K. Ashok Babu, Chairman -
(1.) ASSAILING the levy of penalty @ 100% u/s. 53(ii) of the APVAT Act, 2005 (hereinafter referred to as the Act) on the tax of Rs. 41,250/ - by the ld. Deputy Commissioner (CT), Charminar Division, Hyderabad, on 21.9.2010 in R.R. No. 3/2010 -2011, the unsuccessful appellants have preferred the appeal on hand contending, inter alia, that there visional authority having not verified the genuineness of the transactions and the facts of the case and not given an opportunity of hearing to find out whether or not there was mens rea , which was a necessary component for levy of penalty and which was absent, such an order is not sustainable and is liable to beset aside. Having noticed during the course of VAT Audit of the appellants' accounts on 12.1.2009 that certain delivery challans were issued for which subsequent sale invoices were not raised on a turnover of Rs. 3,30,3000/ -, the Audit Officer/DCTO, Charminar Circle levied and collected a tax of Rs. 41,250/ - and a penalty of Rs. 10,312/ - @ 25%. However, the Deputy Commissioner (CT), Charminar Division, Hyderabad, issued a show cause notice to the appellants on 4.5.2010 proposing enhancement of the penalty from 25% to 100% amounting to Rs. 41,250/ - which was served on the appellants on 25.9.2010. In response to it, the appellants filed objections by their letter dated 4.5.2010 contending, inter alia, that the appellant having already paid the tax and penalty levied and confirmed by the Audit Authority, the question of revision of penal proceedings did not arise as they were outside the scope of the revisional powers. However, the ld. Deputy Commissioner (CT), Charminar Division, though, heard the appellant's Counsel on 28.6.2010 and received the letter filed by him on 29.6.2010, reiterating his earlier contentions, found that the reply submitted by the appellants was not acceptable as they had already accepted their mistake about the sales made on delivery challans without raising sale invoices and not, recording those transactions in the Books of Accounts, that it was clearly established that delivering the goods in that manner was with an intention to evade tax and that it was a clear -cut case of a 'willful neglect' and 'fraud' as covered by Sec. 53(3) of the Act and rejected the appellants contentions and confirmed the proposed revision u/s. 32(1) and (2) of the Act read with rule 50 and 51 of the APVAT/Rules, 2005 and passed the impugned order enhancing the penalty from 25% to 100%. But, while doing so, the ld. Deputy Commissioner, Charminar Division, did not record a finding how the appellants splayed a 'fraud' or 'willful neglect' by his omission or commissions relating to the sales made on delivery challans and not raising sale invoices and not recording them in the Books of Accounts which, as explained by the appellants, was due to their Auditor, looking after the Books of Accounts, having been out of station on account of which delivery challans were issued. Had it been a case of 'willful neglect' or 'fraud' as found by the ld. Deputy Commissioner (CT), Charminar Division, the Audit Officer/D.C.T.O., would have certainly mentioned about it in his assessment order dated 12.1.2009 when he levied and collected tax of Rs. 41,250/ - and a penalty of Rs. 10,312/ - @ 25% u/s. 53(3) of the Act. In the absence of a clear recording a finding of 'fraud' or 'willful neglect' by the Audit Officer, who levied a penalty of Rs. 10,312/ - u/s. 53(1)(ii) of the Act and there being no additional material before the ld. Deputy Commissioner (CT), Charminar Division, except the objections filed by the appellants, which could not have been construed as admissions for enhancing the penalty and their having remitted the entire tax of Rs. 41,250/ - and penalty of Rs. 10,312/ - as levied and collected by the Audit Officer on the spot, the ld. Deputy Commissioner (CT), Charminar Division, should not have revised it by enhancing it from 25% to 100% by invoking her powers u/s. 32(1) & (2) of the Act read with rule 50(2) of the Rules which could have been exercised only for revision of orders relating to assessments but not orders relating to penalties.
(2.) MOREOVER , as held by the High Court of Andhra Pradesh in Delta Lubricants Vs. DCTO : (2006) 147 STC 463), tax as well as penalty cannot be imposed by the same order and 100% penalty cannot be imposed without there being a finding in the notice/order that the appellant committed 'fraud' or will neglect' which is an essential ingredient of Sec. 53(3) of the Act and, therefore, the penalty as imposed was without jurisdiction and was liable to be quashed. In the instant case, the ld. Audit Officer did not give any opportunity of hearing to the appellants when he audited the Books of Accounts of the appellants on 12.1.2009 and levied tax of Rs. 41,250/ - and penalty of Rs. 10,312/ - by the same order dated 12.1.2009 and collected it on the spot, without giving any time for reflexion, and it appears to have been remitted by the appellants finding no other alternative. Likewise, the ld. Deputy Commissioner, too, revised the order of the Audit Officer u/s. 32(4) of the Act read with rule 50(2) of the Rules without there being any new material about the 'willful neglect' or 'fraud' allegedly committed by the appellants but merely relying on their own objections, construing them to be admissions and enhanced penalty from 25% to 100% u/s. 32(4) of the Act which provision is applicable only to enhancement of orders relating to assessments but not to that of penalties and even while doing so, she did not pass a speaking order in rejecting the appellants contentions or justifying her findings in enhancement of the penalty from 25% to 100%. For the foregoing reasons, we reach the irresistible conclusion that the orders rendered by both the ld. Deputy Commissioner (CT), Charminar Division, and the Audit Officer/D.C.T.O., Charminar Circle, are not sustainable in law for want of jurisdiction and they are, accordingly, set aside by allowing the appeal as prayed for, ordering refund of the penalty of Rs. 10,312/ - to the appellant forthwith.
(Dictated to Personal Assistant, transcribed by him, corrected and pronounced by us in the Open Court on this the 21st day of October, 2011).;