The Madras High Court quashed the order confirming the imposition of penalty at 1.5 times of the tax demand.
The respondent, Harish Agencies is a dealer in petrol and high-speed diesel in the Union Territory of Puducherry. The petitioner-Department issued a pre-assessment notice in supersession of earlier notice proposing to reject the return filed by the respondent and assessed them on best of judgment passed under Section 13(2) of the Pondicherry General Sales Tax Act, 1967 read with Section 81 of the PVAT Act.
The cause of action for issuance of the pre-assessment notice was based on a cross verification done by the Department with regard to the supply details from Hindustan Petroleum Corporation Limited (HPCL) with a sale turnover by the respondent in their A2 returns and upon such cross verification, it appeared that the respondent had filed incorrect returns for the relevant period, namely 2006-07.
The petitioner proposed to reject the returns filed by the dealer and determine the correct rate of tax. The respondent, on receipt of the pre-assessment notice, sought for 30 days time by letter to enable them to submit their reply. They did not submit their reply but gave another representation requesting further time to submit their objections.
By another letter the respondent stated that some invoices were wrongly mentioned and requested to delete the same and they furnished the closing stock.
Subsequently, the Department received an authenticated copy of the C-Form issued by HPCL, which reveal that they had affected the total purchase of 230 kl of MS, 746 kl of MSD, and Lubricants for the financial year 2006-07 valued at Rs.3,10,12,739/-, but had reported a turnover of Rs.1,06,72,148.87/- in their A2 returns, which proves that the respondent had filed incorrect returns with an intention to evade tax. The respondent was granted an opportunity to submit their objections. In spite of repeated notices, the respondent did not come forward with any justifiable reason but disputed the allegation made against them by the petitioner.
The finding of the Tribunal was that there was no willful suppression is incorrect, because the respondent did not have any defence as against the proposal made in the pre-revision notices and in fact, they had accepted the stand taken by the Department and paid the tax, not in one lump sum, but in installments as and when the Department issued notices.
The coram of Justices T.S.Sivagnanam and R.N.Manjula held that the tax case revision filed by the Revenue is allowed and the questions of law are answered in favour of the Revenue and the finding of the Tribunal confirming the imposition of penalty at 1.5 times alone is set aside and the matter is remanded back to the Assessing Officer for a fresh consideration bearing in mind the observations made in this order.
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