1. Heard Sri Piyush Agrawal, learned counsel for the assessee/applicant and Sri B.K. Pandey, learned Standing Counsel for the revenue.
2. The present revision has been filed against the order of the Commercial Tax Tribunal, NOIDA dated 18.04.2013. The Tribunal has dismissed the appeal filed by the assessee/applicant-in-revision and upheld the levy of penalty under section 54 of the U P VAT Act, 2008 (hereinafter referred to as the Act).
3. The present revision was admitted on the following two questions of law:
"i) Whether penalty under Section 54(1)(5) of the Act could be imposed upon the assessee revisionist for not issuing Tax Invoice, though admittedly, Sale Invoice were issued by it?
ii) Whether the assessee revisionist could have issued the Tax Invoice though the purchasing dealers had not supplied the full particulars as required by sub-section 7 of Section 22 of the Act, in view of prohibition contained in Sub-section 8 of Section 22 of the Act, so as to entail imposition of penalty?"
4. The admitted facts in this regard are, during the A.Y. 2008-09, the assessee had amongst others performed 68 transactions of sale, against different Sale Invoices. These transactions gave rise to penalty proceedings against the assessee/appellant under Section 54(1)(5) of the U P VAT Act, 2008 (hereinafter referred to as the 'Act').
5. Section 54(1)(5) of the Act, reads as under:
"Section 54. Penalties in certain cases.-
(1) The assessing authority, if he is satisfied that any dealer or other person, as the case may, has committed the wrong described in column 2 of the table below, it may, after such inquiry, if any, as it may deem necessary and after giving dealer or person reasonable opportunity of being heard, direct that such dealer or person shall, in addition to the tax, if any, payable by him, pay by way of penalty, a sum as provided in column 3 against the same serial no. of the said table:
Sl. No. Wrong Amount of penalty (1) (2) (3)
1.
---
---
2.
---
---
3.
---
---
4.
---
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5. Where the dealer has,-
(i) failed to issue or has deliberately not issued a tax invoice or sale invoice; or
(ii) deliberately not obtained tax invoice in spite of being a registered dealer while purchasing the goods liable to tax under this Act from a registered dealer; or
(iii) not issued purchase invoice;
in accordance with the provisions of this Act Tax payable on the value of goods or 40% of the value of goods whichever is higher
6. Chiefly, the allegation made against the assessee was, it had performed each of the aforesaid 68 transactions against Sale Invoice, though it was obliged to perform those transactions only against Tax Invoice. The revenue claimed to be aggrieved thus: by issuing Sale Invoice, the assessee/appellant deprived the revenue of opportunity to tax the subsequent sale on value addition base.
7. The assessee resisted the penalty proceedings and submitted :- the aforesaid 68 transactions had been performed with unregistered dealers and therefore no Tax Invoice could be issued. That explanation did not find favour with the assessing authority, who by his order dated 18.11.2009 imposed penalty @ 40% of the disputed turnover Rs. 3,98,96,675/-. Thus, penalty Rs. 1,59,58,670/- was imposed.
8. The assessee carried the matter in appeal to the first appeal authority who by order dated 30.05.2011 partly allowed that appeal and deleted the penalty with respect of 64 transactions, since upon inquiry, those transactions were found to have been actually performed with unregistered dealers. Consequently, no defect was found in issuance of Sale Invoice against those 64 transactions. Thus, the penalty amount Rs. 1,54,15,111/- was deleted. The disputed demand of penalty that has survived against the remaining four transactions is Rs. 5,43,559/-.
9. The assessee carried the matter further, in second appeal, to the Tribunal. That appeal has been dismissed by the impugned order. Before the Tribunal, the assessee submitted, it was not at fault in not issuing the Tax Invoice against the four disputed transactions, though they had been performed with registered dealers, since those dealers did not provide their Taxpayer Identification Number (TIN in short), at the relevant time.
10. The Tribunal rejected the aforesaid submission on the reasoning, since undisputedly the purchasing dealers were registered dealers, the appellant should have issued the Tax Invoice. In not doing so, it had acted in collusion with the purchasing dealers and deprived the revenue of tax on value addition.
11. Sri Piyush Agrawal, learned counsel for the appellant submitted, a Tax Invoice could be issued only to a registered purchasing dealer. For that purpose, by virtue of Section 22 (7) of the Act, the obligation to make available to the seller, the details of name, address and TIN, was on the purchasing dealers. Unless those details had been first made available by the purchasing dealer, the assessee/selling dealer was helpless and he could not have issued the Tax Invoice. In fact, if such Tax Invoice had been issued (without such details), it would have been null and void and it may have further exposed the selling dealer to penal consequences. He would also submit, the selling dealer/assessee was not in a position to refuse to perform the sale transaction unless the purchaser first made available to it the details required for the purpose of issuance of Tax Invoice. On the contrary, in absence of those details being made available, the selling dealer was obligated to issue a Sale Invoice, which was done in the present case.
12. Then, referring to the provisions of Section 54(1), Table entry (5), it has been submitted, for imposition of penalty, under that provision, the failure to issue a Tax Invoice or Sale Invoice should have been a 'deliberate' act and not an unintentional act on part of the selling dealer. Second, it has been submitted, on a co-joint reading of clauses (i) and (ii) of Table entry 5 to Section 54(1) of the Act, and in face of Sale Invoice issued by the assessee, it is clear, the penal consequences may have followed against the purchasing dealer but not the selling dealer. Also, in absence of such evidence existing, the finding of collusion recorded against the assessee/selling dealer, is perverse.
13. Sri B.K. Pandey, learned Standing Counsel on the other hand submits, the assessee is a known manufacturer of Pan Masala and other items. It had an enormous turnover as is reflected from the value of the disputed transactions, itself. Then, it has been submitted, looking into the nature of the commodity, the fact that the appellant chose to enter into a sale transaction without first issuing a Tax Invoice, was evidence of its complicity in the commission of the offence. He therefore submits, the Tribunal had not erred in rejecting the appeal filed by the appellant, especially since substantial relief had already been granted by the first appeal authority.
14. Having considered the arguments so advanced by learned counsel for the parties, it is seen, this being a case of penal provision, the ingredient of the breach/infringement of law contemplated by the legislature, must be clearly established to justify its impost. The Supreme Court in Karnataka Rare Earth and Another Vs. Senior Geologist, Department of Mines & Geology and Another, (2004) 2 SCC 783 had the occasion to consider the concept of penalty. It was found to be a liability arising from a breach of law. It was thus observed:
"13. A penal statute or penal law is a law that defines an offence and prescribes its corresponding fine, penalty or punishment. (Black's Law Dictionary, 7th Edn., p. 1421.) Penalty is a liability composed (sic imposed) as a punishment on the party committing the breach. The very use of the term "penal" is suggestive of punishment and may also include any extraordinary liability to which the law subjects a wrongdoer in favour of the person wronged, not limited to the damages suffered. (See Aiyar, P. Ramanatha: The Law Lexicon, 2nd Edn., p. 1431.)"
15. A plain reading of Section 54(1), Table entry 5 of the Act suggests, penalty may be imposed on the selling dealer or the purchasing dealer for non-issue of either the Tax Invoice or the Sale Invoice or the Purchase Invoice. The circumstances in which such penalty may be imposed on the selling dealer are contained in sub-clause (i) of Table entry 5 being, either upon his failure to issue a Tax Invoice or a Sale Invoice or upon his deliberate non-issuance of the those documents. On the other hand, the circumstances in which penalty may be imposed on a registered purchasing dealer are contained in sub-clauses (ii) and (iii) of that Table entry being, either upon his deliberately not obtaining a Tax Invoice from a registered dealer, on purchase made from the latter [(under sub-clause (ii)], or upon non-issuance of a Purchase Invoice to an unregistered selling dealer - on purchase made from such dealer [(under sub-clause (iii)]. However, no penalty may be imposed on a purchasing dealer in case of non-issue of the Sale Invoice (to him), by that registered selling dealer.
16. Therefore, as to the intention or mens rea, as an ingredient for imposition of penalty on a registered purchasing dealer, for not obtaining a Tax Invoice [under sub-clause (ii) of Table entry 5, of section 54(1) of the Act], that act or omission must be deliberate. It is apparent from a plain reading of that provision inasmuch as the word 'deliberately' used therein clearly burdens the revenue to establish ill intent on part of the purchasing dealer, in not obtaining a Tax Invoice.
17. In contrast, for the purpose of sub-clause (iii) a simple failure by a registered purchasing dealer (to issue the Purchase Invoice), to the unregistered selling dealer, would, in itself, constitute and complete the necessary ingredient for levy of penalty, on such a purchasing dealer. Omission of the word 'deliberately' in that sub-clause and absence of any other word to suggest existence of intention or mens rea, clearly excludes it's requirement as an ingredient of penalty under that sub-clause.
18. However, for imposition of penalty for infringements contemplated under sub-clause (i), such intention or mens rea may not be mandatory. Both, a simple failure and also deliberate non-issuance of Tax Invoice or Sale Invoice appear to invite penalty on a registered selling dealer. Thus, mens rea may or may not be an ingredient for imposition of penalty under sub-clause (i). It is in such statutory context, the statute invites a construction, to locate and define the circumstance/s when a registered selling dealer may stand exposed to penalty for non-issuance of a Tax/Sale Invoice.
19. As noted above, the legislature does appear to have treated differently, similar or comparable infringements committed by different persons, depending on their status-whether registered or unregistered and also depending on whether the person committing the infringement was a seller or a purchaser. Thus, in the first place, as the revenue suggests, with respect to a sale transaction, the registered selling dealer may be penalized if he either deliberately does not issue or if he simply fails to issue a Tax Invoice or a Sale Invoice.
20. However, the legislature has treated differently, the same person, in similar or comparable circumstances. Hence, a question arises whether there exists any obligation on the purchasing dealer to do certain positive acts to establish the requirement for issuance of a Tax/Sale Invoice. Further, if such person is not required to do anything in this regard, his inaction, even if proven, may invite a penal action on the selling dealer, in the event of non-issue of a Tax Invoice. In the latter construction, the word "deliberately" used in that sub-clause may be rendered redundant or superfluous, which construction of the statute must, in the first instance, be avoided. Therefore, the nature of obligation and duty cast by the Act with regard to issuance of a Tax invoice; a Sale invoice and; Purchase invoice calls for a deeper and careful scrutiny.
21. Under section 2(aj) of the Act, the term "Tax Invoice" has been defined to mean a "bill or a cash memo issued in the prescribed form and manner by a registered selling dealer to a registered purchasing dealer" or to certain other specified persons. However, Sale Invoice is not defined under the Act. The incidence and levy of tax arise under sections 3, 4 and 5 of the Act, section 22 thereof and the relevant Rules framed under the Act, relate to issuance of Tax Invoice, Sale Invoice and Purchase Invoice.
22. Section 22 of the Act reads as under:
"22. Tax invoice, Sale invoice and Purchase invoice to be issued by a dealer :-
(1) In respect of all taxable goods, except non-vat goods, in the circumstances mentioned below, every registered dealer except a dealer who opts for payment of composition money under section 6, where such dealer is liable for payment of tax on sale of any such goods, shall, while making sale of the goods, issue to the purchaser, tax invoice containing such particulars as may be prescribed including name and complete address and Taxpayer's Identification Number, if any, of the person purchasing the goods, and shall charge separately on such tax invoice the amount of tax payable by him, where such goods are sold to -
(i) a registered dealer; or
(ii) an official or personnel of any foreign diplomatic mission or consulate in India; or
(iii) the United Nations or any other similar International body, entitled to privileges under any convention to which India is a party or under any other law for the time being in force; or
(iv) any consulate or diplomatic agent of any mission, the United Nations or other body referred to in clause (ii) or clause (iii); or
(v) any developer or co-developer of any Special Economic Zone, for use or consumption in the authorized operations:
(2) The dealer selling the goods referred to in sub-section (1) shall prepare tax invoice referred to in sub-section (1) in three copies marked original, duplicate and office copy and shall deliver copies marked original and duplicate to the person purchasing the goods. Copy of tax invoice marked as duplicate shall accompany the goods during transportation of such goods.
(3) All dealers except as provided in sub-section (1), shall issue sale invoice to the purchaser in such manner and containing such particulars as may be prescribed.
EXPLANATION - in this sub-section sale invoice means any invoice in the nature of bill, invoice, cash/credit memo containing such particulars as may be prescribed.
(4) Subject to provisions of sub-section (1) and sub-section (3), every taxable dealer shall, in respect of sale of all goods, where-
(i) sale value of single sale exceeds the amount prescribed in this behalf; or [See Rule 44(4)]
(ii) purchaser of goods demands sale invoice; or
(iii) any other law prescribes for issue of sale invoice in respect of sale of any goods; or
(iv) selling dealer as a practice issues sale invoice in respect of sales made by him, issue to the purchaser sale invoice in the prescribed manner containing such particulars as may be prescribed.
(5) Every dealer referred to in sub-section (1) shall charge amount of tax payable separately on every tax invoice. However, the dealer referred in sub-section (3) may charge tax separately.
(6) Office copy of tax invoice, sale invoice, as the case may be, prepared by the selling dealer and copies of tax invoice, sale invoice, as the case may be, received by the purchasing dealer shall be preserved by them for the period provided under sub-section (3) of section 21.
(7) Every dealer, while making purchase of any goods from a registered dealer, shall give his name, address and Taxpayers' Identification Number, if any, to the selling dealer.
(8) The dealer, making sale of goods to any purchaser referred to in sub-section (1), shall not issue tax invoice to such purchaser unless the purchaser has furnished his name, complete address and Taxpayers' Identification Number.
(9) Where a dealer liable to pay tax makes purchase of any taxable goods from a person other than a registered dealer and if the person selling such goods does not issue cash memo or bill, the purchasing dealer shall issue to the person selling the goods a purchase invoice in respect of such purchase in the prescribed manner containing such particulars as may be prescribed and shall obtain signature or thumb impression of the person selling the goods.
(10) The purchasing dealer referred to in sub-section (9) shall prepare purchase invoice in two copies marked as original copy and office copy. The purchasing dealer shall deliver original copy of such purchase invoice to the person selling the goods and shall preserve office copy of such purchase invoice for the period prescribed under sub-section (3) of section 21."
23. Thus, in the first place, it is not the scheme of the Act to provide for issuance of a Tax Invoice by a registered dealer in the case of every sale made by such dealer. That obligation is, in the first place, governed by the facts whether the goods sold are (i) taxable and (ii) vat-able. If the goods sold are not taxable and/or non vat-able, the selling dealer may not issue a Tax Invoice with respect to the same. Then, the person who may issue a Tax Invoice must be a registered selling dealer who may not have been admitted to compounding under section 6 of the Act. Clearly, that embargo exists to prevent availment of Input Tax Credit by a purchasing dealer of any tax paid (by the seller) on compounded basis, at the immediately preceding stage.
24. Then, even if that condition is satisfied, the selling dealer may issue a Tax Invoice only if the sale is made to a person described under clause (i) to (v) of the sub-section (1) of section 22 of the Act and to no other.
25. As to its format, the Tax Invoice must contain the name and complete address and TIN, if any, of the person purchasing the goods. Correspondingly, under section 22(7) of the Act, the purchasing dealer is obligated to provide to the registered selling dealer, his name, address and TIN. By virtue of sub-section (8) of section 22 of the Act, in absence of those details being made available, the selling dealer is restrained from issuing a Tax Invoice.
26. Then, by virtue of section 22(3) of the Act, all dealers except those falling under sub-section (1) shall issue Sale Invoice to the purchaser. Also, under sub-section (5) while issuing a Tax Invoice, the selling dealer is further obligated to charge amount of tax payable separately on every Tax Invoice, in case of Sale Invoice, tax may or may not charge tax separately.
27. Rule 44(1) of the Rules framed under the Act, prescribes the details to be filled up in the Tax Invoice. Similarly, Rule 44(2) of the Rules prescribes the details to be filled up in the Sale Invoice. Then, the first proviso to sub-Rule 2 provides, in the event of sales made to unregistered dealers, in excess of certain value, other than by account payee cheque, the selling dealer may obtain and retain a copy of the identification proof of the purchaser.
28. Thus, whether a registered selling dealer would issue a Tax Invoice or a Sale Invoice does not depend on the free choice of the contracting parties but, it is predetermined/prescribed by the Act/law. In case of taxable and vat-able goods sold by a dealer (not admitted to compounding), primarily, that obligation hinges on whether the selling and the purchasing dealers are registered dealers or unregistered dealers. While, a Tax Invoice would have to be necessarily issued when a sale is performed between two registered dealers, a Sale Invoice may be issued when the sale is performed by a registered dealer to an unregistered dealer or by a registered dealer (admitted to compounding), to another registered or unregistered dealer.
29. Correspondingly, no unregistered dealer may issue a Tax Invoice. Also, the first proviso to sub-Rule 2 of Rule 44 places a further restriction on the sales performed by a registered dealer to an unregistered purchasing dealer, by requiring proof of identity to be maintained, in certain circumstances - involving issue of a Sale Invoice. On the other hand, in the case of purchase made by a registered dealer from an unregistered dealer, the purchasing dealer is necessarily obliged to issue a Purchase Invoice.
30. Keeping in mind such clear prescriptions made by law - for issuance of a Tax Invoice and/or Sale Invoice, in mutually exclusive circumstances, the obligation cast on the purchasing dealer under section 22(7) of the Act is crucial and in fact decisive and mandatory as to the conduct he must offer, to test the allegation of breach/infringement of law, levelled against a selling dealer in not issuing a Tax Invoice. The selling dealer may only react to the action taken or representation made by the purchasing dealer. Only after the purchasing dealer voluntarily discloses to the selling dealer all details required to be furnished under that provision, can the latter become aware of the facts that alone may give rise to his legal obligation to issue a Tax Invoice.
31. It is so, because a Tax Invoice cannot be issued generally, but only in circumstances specified under sub-Section (1) of section 22 of the Act. The status of his own registration and the fact of (his) not being admitted to the benefit of compounding as also the nature of goods being sold by him-whether taxable and vat-able, may be presumed to be always known to the selling dealer, from before. No disclosure is required to be made by the purchasing dealer in that regard. However, that is not enough for the registered selling dealer to discharge his obligation to issue a Tax Invoice.
32. Both by virtue of stipulation made under Section 22(7) & (8) of the Act as also from a common sense/practical point of view, the name, address, TIN and other facts as may give rise to the obligation under clauses (i) to (v) of Section 22(1) of the Act, by very nature of those informations, would have to be disclosed to the selling dealer, by the purchasing dealer only.
33. The selling dealer has no means to learn of those facts, on his own and therefore, he may never be saddled with that obligation. It would be wholly unreasonable to expect him to either have the industry or the requirement to make such exact inquiries, while conducting his business of trading in goods. To cast such an obligation on the selling dealer would be to impose an unreasonable condition and in the context of trading activities and also the value added scheme of taxation, an unnatural condition as may, if allowed to exist, obstruct free trade in goods.
34. Facts specified under section 22(1)(i) to (v) and 22(7) of the Act are special facts known to the person to whom they pertain i.e. the purchasing dealer. Uptill after the purchasing dealer discloses those facts to the selling dealer or unless those facts are known to the selling dealer from before - arising from past dealings or other circumstance, the selling dealer may remain oblivious to those special facts in the knowledge of the purchasing dealer. In the absence of such a disclosure being made by the purchasing dealer, in the context of the statutory provisions as noted above, the selling dealer may assume, such a purchaser to be an unregistered dealer.
35. Therefore, no legal obligation or penal action may automatically arise or visit the selling dealer upon non issuance of a Tax Invoice. In fact he would be at no fault to presume the general fact/status-of the purchasing dealer being unregistered and consequently, in issuing a Sale Invoice, unless the special fact is first made known or disclosed to him. That has to be the plain effect of Section 22 of the Act.
36. By way of corollary, a purchasing dealer who approaches a selling dealer for purchase of goods for his business needs, cannot compel such selling dealer to issue a Tax Invoice, though the Act may mandate its issuance, in given facts. The Act does not forbid a purchasing dealer from making purchase of those goods. It only compels the purchasing dealer to make known to the selling dealer of facts specified in sections 22(1)(i) to (v) and section 22(7) of the Act.
37. Once, the purchasing dealer has discharged that obligation, the Act does not require him to make any other or further compliance. Thereafter, the obligation arises on the selling dealer to make further compliance of law by issuing the Tax Invoice. The Act does not prescribe or alter the manner in which a business transaction be entered between contracting parties.
38. Keeping that scheme of the Act in mind, different obligations have been created on the selling and the purchasing dealers in different circumstances. They call for different penal consequences. Thus:-
(a) in the event a registered selling dealer (not admitted to compounding), sells goods that are taxable and vat-able to a person described under clauses (i) to (v) of the sub-section (1) of section 22 of the Act, he 'may be' exposed to penal consequences (irrespective of the consequences that may follow the purchasing dealer), for failure to issue or for deliberately not issuing a Tax Invoice [under clause (i) of section 54(1)(5) of the Act].
(b) however, before the registered selling dealer may become obliged to issue a Tax Invoice, the purchasing dealer must have disclosed to that selling dealer or the latter must be shown to know from before, the facts specified in section 22(1)(i) to (v) and/or section 22(7) of the Act. Otherwise, the selling dealer would not be obliged issue a Tax Invoice. It that case, he would assume the purchasing dealer to be an unregistered dealer and issue a Sale Invoice. In that case there would be no breach on part of the selling dealer in not issuing a Tax Invoice. No penalty shall be imposed on the registered selling dealer for not issuing a Tax Invoice.[clause (i) of section 54(1)(5) of the Act read with section 22(1) (i) to (v) and section 22(7) & (8) of the Act] and Rule 41(1) and Rule 41(2) of the Rules]
(c) However, in such circumstance [noted in point (b) above], or while transacting a sale to an unregistered dealer, if the registered selling dealer fails to issue a Sale Invoice, it may attract penalty on him for the breach of failure to issue a Sale Invoice. [clause (i) of section 54(1)(5) of the Act read with section 22(1) (i) to (v), section 22(3) and section 22(7) & (8) of the Act].
(d) also, in the fact scenario noted in point (b) above, if the purchasing dealer though registered or one covered under section 22(1)(i) to (v) of the Act, did not disclose such fact/s and details to the registered dealer he may be penalised for the breach of deliberately not obtaining a Tax Invoice [under clause (ii) of section 54(1)(5) read with section 22(7) of the Act].
(e) if however, it is found, the registered selling dealer had colluded with the purchasing dealer and the Tax Invoice was not issued as a result of such collusion, both dealers may be equally exposed to penal consequences - for the breach of not issuing and not obtaining the Tax Invoice [under clauses (i) and (ii) of section 54(1)(5) of the Act].
(f) if a registered purchasing dealer fails to issue a Purchase Invoice to an unregistered dealer, while making purchase from the latter, he may be penalised for breach of not issuing a Purchase Invoice [under clause (iii) of section 54(1)(5) of the Act].
39. Therefore, the difference between the words 'failure' and 'deliberately' appearing in sub-clause(i) of section 54(1)(5) of the Act is not relevant to the consequence that may visit the registered selling dealer but, it may, in case of collusion be relevant as to the consequence that may follow on the purchasing dealer. Also, all penalties under section 54(1)(5) of the Act are discretionary and not mandatory. Such discretion has to be exercised on accepted and established norms.
40. Turning to the facts found by the Tribunal in the present case, the assessee/appellant had from the very beginning stated, he had performed 68 sale transaction to unregistered dealers. Upon inquiry 64 of such transactions were found to have been performed with unregistered dealers. For the remaining four, the assessee had further claimed, the purchasing dealers had not provided their TIN details and, therefore, they had to be treated as unregistered dealers.
41. There is no material on record or denial of such fact assertion. The revenue had not led any evidence to establish either that the appellant was aware of the registration granted to any of those four purchasing dealers. Consequently, in the context of the penalty provision, it had to be inferred, at the relevant time the assessee was not aware of the fact of the four purchasing dealers being registered dealers. Therefore, it could never be said that the appellant had either failed to or had deliberately not issued a Tax Invoice to such dealers or that there was any collusion between the parties.
42. The assessee rightly assumed those purchasing dealers to be unregistered dealers. The appellant did issue Sale Invoice against each of the four disputed transactions. Absence of any statement of the purchasing dealer to establish, they had informed the applicant of the facts specified under sections 22(1)(i) to (v) and 22(7) of the Act, clearly absolved the appellant - a selling dealer from any liability under sub-clause (i) of Table entry 5 of Section 54(1) of the Act. Thus, facts found by the Tribunal clearly make this case fall in category (b) considered in paragraph 38 of this order.
43. Consequently, question nos.1 and 2 are answered in the negative i.e. in favour of the assessee and against the revenue.
44. Accordingly, the present revision is allowed. No order as to costs.
Order Date :- February 22, 2019 Abhilash