Merely statement of a truck driver cannot be the basis for initiating the penalty proceedings: HC

The case of the assessee is that the goods were being brought into the State of U.P. from Kutchh, Gujarat and was accompanied by the tax invoice alongwith other documents and Form 38. The truck on which the goods were being carried was intercepted at Mathura on 04.08.2016. The goods were to reach Agra. Penalty proceedings were initiated against the assessee and a notice was issued to which a reply was submitted by the assessee. The assessing officer has rejected the reply and passed a penalty order under Section 54 (1) (14) of the Act. Aggrieved with the said order, a first appeal was preferred which was also dismissed. The assessee preferred the second appeal before the Tribunal which was also dismissed. Hence, the present revision was preferred before the High Court.

This revision was admitted by High Court on 04.07.2019 on the following question of law;

“(i) Whether the Tribunal was legally justified in sustain penalty on conjectures and surmises when the transaction was duly recorded in books of accounts and accompanied by Form C and payment were made through Banking channel?”

Mr. Suyash Agarwal, Learned counsel for the revisionist has submitted that solely on the presumption that the goods were to be unloaded at Vrindavan, Mathura and not at its destination at Agra, the penalty proceedings were initiated. He further contends that the statement of the truck driver was recorded which forms the sole basis for the penalty proceedings. According to learned counsel for the revisionist none of the provisions of Section 54 (1) (14) read with Section 50 of the Act is made out and there is no discrepancy in the documents, which were carried by the truck driver by which the goods were bring brought at the premises of the dealer. According to learned counsel the penalty proceedings cannot be initiated merely on presumption and there must be some material on record to substantiate the claim by the department. Reliance has been placed upon the earlier decision of this Court in case of Jain Shudh Vanaspati Ltd. Vs. State Of U.P. & Others, 1983 UPTC 198.

Sri Rishi Kumar, learned Standing Counsel, while defending the order passed by the Tribunal, submitted that on the statement of the truck driver it was found that the goods were to be unloaded at Vrindavan, Mathura and again the truck which was carrying the timber was to bring the timber into the State using Form 38 as the validity of the said form was eight days and only 24 hours had expired. According to him, the assessing authority after considering the reply filed by the assessee had imposed the penalty and found the reply not to be accepted.

Having heard learned counsel for the parties and from perusal of the material on record, the High Court found that merely on the basis of presumption and statement of the truck driver which was carrying the goods, penalty proceedings have been initiated by the assessing officer. The taxing department did not have any material on record so as to hold that there was any violation by the dealer in bringing the goods from outside the State of U.P. The Form 38 which was accompanying the goods was filled and all the tax invoice alongwith the bilti and transporter’s bill was there when the truck was intercepted by mobile squad on 04.08.2016.

Moreover, the statement of a truck driver cannot be the basis for initiating the penalty proceedings. The statement of truck driver which has been recorded by the officer of the department is not corroborated by any proof and the said statement cannot be relied upon for initiating the penalty proceedings. This Court finds that the action of the taxing department was not justified in initiating penalty proceedings without any material on record. The statement of truck driver seems to be under duress as assessee has taken specific grounds in his objection as well as the appeal before the Tribunal, which the Tribunal has not considered and recorded any finding. The statement of a driver cannot be sole basis for initiation of penalty proceedings and no intention to evade the tax can be established from the statement of driver when the entire documents are there on record.

This Court further finds that the Tribunal itself has recorded a finding that it could not be ascertained whether the truck was unloaded at Mathura or not. Once the department has not shown whether the goods were being brought at Mathura from outside the State of U.P. no question of penalty proceedings can arise.

In view of the said fact, the order of Tribunal is unsustainable in the eyes of law and same was set-aside.

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