1. No category

In the Gujarat Value Added Tax Tribunal
at Ahmedabad
Hon'ble Mr. Justice K.A.Puj (Retd.), .president
IVIr. Y.P.Bhatt, Member
Mr. N.A.Achuryu, Member
SECOND APPEAL NO. 347 OF 2013
M/S STAR INDUSTRIES
...Appellant
v/s
The State of Gujarat
..
..Respondent
Shd Apurva Mehta , the learned advocate for the appellant
Shri R.S.Parmar, the learned govt. representative for the respondent
Date:j2.09.2014
JT]DGEMENT
Per: Hon'ble Mr.Justice K.A.Puj (Retd.). president
The appellant has filed this appeal against. the order passed by the learned
Deputy Commissioner of Commercial Tax, Appeal-7, Rajkot on I4/3/I3, whereby
the appeal filed' before him came to be partly allowed and the appellant was
granted refund
of
Rs.1,83,788/-. The appellant was however not granted any
interest on this refund. The appellant hps, therefore, challenged the said order
before this Tribunal requesting this Tribunal to hold that the appellant is eligible to
interest on refund u/s 54(lXaa) and Sec. 54(IXb) of the Act. The appellant has also
prayed for deletion of penalty levied by the as'sessing officer and/orretained by the
learned
D.gty
commissioner u/s 45(zXc) of the Act.
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2.
It is the case of the appellant that the appellant is a partnership firm working
in the name and style of "Star Industries" having its principal place of business
at
Rajkot and branch at Pune. The appellant is engaged in manufacture and trading of
bearings, rollers, etc. The appellant was duly registered as
appropriate point of time under the Gujarat Sales Tax
accounts
Act,
a
dealer at the
1969. The books
for the yeat 2005'06 were duly closed, adjusted and audited.
of
The
premises of the appellant were surprisingly visited/searched by the officials
of the
Commercial Tax Department on 816/07. No discrepancy in the books of accounts
or stock difference was observed. No unaccounted transactions, loose notes or any
other incriminating materials were found. No seizure was effected. However, it
was found that the appellant had effected certain branch transfers, which, had
been
duly recorded. However, purchase tax u/s 15B of the Act on raw or processing
materials or consumable stores used in manufacfure of the goods so transferred
was not paid. Purchase tax.u/s 15B is also allowed as a set off under Rule 42
of the
G.rj arat Sales Tax Rules, IgTl,provided the manufactured goods are sold within
the state or in the course of inter state trade or in the course of exports. Therefore,
as such, a dealer would not pay any tax u/s 158, however, this is not so in the case
of branch transfers. The appellant being under a bonafide belief that he was not
liable to pay any purchase tax because of above position of law and having
effected branch transfers for the first time during F.Y. 2005-06,
!s
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had,
not paid the
3
same.
As soon as the aforesaid default was explained and brought to the notice of
the appellant by search parties, he'immediately agreed to pay the tax on the same
along with interest.
It is also the case of the appellant thatthe notice was issued on
the appellant proposing to frame provisional assessment u/s 41B of the Act.
Accordingly, the provisionu, assessment was framed on the appellant on
2311112007 assessing
the appellant to purchase tax u/s 15B and interest thereon
was also charged. The appellant did not agitate the said issue in the course of
assessment nor was the said issue carried out
in any appeal. However, the assessing
officer imposed penalty @ L50% u/s 45(2)(c) of the Act which was neither stated
during surprise visit nor any cheque to that extent was obtained. The appellant
carried the aforesaid issue
passing
of regular
in first appeal which became infructuous
assessment order u/s
because
of
4I(3) of the Act by Commercial Tax
Offrcer on 12/6/08. The appellant has, therefore, filed first appeal against the
regular assessment order challenging the levy of penalty u/s a5Q)@) of the Act.
The said appeal came to be partly allowed and the
to
50Yo.
pena$ was reduced from I50%
The appellant was also not granted any interest despite the fact that as a
result of the appellate order the appellant was entitled to refund.
3.
Nk. Apurva Mehta, the learned advocate appearing for the appellant
has
submitted that as per the decision of this Tribunal in the case of iWs Saurashtra
Ltd. vs State of Gujarat in SA No. 603 of 2007 decided on I/8114, the
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appellant is entitled to interest on refund granted
to the appellant as a result of the
appellate order. He has further submitted that the
learned Deputy Commissioner
has erroneously confirmed the penalty to the
extent
of
50yo
of the tax by ignoring
the fact that there is no concealment or furnishing inaccurate
particulars
transactions were duly
,.rori.d
as
in the books of accounts and the claim was made
under the bonafide belief. The appellant
is therefore not guilty of
any
contumacious conduct which make the appellant
liable to penalty u/s a5Q)@) of
the Act' He has, further submitted that the position
in law with regard to levy of
penalty u/s 45(Z)(c) is well settled. For this purpose,
he relied on the decision of
Hon'ble Apex court in the case of commissioner of
Income-tax vs Reliance
Petroproducts P\4. Ltd. (2010) 322
ITR 158 (sc),
State of Tamil Nadu and another
Q009) 23
state
of orissa' 25
src
211
(sc)
vsT
Shree Krishna Electricals vs
24g,Hindustan steel Ltd. vs The
and the decision of Hon'ble Gujarat High court
in the case of Banu Hasim vs State of Gujarat in Tax Appeal
No. lg42of 2010
decided on 6/7112 as well as Amulakh
Appeal
No'
1613
& company vs state of Gujarat in Tax
of 2010 decided on 29/6ltz. Based on these decisions
as
well
as
facts of the case x{r. Mehta has submitted that entire penalty
is required to be
deleted.
4.
\4r. R.S.Parmar, the learned
government representative appearing
for
the
respondent, on the other hand has relied on the orders passed
by the authorities
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below. So far as the grant of interest on refund as a result of appellate order is
concerned, he has relied on the ,earlier orders
of this Tribunal against which
reference filed by the dealers are pending before the Hon'ble Gujarat High Court.
He has also submitted that the leamed Deputy Commissioner has rightly retained
the penalty
of 50Yo levied is
purchase tax u/s 15B of the
of the Act. The appellant has not paid
Act on the branch transfers which is contrary to the
statutory provisions and hence
bonafide
a5(2)(c)
it cannot be said that the appellant
belief. He has, therefore,
was under a
submitted that the penalty retained
by
the
learned Deputy Commissioner is required to be confirmed.
5.
We have considered rival submissions and the facts of the case. We have
also gone through the orders passed by the authorities below and the decisions
relied upon by the parties. So far as issue regarding grant of interest on refund due
as a result of appellate order is concerned, the said issue was considered
in
great
detail in the case of IWs Saurashtra Chemicals Ltd. vs State of Gujarat in Second
Appeal
No.
603
of
2007 decided on I /8/14 and as per the said decisions, we hold
that the appellant is entitled to claim interest u/s 54(1)(aa) of the Act on the refund
granted to the appellant as a result of the appellate order. The paru nos. 18, 1 g 23
,
&24 of the said decision are reproduced
"18.
as under:-
With regard to true nature and scope of section 54(1)(aa) of the Act,
this Tribunal is of the view that the purpose of the provision is to grantinterest on
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refund of excess money paid by the assessee. Restriction is that interest is payable
where assessment proceedings are'carried out u/s 41 and not u/s 50 or any other
provision. Assessment order is the result of assessment proceedittgr. The refund
arises
in appeal instead of original
expression "order
stage
of
assessment
is
covered within the
of asserr-.nt r:/s 4I". The phrase does not give restricted
meaning as "original order of assessment r.r/s 4I" or "order of assessment u/s
the first assessing officer".
added the word or words
If
the legislafure so intended
4I of
it would have certainly
to give such restricted meaning. Therefore, provision
must be read reasonably and fulI meaning must be given to the words of statute as
the object is to grant interest on the excess amount paid becomes refundable as a
result
of an original order of
assessment passed
by first
assessing officer or
corrected/modified order of assessment passed in appeal.
19.
In the opinion of this Tribunal, the
assessment order passed
t/s 4I
includes original order passed by first assessing authority as well as modified
assessment order
in appeal. Under an appeal the jurisdiction of the original order
appealed against
is exercised and therefore the order passed in
appeal is
corrected/modified order under the provision under which the appealed order is
passed. The order passed
assessment order u/s
in the appeal against original assessment order u/s 41 is
4I and the original order of assessment
merges
in it.
The
intention of the legislature cannot be presumed that the refi:nd arises at the first
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stage of assessment is only eligible for interest and orders of assessment passed at
subsequent stages resulted
in to' refimd
are not entitled
proceedings are continuing single proceedings
passed
in
appeal
of
to
interest. Appeal
assessment. Therefore, order
is an order of assessment u/s 41. The intention is of paying
interest on refund arises in order of assessment u/s 41 and the modified assessment
order passed in appeal is also covered under the clause (aa). The close scrutiny
clause (aa) reveals that the dealer
is eligible for interest on refund arises in
assessment proceedings carried out u/s
appeal
is continuing
proceedings
of
of
the
4I of the Act. It is further held that the
assessment and therefore
the provisions
applicable to the original order of assessment are also applicable to the modified
order of assessment. The restricted meaning of the word "an order of assessment
u/s 41" will create discrimination between the situations of the matters of similar
facts, one gets refund
in original
stage
of assessment and another gets refund in
appeal. The Hon'ble Supreme Court held that the interpretation, which leads
discrimination, must be avoided. The restricted interpretation
to the first
assessing authority
will give discretion
to make available the interest to the
assessee.
Similar situation will take place in appeal, if the appeal is decided by remand to the
first assessing authority who
passes the order .of assessment
in form 3 9 following
the direction and refund arises, the dealer is entitled to interest. However, instead
the matter, the appellate authority decides the matter in appeal and
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passes modified order
of assessment the appellant will be prevented from interest
even though he gets refund. The interpretation, which makes the provisions
unworkable, should be avoided.
If the phrase "assessment
order r:/s 4I" is not
interpreted reasonably and the narrow and restricted meaning as "original
assessment order" is given, considerable chaos, confusion, uncertainty and conflict
would arise. The legislature never intends to deprive the assessee from entitlement
where refund does not arise because of the effoneous original assessment order
which modified in appeal and resulted in to refund. The appellant cannot be put to
loss for the mistake of the first assessing authority or for the reasons beyond
control of the appellant. The n€urow and restricted meaning
will
defeat the purpose
of clause (ua) for which it is inserted. The accepted principle in interpreting a
provision is that a construction, which would defeat its purpose2 should be avoided.
Even
if more than one construction is possible that which preserves its workability
and efficiency should be preferred to the one, which would render
it otiose or
sterile.
23. It is, therefore, held that power to grant interest u/s 54(1)(aa) of the
Act is liable to be exercised by every authority who has jurisdiction to deal with
assessment
in one way or another, and at one time or another. It is not confined
strictly to the assessing authority alone as a prescribed authority. The appellate
authority has also jurisdiction to allow interest at the appellate stage. Ths appellate
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9
authority is in continuation of the assessing authority and
it
can exercise such
powers conferred u/s 54(1Xaa) of the Act. The term order of assessment should not
hold any restricted meaning of assessment only. Provisions made u/s 54(1)(aa) of
the Act are benevolent provisions and they are inserted by the legislature with a
view to compensate the financial loss to be incurred to assessee. Only with a view
to prevent the future default and to make the assessee absolutely free about his tax
liability, the provision has been inserted. . Passing of appellate order is merely
a
rectification or coffection in original order. It is simply a merger as there cannot be
more than one operative order governing the same subject matter. The strict
interpretation of section 54(lXaa) as was done earlier by this Tribunal leads to
manifest unjust result which could never have been intended
by the State
Legislature and therefore it is necessary to put a construction which modihes the
meaning of the words used in section 54(lXaa) of the Act so as to grant interest
even
if
refund becomes due to a dealer as a result of order passed in appeal or
revision.
24.
We are mindful of the fact that the department has heavily relied on
the decision of this Tribunal in the case of l\zUs Gayatri Tiles vs State of Guj arat
wherein this Tribunal has given strict meaning to the words "by virtue of an order
of assessment uls 41" and held that the said clause uls 54 was inserted by Guj arat
when the refund has arisen in appeal then the appellant is not
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entitled to interest as seen from the wording of section 54 of the Act. With respect,
the said ratio laid down by this Tribunal does not seem to be corect in view of the
above discussion and also in view of the fact that the provisions relating to interest
on delayed payment of refund have been consistently held as beneficial and nondiscriminatory.
It is, therefor", h.ld that the appellant is entitled to the interest
on
delayed payment of refund, irrespective of the fact whether such interest is payable
by virtue of an order of assessment or even by virrue of an order passed in appeal
or revision. It is, therefore, held that in case of IWs Mahavir Expo Chem Ltd. vs
State of Gujarat, this Tribunal vide its order dated 22/4/02 passed in
336
SANo. 335 &
of 2006 has adopted a very n€rrow meaning of the word used in
S4(IXaa) of the Act and held that the entitlement of interest
r.r/s
section
54 is from I/4193
and only on such refund amount which has arisen in the assessment order u/s 41
of
the Act and not at the appellate stage. With respect, this is not correct proposition
of law and it cannot be considered
6.
as
binding precedent."
So far as the issue relating to leqy of penalty u/s a5Q)@) of the Act is
concerned, we are of.the view that the appellant has not concealed any particulars
of no transactions or
transaction liable
deliberately furnished inaccurate particulars
of
arry
to tax. The transactions were duly recorded in the books of
t
accounts and the same were duly reflected
in the returns filed by the
appellant.
Because of the bonafide belief of the appellant, the appellant has not paid purchase
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tax u/s 15B on the transaction of branch transfer. However, as soon as this fact was
brought to the notice of the appellant, the tax was immediately paid along with the
interest. The appellant has neith er agitated this issue in the assessment nor in the
appeal proceedings.
Despite
fact the assessing officer has levied penalty at
150% of the tax u/s a5Q)@) of the Act which was reduced by the learned Deputy
Commissioner
by 50% of the tax. This is also not justified in view of the settled
legal position. In the case of Commissioner of Income-tax vs Reliance Petroproducts Pvt. Ltd. (supra)
it is held by the Hon'ble Apex Court that where there is
no findings that any details supplied by the assessee in its return are found to be
incorrect or elroneous or false there is no question of inviting the penalty
r.r/s
27(IXc) of the Income-tax Act, l96L A mere making of a claim, which is not
sustainable
in law, by itself, will not amount to furnishing inaccurate particulars
regarding the income of the assessee. Such a claim made in the return cannot
amount
to
furnishing inaccurate particulars.
In the case of
Shree Krishna
Electricals vs State of Tamil Nadu (Supra) it is held by the Hon'ble Supreme Court
that since the items'were found incorporated in the appellant's account books
though
it
had not included them in its turnover, penalty could not be imposed
merely because the exemption claimed by the appellant was disallowed. In the case
of Hindustan Steel Ltd. vs the State of Orissa (Supra) it is held that the penalty
will
not be imposed unless the party obliged either acted deliberately in defiance of law
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t2
or was guilty of conduct confumacious
or dishonest or acted in conscious disregard
of its obligation' Pen alty will not also be
imposed merely because it is lawful to
do
so' whether penalty should be imposed
for failure to perfonn a statutory obligation
is a matter of discretion of the authority to
be exercised judicially and on a
consideration of all the reli:vant circumstances.
Even if a minimum
penalty is
prescribed' the authority competent
to impose the penalty will
be justified in
refusing to impose penalty, when there
is a technical or venial breach of provisions
of the Act or where the breach flow from
a bonafide belief that the offender is
not
liable to act in the manner prescribed
by the statute. In the case of Banu Hasim
vs
State of Gujarat (Supra), the Hon'ble
Gujarat High court has
held
thatthe
appellant was litigating under the bonafide
belief that the goods exported were
exempted from payment
of sales tax and for the first time, the goods become
taxable after the decision of Hon'ble
Apex court in the case of yasha overseas vs
commissioner
of Sales Tax and others (2008) g scc
appellant deposited the tax, interest and penalty.
6g
1 and thereafter
the
It was, therefore, held that the
penalfy could not have been imposed
on the appellant and that there wbs no
intention of the appellant to evade the payment
of sales tax. The penalty imposed
by the authorities was therefore held as not justified
and hence the amount of
penalty paid was liable to be refunded
to the appellant. In the case of Amulakh &
company vs State of Guiarat (Supra), the
Hon'ble Guj aratHigh court has held
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t3
that in the absence mens rea, to evade payment of sales tax, all the authorities
below were not justified in levying penalty.
7
.
In view of the above decisions, as well as the facts of the case, we hold that
the learned Deputy Commissioner is not justified in retaining penalty of
50oh
levied u/s 45( z)(c)of the n.t. The entire penalty is required to be deleted and
it is
accordingly deleted.
8.
We, therefore, pass the following order:-
ORDER
This appeal is allowed. The appellant is entitled to interest on the refund
granted to the appellant as a result of the appellate order on the applicable rate. The
penalty levied by the assessing officer u/s 45(2)(c) and retained by the learned
Deputy Commissioner is hereby deleted in toto.
There'shall be no order as to cost.
Pronounced in open court on this 2"d day of Sept .,2014.
sd/(Mr. Justice K.A.Puj)
President
sd/(Mr. Y.P.Bhatt)
Member
sd/-
(Mr.N.A.Acharya)
Member
Rpp
THUE COFY
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