I was once again to an ICC barrier today for a case regarding section 51 of Punjab VAT Act, 2005. This inspires me again to share some views on levy of penalty u/s 51. I am re-sharing my earlier article on section 51 herebelow for the readers of my blog who might not have read it, this article was also published in Punjab & Haryana Taxes Law journal.
Conclusion: There are a lot of case laws on section 51 of PVAT Act 2005(under the PGST Act it was section 14B). The leving of penalty u/s 51 should depend upon the facts of each case. But the most important thing is that the intention to evade tax must be proved before leving penalty u/s 51 of PVAT Act
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Section 51 of Punjab VAT Act 2005
Under section 51 of PVAT Act 2005 information collection centres have been esteblished by the Punjab Government at various places with a view to prevent and check the evasion and avoidance of tax under PVAT Act. Section 51(1) of PVAT Act authorizes the state government to esteblish such information collection centre or check posts by notification.
DOCUMENTS TO BE CARRIED WITH GOODS VEHICLE:
1)a goods vehicle record,
2) goods receipt,
3) a trip sheet or a log-book,
4)sale invoice or bill or cash memo or a delivery challan
containing particulars about goods where such goods are meant for business purpose. Such documents need to be produced at the information collection centre or check post to the officer incharge of such centre or post checking the vehicle.
GOODS NOT MEANT FOR BUSINESS PURPOSE:The words mentioned in sub section 2 is that goods meant for business purpose. Thus section 51 has applicability only on those goods which are meant for business purpose and not on goods carried on in any vehicle purely for personal use of a person and are not meant for business purposes.
DOCUMENTS TO BE CARRIED WITH GOODS VEHICLE:
1)a goods vehicle record,
2) goods receipt,
3) a trip sheet or a log-book,
4)sale invoice or bill or cash memo or a delivery challan
containing particulars about goods where such goods are meant for business purpose. Such documents need to be produced at the information collection centre or check post to the officer incharge of such centre or post checking the vehicle.
GOODS NOT MEANT FOR BUSINESS PURPOSE:The words mentioned in sub section 2 is that goods meant for business purpose. Thus section 51 has applicability only on those goods which are meant for business purpose and not on goods carried on in any vehicle purely for personal use of a person and are not meant for business purposes.
Section 51(11) also provides that No person or any individual including a carrier of goods or agent of a transport company or booking agency, acting on behalf of a taxable person or a registered person, shall take delivery of, or transport from any station, airport or any other place, whether of similar nature or otherwise, any consignment of goods, other than personal luggage or goods for personal consumption, the sale or purchase of which, is taxable under this Act, except in accordance with such conditions, as may be prescribed, with a view to ensure that there is no avoidance or evasion of the tax imposed by or under this Act.
Thus the above underlined word used in sub section 11 or section 51 also makes it clear that the provisions of section 51 are not applicable to the personal luggage or goods for personal consumption.
Section 51(4) provides that The owner or person Incharge of a goods vehicle entering the limits or leaving the limits of the State, shall stop at the nearest check post or information collection centre, as the case may be, and shall furnish in triplicate a declaration mentioned in sub-section (2) alongwith the documents in respect of the goods carried in such vehicle before the officer Incharge of the check post or information collection centre. The officer Incharge shall return a copy of the declaration duly verified by him to the owner or person Incharge of the goods vehicle to enable him to produce the same at the time of subsequent checking, if any:
Thus it is clear that the carrier of a goods vehicle entering or leaving limits lf state of Punjab must stop at the nearest check post or ICC for production of documents and declaration mentioned in section 51(2).
If the goods are carried with an intent to evade the tax under PVAT Act or CST Act the action can be taken u/s 51 of PVAT Act and penality can be levied. Where the officer incharge of a check post or the ICC has reason to suspect that the goods under transport are not covered by genuine documents as mentioned u/s 51(2) and are being carried for the purpose of trade then such goods can be detained by such officer u/s 51(6)(a) after recording the reasons in writing for the same or where the documents relating to the goods are not submitted at the nearest check post or ICC in the state on entry into or exit of such goods from the state then such goods shall be detained by such officer.
Such goods can be realesed against surety bond to the satisfaction of the officer where the consigner or the consignee of goods is registered under PVAT Act and against a bank guarantee or cash or bank draft where the consigner or consignee is not registered under the Act.
The officer detaining such goods records the statement of the consignor or consignee or his representative or driver or the person incharge of such goods and such person needs to prove the genuinness of the transaction within 72 hours before the detaining officer. After 72 hours the proceedings are submitted to the designated officer for conducting enquiry.
When penalty u/s 51 is leviable @ 30%: If on conducting enquiry the designated officer finds that in case where goods are detained u/s 51(6)(a) (i.e goods detained when it is suspected that the goods are not covered by genuine documents) that there has been an attempt to evade tax the penality @30% of the value of goods can be levied in addition to the tax evaded.
When penalty u/s 51 is leviable @ 50%: In case where the goods are detained u/s 51(6)(b) (i.e when documents are not submitted at the check post or ICC) and it is found that there has been an attempt to evade tax, the penalty @50% of the value of the goods can be levied after recording reasons for the same.
If there is no attempt of evasion of tax is detected after enquiry the goods shall be released by the designated officer.
Summary Proceedings: The proceedings u/s 51 have been held has summary proceedings if the goods are covered by genuine documents and there is no attempt to evade tax then merely on technical grounds like incorrect mentioning of R.C number by clerical mistake or mistake in the name of the consignee penalty u/s 51(7) can not be imposed.
Intention to evade tax must be proved: Many a times I have seen that the penalty u/s 51 is levied merely on technical grounds like wrong mentioning of TIN no on the Invoice or the wrong mentioning of name of a dealer. These technical mistakes cannot lead to the conclusion that there is intention of evasion of tax. The intention of evasion of tax must be proved before leving any penalty u/s 51.
No Penalty u/s 51 can be levied where no Punjab Tax is involved: Where the goods are imported from outside the state of Punjab, the penalty cannot be levied u/s 51 on the ground that the goods are shown as under valued in the invoice because where the goods imported are claimed to be undervalued by the officer in Punjab in such case there is tax evasion of CST in the state where from the goods are imported and not that of any under the PVAT Act 2005
The tax of Punjab will arise when such goods are sold at under valued price in Punjab.
Nature of transaction cannot be decided at the ICC barrier: Where the goods are covered by genuine documents and the goods are duly produced at the nearest ICC barrier then in such case by disputing the nature of transaction, the designated officer cannot levy penalty u/s 51.
For example where there is difference of opinion regarding the rate of tax then in such case the designated officer cannot levy penalty u/s 51 because it’s the matter to be decided by the assessing authority. At the most the officer u/s 51 can bring to the notice of the concerned assessing authority.
Similarly in the matters relating to branch transfers against F forms where no CST is chargeable, no action for leving penalty should be taken by disputing the nature of transaction if the goods are covered by genuine documents. Whether the transaction is a genuine branch transfer against F forms or not is a matter to be decided by the assessing officer and not by the designated officer at the ICC Barrier or check post.
Machinery purchased for installation: In M/s Mahavir Spinning Mills Vs. State of Punjab [June 1998- STM-7(STT. Pb.)] it was held that where the machinery was purchased for instalaton in the factory and as such the goods were not m,eant for trade hence penalty was qushed.
Goods Imported as first Import by the person having TOT registration: Person having TOT registration under the PVAT Act cannot import any goods from outside the state of Punjab since he doesnot hold registration under CST Act 1956. Recently I confronted with a situation where a TOT dealer who wanted to convert his TOT registration into VAT registration and for that he made first Import from outside the state of Punjab so that his liability as a VAT dealer can be fixed from the date of first import. But the goods were detained at the ICC barrier when the goods were duly produced at the barrier along with all requisite documents, where the officer sought to levy penalty on the goods. But when explained about the true situation the goods were released.
There must be an intention of tax evasion proved so as to levy the penalty u/s 51 of PVAT Act 2005.
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