 26th October 2016 HON'BLE MR.JAINENDRA KUMAR RANKA,J. Mr. Alkesh Sharma Adv., for petitioner. Ms. Tanvi Sahai Adv., for respondent. JUDGMENT --------- 1. Instant revision petition is directed against the order dt.24.03.1998 passed by the Rajasthan Tax Board, Ajmer (in short 'the Tax Board'). 2. The brief facts noticed for disposal of the present petition are that a survey was conducted at the business premises of the petitioner on 12.04.1996 by the Officers of the revenue. The assessee is involved in manufacturing/production of edible oil as well as hydrogenated vegetable oil. Several discrepancies were found by the Officers of the Revenue department. Apart from the other discrepancies, a major discrepancy was noticed by the officers was that the assessee sold 72.219 Metric Tons of Soyabin oil against declaration form ST-17 which was to the extent of Rs.25,27,665/- on which the provisional assessment was made by the Assessing Officer on 10.06.1996 wherein on the said turnover of Rs.25,27,665/-, tax of Rs.1,51,660/- was levied and in 2 addition to that interest of Rs.18,272/- and a penalty to the extent of Rs.3,03,320/- was imposed u/Sec.65 of the Act. 3. It was claimed by the assessee that on account of inadvertence, the same was sold through declaration Form ST-17 and immediately deposited the differential tax on 24.04.1996. It was contended that since the assessee has paid the tax much prior to even a show cause notice which was issued in May, 1996, there being no concealment of particulars or furnishing inaccurate particulars, due tax having been deposited, the penalty is not leviable. However, the Assessing Officer did not accept the said contention and imposed penalty. It was also contended that tax on the disputed turnover is only Rs.69,000/- and not Rs.1,51,660/-. 4. The matter was carried in appeal by the assessee before the Dy. Commissioner (A) who took into consideration the fact that in the instant case, the due tax of Rs.69,000/- was deposited by the assessee on 24.04.1996 within a period of less than 15 days of survey and it was not with the intention of evasion of tax and accordingly, deleted the penalty. 5. On a further appeal by the Revenue before the Tax Board who after revisiting the facts and consideration and provisions held that depositing the tax after survey has no meaning and after a person is caught in the evasion of tax, depositing the amount of tax does prove that the assessee was aware and was 3 selling the goods with the intention of evasion of tax and upheld the penalty of Rs.3,03,320/- which was imposed by the Assessing Officer. 6. Learned counsel for the petitioner contended that admittedly, the survey took place on 12.04.1996 and within the period of less than 12 days, the assessee deposited the due tax and it certainly proves that there was no intention of evasion of tax. Even the show cause notice in the instant case is much later in May, 1996 when the tax was deposited on 24.04.1996. He also contended that merely because there is an omission it does not prima-facie prove that the goods were sold with the intention of evasion of tax. He also further contended that all relevant entries were found in the books of account and he relied upon judgments of this Court in the case of M/s. Murarilal Ahuja & Sons Vs. Board of Revenue & Ors (1986) RTC 53, C.T.O. Vs. Baran Co-operative Marketing Society Ltd.(1994) 93 STC 239, Asst. Commercial Taxes Officer Vs. Kumawat Udhyog (1995) 97 STC 238, CTO (A-E), Sriganganagar Vs. M/s. Durgeshwari Food Ltd. Sriganganagar (2012) 32 Tax Up-date 3, Commercial Taxes Officer, Special Circle, Pali Vs. Sojat Lime Co. (1989) 74 STC 288 and the judgments of the Apex Court in the case of Shree Krishna Electricals Vs. State of Tamil Nadu and Another (2009) 23 VST 249 (SC), The Cement Marketing Co. of India Ltd. Vs. The Assistant Commissioner of Sales Tax, Indore and Others (1980) 45 STC 197. Alternatively, counsel for the petitioner also contended that the differential tax on selling of Rs.25,27,665/- comes to Rs.69,000/- 4 on which even as per the provisions of law and as per Sec.65 of the Act, the penalty being double could not exceed an amount of Rs.1,39,000/-. He contended that this was brought to the notice of the lower authorities but none has taken into consideration and contended that directions be given to the Assessing Officer to re-compute penalty. 7. Per-contra, learned counsel for the revenue vehemently contended that it is one of the unique case where huge turnover of Rs.25,27,665/- was found to be involved which was being sold using declaration Form ST-17 and it was admittedly a clear cut case that there was misuse and mis-utilization of declaration Form ST-17 and both the Tax Board as well as the Assessing Officer have come to a correct conclusion that the same was being sold with the intention of evasion of tax. Counsel contended that the assessee was well aware that he is misusing/mis-utilizing the declaration Form ST-17 and only came to light on account of the said survey otherwise, the assessee may have been selling the same without knowledge of the revenue. Counsel further contended that it is a clear cut case of concealment of particulars or furnishing inaccurate particulars. Counsel for the revenue also contended that this being a finding of fact, no question of law is involved and supported the order. She relied upon judgment of the Apex Court in the case of Guru Nanak Dev University Vs. Sanjay Kumar Katwal and Another (2009) 1 SCC 610, M/s. McDowell and Company Limited Vs. Commercial Tax Officer (1985) 3 SCC 230 & the Division Bench judgment of this court in 5 the case of Commissioner of Income Tax Vs. Mohd. Mohtram Farooqui (2002) 177 CTR (Raj.) 434. 8. I have considered the arguments advanced by the counsel for the parties and have also gone through the order impugned as well as other material available on record. In my view, the Tax Board insofar as imposition of penalty is concerned, has correctly analyzed the provisions and the penalty imposed is required to be upheld. 9. It would be appropriate to quote Section 65 of the Act for better appreciation of the issue :- “Penalty for avoidance or evasion of tax.- Where any dealer, whether or not registered, has concealed any particulars from any return furnished by him or has deliberately furnished inaccurate particulars therein or has concealed any transaction of sale or purchase from his accounts, registers and documents required to be maintained under this Act or has avoided or evaded tax in any other manner, the assessing authority may direct that such dealer shall pay by way of penalty, in addition to the tax payable by him under law, a sum equal to double the amount of tax avoided or evaded.” 10. Admittedly, the survey came to be conducted on 12.04.1996 and the discrepancy was noticed by the survey team on 12.04.1996 and depositing the differential tax after survey, in my considered opinion, cannot be said to be voluntary act even, if show cause was issued in May 1996. Though the oil being sold by the petitioner was liable to tax, however, the same was sold misusing the declaration Form ST-17 by showing that it is tax paid which certainly proves that the assessee was fully aware of 6 the sale being conducted by it though taxable but claiming exemption. The amount found involved to the tune of Rs.25,27,665/- is not a small figure and such a huge figure was noticed within 12 days of start of the Financial Year and shows the magnitude of amount involved, while amount is not a criterion but the nature of transaction does prove that it was being carried with the intention of evasion of tax. 11. Counsel for the assessee relied upon judgment of this Court in the case of M/s. Murarilal Ajuja & Sons (Supra) where this Court has held that mens-rea is necessary and has also held that if the assessee himself voluntarily files a revised returns before the order of assessment is made, then in such a case penalty for concealment of particulars or furnishing inaccurate particulars cannot be imposed. After having gone through the judgment minutely, in my view is distinguishable on facts. The Hon'ble Apex Court in the case of Guljag Industries Vs. Commercial Taxes Officer (2007) 7 SCC 269 as also the judgment of Larger Bench of this court in the case of ACTO Vs. Indian Oil Corporation (2015) 82 VST 200 (Raj.) has held that mens-rea is not essential. 12. On perusal of the judgment of M/s. Murarilal Ahuja & Sons (supra) on the second proposition, it is noticed that this Court came to the conclusion that “if the assessee himself voluntarily files a revised return before the order of assessment is made, after he has himself discovered an omission or wrong statement in the original return, then in such a case, 7 penalty for concealment of particulars or furnishing inaccurate particulars cannot be imposed.” In the case of M/s. Murarilal Ahuja & Sons (supra), the assessee himself voluntarily files a revised return noticing the omission or wrong statement in the original return whereas in the instant case, it is a case of survey and after survey, the assessee deposited the tax and therefore, the judgment is distinguishable. Placing reliance on judgment of the Apex Court by the counsel for the petitioner in the case of Shree Krishna Electricals (supra), in my view, is also distinguishable on facts, it is also not a case of survey as admittedly, in the case of Shree Krishna Electricals (supra), the turnover was disclosed in the books of account but on account of interpretation, had claimed exemption whereas as noticed herein above, the assessee has misused declaration Form ST-17, and claimed exemption knowing-fully well that the declaration Form ST-17 was misused. The Judgment of this Court at Principal seat at Jodhpur in the case of M/s. Durgeshwari Food Ltd., Sriganganagar (supra) relied upon by the counsel for the petitioner is also distinguishable inasmuch as in the said case, it has been held that there was debatable issue as to whether the tax was leviable or not and the Court held that the assessee did not deliberately file wrong returns or mala-fidely claimed 100% input tax credit, the same is also thus distinguishable. The other judgments relied upon by the counsel for the petitioner are also on the same proposition and are thus, distinguishable for the reason assigned earlier. 8 13. The judgment of this Court relied upon by the counsel for the revenue in the case of Commissioner of Income Tax Vs. Mohd. Mohtram Farooqui (supra) relates to income tax penalty u/Sec. 271 (1) (c) on account of concealment and where also the assessee surrendered certain amount after search having been conducted. This Court held that penalty was imposable and the relevant para Nos. 12 & 13 of the said judgment is quoted here under:- “12. In the case in hand, the amount of Rs.5,92,340 was seized from the assessee by the police. He disclosed that part of the amount belongs to his brother, brother-in-law and part of the amount belongs to him. No specific figure of amount has been given how much belongs to his brother, how much belongs to his bother-in-law and how much belongs to him. If what he explained was correct then it is obviously he must be knowing the figure of amount how much belongs to him, how much to his brother and how much to his brother-in-law, jointly or separately. He has not even given the purpose such as whether the amount was carried for or relates to any specific transaction to pay that amount to any specific person for any transaction. It is unbelievable that if any person who carries this huge amount does not know the exact purpose to whom the amount is to be paid and for what purpose or in respect of which transaction the amount being carried. Therefore, it left no doubt that explanation furnished by the assessee at the time of seizure is false. The penalty is not automatic but the penalty can be levied on considering the facts on record of a case. It is not necessary that some more material should be brought on record in such case if sufficient material is available on record for penalty. No material on record has been placed to support the case of assessee that department has pressurised him for surrendering income of Rs.5,92,340. The assessee simply said that he has surrendered the income to buy peace. That type of explanation any assessee can take but unless it is supported by some material that cannot be accepted. Otherwise if this type of explanation is accepted without any material in support, the provisions of section 271 (1) (c) will 9 be redundant, and no purpose will be served of the Explanation inserted by amendment in section 271 (1) (c) . It is also not in dispute that amended provisions of section 271 (1) (c) is applicable in the case in hand. Even counsel of assessee has not suggested in this case what type of material should be brought on record by Income Tax Officer for imposing penalty under section 271 (1) (c) of the Act, 1961. 13. When the income has been surrendered after seizure, it cannot be said that the assessee has surrendered the income voluntarily. After seizure of any amount or income that no more remain concealed income for department. The explanation given by the assessee was not found satisfactory, therefore, it is fit case of penalty on deemed concealment. The assessing officer as well as Commissioner (Appeals) has rightly imposed the penalty under section 271 (1) (c), the Tribunal has committed error in cancelling the penalty. In the result, the appeal is allowed.” 14. The Division Bench of this Court in the case of M/s. Grass Field Farms & Resorts Pvt. Ltd v. Dy. CIT Circle-2, Jaipur [DB ITA 60/2016 decided on 01.06.2016], had an occasion to consider the penalty imposed on the assessee consequent to a survey u/s 133A of the IT Act where incriminating documents were found and statements of the Directors were recorded and so also of various employees or/and other connected persons, this Court taking into consideration the voluntary statements recorded of the Directors as well as employees/associates held that even surrendering income “to buy peace” or “to avoid litigation” after detection by the Revenue, was not proper and it was held that the penalty imposed u/s 271(1)(c) was just and proper. 15. The fact which has been analyzed herein before 10 clearly leads to the fact that the assessee though may have deposited tax after survey but cannot be said to be voluntary act and thus, the penalty was rightly imposed by the Assessing Officer, is in accordance with section 65 and up-held by the Tax Board and the same is up-held. 16. Counsel for the assessee had alternatively contended that on tax of Rs.69,000/- penalty at best could be twice, the amount whereas the penalty imposed is Rs. 3,03,320/- which is almost five times, the tax found imposable on the basis of survey and therefore, penalty in excess is required to be deleted/reduced to that extent, though this fact does not emerge out of the order of the Authorities below and if the assessee had any grievance then he ought to have moved an appropriate application before the Assessing Officer about the above facts. Be that as it may without expressing any opinion on this arguments, if the assessee makes an application within one month from today, the Assessing Officer may consider and pass an appropriate order in accordance with law. 17. Accordingly, the petition is dismissed with no order as to cost. (JAINENDRA KUMAR RANKA),J. S.Kumawat Jr. P.A. "