BEFORE THE APPELLATE TRIBUNAL VALUE ADDED TAX
2ND FLOOR, VYAPAR BHAWAN, I.P. ESTATENEW DELHI
Appeal No. 338-339/ATVAT/06-07
(Default Assessment/Penalty)
(A.Y. 2005-2006)
M/s Hagemeyer India Ltd.
(New Name: Asia Pacific Brands
India Ltd.)
159, Punj Corporate House,
Okhla Industrial Estate,
Phase-III, New Delhi
…..……...APPELLANT
V E R S U S
Commissioner, Trade & Taxes Delhi ……….RESPONDENT
Counsel for the Appellant : S/Shri H.L.Madan & S.K. Kohli, CA
Counsel for the Respondent : Shri C.M. Sharma, Advocate
O R D E R
1. This common order shall dispose of the above noted two appeals as common question of law and fact is involved in both these appeals.
2. Appellant M/s Hagemeyer India which subsequently changed the name of the company as ‘Asia Pacific Brands India Ltd. is a registered Dealer of Ward-91, vide TIN 07470246642, under the Delhi Value Added Tax Act, 2004 (hereinafter to be referred as the Act). The Appellant was previously registered under the Delhi Sales Tax Act, 1975 (hereinafter to be referred as DST) and after enforcement of the Act it was deemed to be a registered dealer under the Act.
3. It is alleged that appellant was holding tax paid opening stock in Delhi as on 01.04.2005 on which tax to the tune of Rs.76,823/- had been paid u/s 5 of the DST. Appellant submitted a statement of stock in DVAT-18 on 03.08.2005 and claimed tax credit of Rs.76,823/- in the return. Due date for filing the return was 31.07.2005. Appellant filed the return on 03.08.2005. According to the appellant the delay in submission in DVAT-18 was only of one day as the return could be filed on 01.08.2005 because 30.07.2005, 31.07.2005 were consecutive holidays being Saturday and Sunday. Grievance of the appellant is that just for a delay of one day, the tax credit of Rs.76,823/- was denied and a penalty of the equal amount was levied u/s 86(11) of the Act although the claim of the appellant is otherwise genuine and correct.
4. Appellant revised the 12 monthly returns on 17.11.2006 for the period from 01.04.2005 to 31.03.2006 but no tax was involved in these revised returns and despite that the assessing officer levied penalty of Rs.10,000/- for each month u/s 86(10) on the ground that these returns were revised after issue of notice for audit to be conducted on 17.11.2006. Appellant is thus aggrieved on account of a penalty of Rs.1,20,000/-.
5. Appellant filed objections against the notice of default assessment of tax and interest u/s 32 and against the notice of assessment of penalty u/s 33 of the Act. These objections were taken up for hearing by the Ld. Jt. Commissioner-III, the Objection Hearing Authority (hereinafter to be referred as Ld. OHA) who vide his order dated 12.10.2007 dismissed the objections.
6. Appellant has filed appeal No.338 against the order of the Ld. OHA rejecting the objection against the demand of tax to the tune of Rs.76,823/- and interest to the tune of Rs.18,245/- created on account of rejection of the claim of the appellant for ITC on the ground that DVAT-18 was filed not by 31.07.2005. Appeal No.339 has been filed against the demand of the penalty of Rs.1,20,000/- u/s 86(10) of the Act on the ground that the return was revised after issuing for notice for audit and a penalty of Rs.76,823/- u/s 86(11) on account of rejection of the claim for ITC. The appellant has filed these appeals with a prayer for admitting his claim for ITC on transitional stock and with a prayer for quashing of both these penalties on the following grounds:-
(i) That the claim of the petitioner to input credit on the opening stock available on 01.04.2005 which had suffered tax at the first point under the DST had been wrongly disallowed by the VATO and the Ld. OHA has erred in rejecting the objections because when substantive conditions had been strictly complied with, the benefit could not be denied by having recourse to procedural irregularities.
(ii) That the penalty of Rs. 76,823/- u/s 86(11) is not leviable as the appellant was legally entitled to input tax credit on transitional stock.
(iii) That the penalty of Rs. 1,20,000/- u/s 86(10) is not leviable as there is nothing in section 86(10) that penalty can be imposed if return is revised after receipt of the notice for audit and also for the reason that no tax was involved in these revised returns- and as such there was no tax deficiency.
7. Revenue has contested the appeal on the ground that when law confers a right and lays down a procedure for availing the same then for claiming such a right that procedure has to be strictly followed and since in this case the procedure was not followed as laid down by section 14 of the Act and so the default assessment of tax and penalty was rightly made by the Ld. VATO and the Ld. OHA did not commit any illegality in rejecting the objections. Regarding the penalty of Rs.1,20,000/-, the case of the Revenue is that the appellant revised the returns after the receipt of the notice for audit and filing of the return itself shows that the earlier returns were false or misleading or deceptive.
8. These appeals were admitted for hearing on merit subject to deposit of Rs.25,000/- against default assessment of tax and interest and further deposit of Rs.25,000/- against assessment of both the penalties as condition precedent, for hearing the appeals on merit, by the appellant, u/s 76(4) of the Act vide our order dated 10.09.2009. On compliance of this order, these appeals were heard on merit.
9. We have heard Shri H.L. Madan, CA Ld. Counsel for the Appellant, Shri C.M. Sharma, Adv., Ld. Counsel for the revenue and gone through the record.
10. A careful perusal of the order of the Ld. OHA shows that the claim of the appellant for tax credit on transitional stock was disallowed because as per section 14(1) of the Act the statement in DVAT-18 was not filed within a period of four months of the commencement of the Act. Thus it is clear that claim of the appellant for tax credit of Rs. 3,82,796/- on the transactional stock, though otherwise in order and admissible as per law, was not allowed for the reason that the appellant did not claim the amount of ITC on transitional stock within the period of four months of the commencement of the Act. Thus, the claim for tax credit on the transactional stock was disallowed not on merit but on technical grounds. Shri H.L.Madan, Ld. Counsel for the Appellant submitted that Hon’ble High Court of Delhi in the judgment reported as Northern India Motor Company Vs. Commissioner of Value Added Tax, Department of Trade & Taxes, New Delhi: 25 VST 466 has observed that a pragmatic interpretation of the provision has to be made and case of the Appellant is squarely covered by the principle of law laid down by Their Lordships in this judgment.
11. We have carefully considered the judgment relied upon by the Ld. Counsel for the appellant. The point that came up for consideration before Their Lordships in this case was whether the appellant who was holding stock of tax paid goods to the tune of Rs. 7,32,554/- as on 31.03.2005 and was entitled to tax credit of Rs. 49,424/- on this stock but did not mention the details of the input tax credit on transitional stock in the return form DVAT-16 could claim refund/adjustment of the same by filing objection under section 28(2) of the Act. The Ld. Counsel for the appellant before Their Lordships submitted that the expression “mistake or error paid more tax than was due under the Act” appearing in section 28(2) of the Act should be taken to mean not only “actual payment” of tax paid but even a credit which is lying to the account of the assessee. Their Lordships held that a pragmatic interpretation of the provision is to be taken and the expression in section 28(2) should include tax available as a credit and this expression appearing in section 28(2) should be interpreted to include a credit lying to the account of the assessee. Accordingly, we hold that in view of this judgment of Hon’ble High Court of Delhi, appellant is entitled to be given credit of the input tax on transitional stock of tax paid goods which the appellant could not claim within the period of four months of the commencement of the Act. The fact that the appellant was not given credit of the tax on transitional stock for the reason that statement in DVAT-18 was filed late and so the obvious conclusion is that but for the delay in submission of form DVAT-18, the appellant was entitled to the tax credit on transitional stock. We accordingly set aside the order of Ld. Objection Hearing authority and direct that appellant be given the tax credit on the transitional stock.
12. Now coming to the consideration of the penalty. Penalty of Rs. 76,823/- u/s section 86(11) was confirmed by the Ld. OHA because the tax credit of Rs. 76,823/- against transitional stock was disallowed on the ground that DVAT-18 was filed in violation of section 14 of the Act and so the appellant was held liable to pay penalty equal to the amount of tax credit claimed, without entitlement under section 14 of the Act, as the input tax credit claimed was greater than Rs.10,000/-. As held in the foregoing para, the appellant cannot be denied the input tax credit of Rs. 76,823/- just on the ground that DVAT-18 was filed late and not within four months of the commencement of the Act provided the appellant fulfils the other requirements necessary for grant of credit of input tax credit on transitional stock. Thus, in view of this finding the penalty of Rs. 76,823/- u/s 86(11) cannot survive. Accordingly, we quash the penalty of Rs. 76,823/- u/s 86(11) of the Act.
13. Now coming to the consideration of the legality of the penalty of Rs. 1,20,000/- imposed u/s 86(10) of the Act. The reason for imposing this penalty is that the appellant revised twelve returns after receipts of the notice for audit. The Ld. Counsel for the appellant submitted that returns have been revised on 17.11.06 before the audit party came for conducting audit of the business affairs of the appellant. Appellant has assailed this penalty by submitting that there is no provision u/s 86(10) of the Act which prevents revising of the return after issue of notice for audit. Further submission of the Ld. Counsel for the appellant is section 86(10) does not laid down that penalty can be imposed in case appellant revises the return after receipt of the notice for audit. We have carefully considered the submission of the Ld. Counsel for the appellant. As per section 86(10) of the Act a penalty of Rs. 10,000/- or penalty equal to tax deficiency which is greater can be levied if a person furnishes a false, misleading or deceptive in a material particular. Thus, it is clear that under u/s 86(10) no penalty can be levied on the ground that the assessee revised return after receipt of notice for audit. In our considered view this penalty is not as per the law and the same is liable to be quashed which we hereby quash.
14. For the foregoing reasons both these appeals stand accepted.
15. And announced in the open court.
16. Copies of this order shall be served on both the parties and proof of service shall be brought on record by the Registry.
(G. K. MARWAH) (SANATAN PRASAD)
MAT, VALUE ADDED TAX MAT, VALUE ADDED TA
(S.K. KAUSHIK)
CHAIRMAN
APPELLATE TRIBUNAL: VAT
09/07/2010
No.ATVAT/2009/ Dated:
1) Commissioner, Trade & Taxes
2) Additional Commissioner (L&J), Trade & Taxes
3) VATO, Ward-17
4) Dealer
5) 2nd Case file
6) Guard File
7) Govt. Counsel.
8) Secretary Sale Tax Bar Association.
REGISTRAR
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