No Tax Evasion If Goods in Transit was not Marketable: Patna HC [Read Order]

A division bench of the Patna High Court held that tax evasion cannot be alleged under the Bihar Value Added Tax Act, 2005 when the goods transported by the dealer found not marketable.

The bench comprising Chief Justice Rajendra Menon and Justice Rajeev Ranjan Prasad was hearing a writ petition wherein a penalty was imposed on the petitioner, a partnership Firm for alleged evasion of tax.

Before the High Court, the petitioners said that after the commencement of the consignment, they came to know about the judgment in M.C. Mehta Vs. Union of India & Ors. wherein the Court has prohibited the sale of all vehicles with B.S. III engines. Though the petitioner immediately cancelled the E-Suvidha declaration, failed to communicate the same to the driver of the vehicle. When the goods were intercepted by the authorities, the driver of the transport vehicle produced the e-suvidha declaration and also the retail invoice. The authorities verified the same and found that the e-suvidha declaration which was produced had been cancelled and found accordingly on the website of the Commercial Taxes Department. Accordingly, the penalty was imposed on the petitioners for violation of the provisions of Section 16(2) of the Bihar Vat Act, 2005.

Before the High Court, the petitioners submitted that only because of lack of due communication, the driver of the transport vehicle drove the transport vehicle to its destination and reached the check post.

According to them, it was found by the inspecting authorities that the declaration (Suvidha) which was produced by the driver had already been cancelled by the consigner on 30.03.2017 but no other suvidha was generated at place of cancelled suvidha. The truck in question reached at the check post after four days on 04.04.2017 and because the goods were being transported without correct and complete declaration, it was found that the goods were being transported in violation of provision of section 16(4)(a) read with Section 56(4)(a) of the Bihar Vat Act 2005.

After hearing both the parties, the bench found that the only reason for the imposition of the penalty shown in the counter affidavit is the alleged violation of the provision of Section 16(2) of the Bihar Vat Act 2005. “Neither in the counter affidavit nor in course of submission before this court the respondent authorities or on their behalf it could be prima facie demonstrated that the petitioner had cancelled the e-suvidha declaration generated on 28.03.2017 with any intention to play fraud upon the taxing authorities,” the bench noted.

Quashing the penalty order, the bench held that “There is no answer to the contention of the petitioner that with effect from 01.04.2017, the vehicle loaded on the truck in question were reduced to scraps and were not marketable, if this is the position and not denied by the respondents, this court would be constraint to hold and declare that cancellation of the e-suvidha declaration by the petitioner was only a bona fide act without there being any intention to play fraud with the taxing authorities. On 04.04.2017, when the Truck was intercepted those loaded vehicles were not marketable and further, Annexure-9 and 10 to the writ application clearly demonstrate that those vehicles were returned to the consigner for which the petitioner has generated e-suvidha declaration to return the goods to the consigner.”