(Per : HONOURABLE MR.JUSTICE V. M. SAHAI) 1. We have heard Mr. Sudhir Mehta, learned Counsel for the appellant – assessee and Mr. Kabir Hathi, learned Assistant Government Pleader appearing for the respondent. The Tribunal has decided three tax appeals for the year 2000-01, 2001-02 and 2002-03 by a common judgment.
2. This tax appeal has been filed challenging the Order dated 25.06.2009 passed by Gujarat Value Added Tax Tribunal at Ahmedabad in Second Appeal No.22 of 2009, as well as the Order dated 31.08.2009 passed by the same Tribunal in Rectification Application No.46 of 2009 and Rectification Application No.101 of 2009 for assessment period 2000-01.
3. The Appeal was admitted on 25.02.2011 on the following substantial question of law:
“Whether, on the facts and in the circumstances of the case, the levy of penalty u/s 45[2][c] & 45 [6] of Gujarat Sales Tax Act, 1969 can be imposed for the period prior to the decision of the Apex Court in case of Yasha Overseas reported in 2008[8] SCC 681 and when entire amount of tax has been paid? ”
4. It is not disputed that tax interest and penalty has been deposited by the appellant for the period of three years viz. 2000-01, 2001-02 and 2002-03. The challenge in this tax appeal is about levy of penalty which has already been deposited by the appellant on the ground that there was no intention of the appellant to evade the payment of sales tax and they were bonafidely litigating under a belief that the goods exported by them were exempted from payment of sales tax prior to the decision of the Hon'ble Apex Court in Yasha Overseas V/s. Commissioner of Sales Tax and Others reported in (2008) 8 SCC 681.
5. Learned A.G.P. for the respondent vehemently supported the Order passed by the Tribunal. However, it is not disputed by him that by this decision of the Hon'ble Apex Court that sales tax is liable to be paid by the assessee which has already been paid along with interest and penalty.
“55. It is thus to be seen that in two vital aspects, relevant to the issue under consideration, DEPB is exactly the same as REP licence. Like REP license it has an innate value and for which it freely sells in the market. Much argument was advanced on the point that DEPB, unlike REP licence was not a licence for import of goods but the submission is clearly misconceived and unacceptable. DEPB is not a licence simply because under the liberal import policy no licence is required to import a very large number of goods and very few items, placed under the negative list, require a licence for import. We are, therefore, unable to accept the submission that DEPB is materially different from REP licence and its transfer by way of sale would not be exigible to sales tax.
59. We are afraid, we find the submission unacceptable. We are unable to see DEPB either as a debt or as a beneficial interest in movable property not in possession of the claimant. To us it is plain that DEPB like REP licence has its own intrinsic value and the purchaser, on payment of consideration, buys something for its value. The DEPB credit is thus clearly `goods' within the meaning of sales tax laws and its sale clearly exigible to tax.
60. We may observe here, if DEPB (or for that matter REP license!) has to be compared with a lottery ticket, it can only be compared with a lottery ticket that has won the prize. The prize-winning lottery ticket ceases to be a mere piece of paper having no value itself. It acquires inherent value and becomes itself a thing of value. Imagine a situation where prize winning lottery tickets are freely available for sale. (As a matter of fact, clandestine sale of the prize winning lottery ticket for conversion of black money into white is not completely unknown!). In buying the prize winning lottery ticket the purchaser would pay the consideration for the value that the piece of paper has acquired and in that situation we fail to see how that ticket can be described as anything else but `goods'.”
7. The appellant has exported under Duty Entitlement Pass Book (for short DEPV) which was not taxable as goods at the time of filing the return, though the sales were recorded in the books of account as tax free. DEPV was same as REP licenses. They were treated as goods in view of decision in Yasha Overseas (Supra). In either of the scheme, the licenses are known as DEPB. The Hon'ble Apex Court in paragraph 55 above has held that the nomenclature may be different in different schemes but they are one and the same scheme considered within the definition of goods.
8. Prior to the decision in the case of Yasha Overseas V/s. Commissioner of Sales Tax and Others (supra) these goods were non-taxable but after the Hon'ble Apex Court clarified the liability, they have become taxable. Therefore, there was no intention of the assessee to avoid payment of tax deliberately.
9. The Hon'ble the Apex Court in Sree Krishna Electricals V/s. State of Tamil Nadu and Another reported in (2009) 23 VST 249 (SC) has held in para 7 as under :
“So far as the question of penalty is concerned the items which were not included in the turnover were found incorporated in the appellant's account books. Where certain items which are not included in the turnover are disclosed in the dealer's own account books and the assessing authorities includes these items in the dealers' turnover disallowing the exemption, penalty cannot be imposed. The penalty levied stands set aside.”
10. Similar view was taken by the Hon'ble the Apex Court in the case of Hindustan Steel Ltd V/s. The State of Orissa reported in 25 STC 211 SC has held as under :
“Under the Act penalty may be imposed for failure to register as a dealer: s. 9(1) read with s. 25(1)(a) of the Act. But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasicriminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so.
Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. Those in charge of the affairs of the Company in failing to register the Company as a dealer acted in the honest and 757 genuine belief that the Company was not a dealer. Granting that they erred, no case for imposing penalty was made out.”
11. Even our Court in the case of Hemchandbhai & Co. V/s. The State of Gujarat reported in (1980) 50 STC 274 has held as under :
“The position of law in regard to the penalty proceedings is no longer in doubt. In Hindustan Steel Ltd. v. State of Orissa [1970] 25 STC 211 (SC) ; [1972] 83 ITR 26 (SC) it was held that an order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and that penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or is guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. The liability to pay penalty does not arise merely upon proof of default. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by the statute...
If the assessee succeeded in establishing reasonable cause for the purpose of reduction of the penalty on the above ground, it is difficult to appreciate how the same ground would not have its play in determining the liability in respect of penalty, for the penalty is leviable only if the default in payment of tax is without reasonable cause.”
12. Having heard the learned Counsel for the parties, we are of the considered opinion that the appellant was litigating under the bonafide belief that the goods exported were exempted from payment of Sales Tax and for the first time, the goods become taxable after the decision of the Hon'ble the Apex Court in the case of Yasha Overseas V/s. Commissioner of Sales Tax and Others (supra) and thereafter, the appellant deposited the tax interest and penalty.
13. In our opinion, the penalty could not have been imposed on the appellant and that there was no intention of the appellant to evade the payment of sales tax. For the aforesaid reasons, the penalty imposed by the authorities is not justified and is liable to be refunded to the appellant.
14. For the aforesaid reasons, we answer the question in the negative and in favour of the assessee against the department.
15. The Appeal is allowed. The penalty imposed on the appellant is set-aside. The appellant shall be entitled to a refund of the amount of penalty deposited by him which shall be refunded within a period of six months from today.
(V. M. SAHAI, J.) Sunil W. Wagh (N. V. ANJARIA, J.)