SAPHIRE ENTERPRISES Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) This petition under Section 65(1) of the Karnataka Value Added Tax Act, 2003 (hereinafter referred to as 'the Act' for short) has been filed by the petitioner against the order dated 15.12.2017, passed by the Karnataka Appellate Tribunal. The appeal was admitted by a Bench of this Court vide order dated 01.02.2018, on the following substantial questions of law:

(2.) Facts giving rise to the filing of this petition, briefly stated, are that the petitioner is a dealer registered under the Act and wholesale distributors of cigaretts for M/s. ITC Limited, Bengaluru. The petitioner has been filing vat monthly returns and discharged applicable taxes within due date. On 06.10.2015, the petitioner dispatched cigarettes of different brands for an amount of Rs.3,57,61,657/- from the principal place of business in Sheshadripuram to the branch situated at Attibele, by goods vehicle bearing Reg.No.TN- 45/BF-9970. The goods in question are 'notified goods' under the Act. The petitioner entered all the details of stock transfer including the quantity and value of the goods in the Commercial Tax website much before the commencement of movement of the goods in accordance with law and e-sugam was also generated. The driver of the vehicle carried all prescribed documents including stock transfer notes, e- sugam, etc. It is the case of the petitioner that its godown at Attibele is situated much before the Karnataka-Tamilnadu border and the driver of the vehicle had to take the service road below the last flyover to reach the petitioner's godown. However, the driver, inadvertently, took the flyover instead of moving below the flyover and landed at the toll gate. It is the case of the petitioner that the driver paid the toll fee and proceeded further looking for a U-turn to return back to regular route. The driver proceeded on the second U-turn which was the last available U-turn just before the Karnataka-Tamilnadu border which is about 150 meters away from the exit toll. It is the further case of the petitioner that while the driver was approaching the second U-turn, the driver was not aware that he was to stop at the Karnataka border check-post. The driver, therefore, came back to regular route without crossing the Karnataka State border. The check-post officer intercepted the vehicle. Thereupon the driver of the vehicle furnished all the documents prescribed under the law for verification by the check-post officer.

(3.) It is the case of the petitioner that no discrepancies were found by the check-post officer with regard to the quantity of goods, value of goods and nature of goods and the documents were found in conformity with the requirement as prescribed by law. However, since the driver did not stop the vehicle at the exit check-post in the State of Karnataka, the check-post officer issued notice proposing to levy penalty solely on the ground that the goods were being taken away to the State of Tamilnadu and an apprehension was raised that an attempt was made to evade the taxes. The petitioner filed a reply to the aforesaid notice on 20.10.2015, in which it was pointed out that the transaction is one of stock transfer, not involving sale of goods and consequently the transaction is exempted and hence, the question of attempt to evade the taxes, did not arise. It was further pleaded that the vehicle reached a wrong route due to inadvertence of the driver. The Commercial Tax officer, however, by an order dated 21.10.2015, levied penalty of Rs.1,07,34,904/- on the basis of presumption that the vehicle would have crossed the Karnataka State border. The petitioner assailed the aforesaid order of penalty in an appeal before the First Appellate Authority, which was dismissed by an order dated 27.05.2017. Thereupon, the petitioner approached the Tribunal. The Tribunal by an order dated 15.12.2017, has reduced the quantum of penalty to the amount of tax on the ground that the penalty is not automatic. In the aforesaid factual background, this petition has been filed.