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15 Jul 2016

Imposition of penalty on account of a discrepancy in the ‘batch numbers’ and ‘date of manufacture’ is unjustified

High Court of Judicature at Allahabad on 12-July-2016, in the case of M/s Hindustan Coca Cola Beverage Pvt Ltd vs The Commissioner, Commercial Taxes (2016-VIL-367-ALH) (Sales/Trade Tax Revision No. 119 of 2016 along with Revision no. 120-129 of 2016) has held that imposition of penalty upon the assessee on account of a discrepancy in the batch numbers and date of manufacture is clearly unjustified and unwarranted in the facts and circumstances of the case.

The High Court set aside the order of the assessing authority dated 31 July 2009, the order of the first appellate authority dated 19 August 2013 and that of the Tribunal dated 15 January 2016.Further, the revisionist shall be entitled to the refund of the amounts deposited towards penalty.

The order of the Tribunal dated 15 January 2016 upholding the imposition of penalty upon the revisionist-assessee, was challenged by the said batch of commercial tax revisions. The proceedings in the said case relate to seizure of goods being dispatched by the revisionist and a consequential levy of penalty under Section 48(5) of the U.P. VAT Act, 2008 (VAT Act).

In the said case the issue was that, during the peak summer months there is a heightened demand for soft drinks as a result of which the revisionist is compelled to engage additional contract labour on a temporary basis at its factory at Dasna, District Ghaziabad. This labour is engaged for loading and dispatching of consignments to its various stockists and distributors situate across the States of U.P. and Uttarakhand. It was the case of the revisionist that the dispatches of soft drinks were duly accounted for in the Books of Account and that all transactions stood duly reflected in the records maintained by it. During the course of oral submission, learned counsel for the revisionist pointed out that following international practices the tax invoices accompanying each consignment also carried the "date of manufacture" as well as the "batch number" of the soft drinks and beverages. Learned counsel for the revisionist pointed out that during the course of loading and dispatching of consignments, the additional labour inadvertently placed certain consignments and packages meant for a particular truck onto other trucks which upon seizure led to the Department claiming that there was a discrepancy in the "date of manufacture"/"batch number" details mentioned in the tax invoices when compared with the actual consignments loaded on the truck. It was these discrepancies which primarily led to the seizure of consignments and ultimately culminated in orders imposing penalty. The assessing authority not accepting the explanation furnished by the revisionist proceeded to levy penalty on the errant consignments constraining the revisionist to prefer appeals which came to be dismissed by the first appellate authority.

Aggrieved by the decision of the first appellate authority the revisionist preferred Second Appeals before the Tribunal which dismissed as many as six appeals by a common judgment and order dated 15 January 2016.

Learned counsel for the revisionist submitted that Rule 44 of UP VAT Act nowhere requires the disclosure of the batch number or date of manufacture of the goods in question. The requirement of mention of a “batch number” and “date of manufacture” are statutory requirements placed by and under a separate statute. Further, there was no intention to evade payment of tax and therefore also the order of the assessing authority as affirmed by the Tribunal as well as the first appellate authority were rendered unsustainable.

Based on the submissions of the Learned counsel, the High Court allowed the said revision and held that the orders of the assessing authority, the first appellate authority as also that of the Tribunal sustaining the levy of penalty upon the revisionist, therefore cannot be sustained.