The Allahabad High Court has held that Over Dimensional Cargo ( ODC ) cannot be penalized by the authorities for reaching its destination in less time than estimated by travelling at a higher speed when there is no intention to evade tax.
Clause 2.4 of the Circular issued by Commissioner, State Tax dated 17.01.2024 provides that Over Dimensional Cargo cannot be detained and penalty cannot be imposed only because the goods have reached the intended place earlier than the estimated time.
M/S Ace Manufacturing Systems Limited, the petitioner was transporting cargo known as Over Dimensional Cargo ( ODC ). Since the vehicle transporting ODC was travelling at a higher speed, the authorities held that the vehicle could not be categorized as ODC and imposed a penalty on the petitioner.
The petitioner argued that the goods were 13.9 feet above the ground and therefore, they were ODC, and the authorities had failed to measure the height of the goods. Reliance was placed on a circular issued by Commissioner, State Tax dated 17.01.2024 where it was provided that goods above the height of 3.8 meters will be classified as ODC. Since the petitioner’s cargo was 13.8 ft which is greater than 3.8 meters (12.46 ft), it will be classified as ODC.
Counsel for the respondent relied solely on the speed of the vehicle to state that ODC goods cannot be transported at the speed at which they were moved.
A single bench of Justice Shekhar B. Saraf held that as per the Circular dated 17.01.2024, the speed of the vehicle carrying cargo is not the criteria for determining if cargo is Over Dimensional Cargo. The Court observed that there was no discrepancy in the cargo and the documents present with the cargo.
The Court held that the penalty was imposed based on surmises and conjectures and was unsustainable. The Court relied on its earlier decisions in Girish and Company vs. State of U.P. and others and M/s Hindustan Herbal Cosmetics vs. State of U.P. where it held that intention to evade tax are sine qua non (essential) for imposition of penalty.
The Court held that means rea or intention to evade tax serves two purposes: first, it distinguishes between inadvertent errors and intentional misconduct as intentional misconduct ensures that penalty is imposed only on those who deliberately act against the law, and second, it deters tax evasion as non-compliance of law/ non-payment of tax will have severe consequences.
The Court quashed the order imposing penalty as well as the order of appellate authority.
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