Anantha Refinery Private Limited, Challakere, Chitradurga District vs State by Commissioner of Commercial Taxes, Bangalore

M.F. Saldanha, J.-We have heard the learned Counsels on both the sides in this appeal. The very brief facts giving raise to the controversy are that the appellants had consigned edible oil through a goods vehicle No. CQB-6381 on 16-9-1994. It is their case that when the vehicle passed through the check-post at Davanagere, an officer of the department of sufficiently high in rank who happened to be there had checked the documents, found them in order and had permitted the truck to go. A couple of hours later when the vehicle was checked at the Nippani check-post, the department''s officer is supposed to have examined the type of oil which the tanker was carrying. He came to the conclusion that it was groundnut oil and not sunflower oil as indicated in the documents and consequently, a penalty of Rs. 34,960/- was levied. The appellants paid the penalty and it is their contention that they did this because the consignment was time bound and that they could not afford to detain the tanker by disputing the correctness of the ground on which the penalty was levied at that time. Subsequently, the appellants have contested the levy of penalty and since they were unsuccessful at that stage, have finally moved this Court by way of an appeal.

The principal contention raised by the appellants'' learned Counsel is that, the vehicle was checked at the Davanagere check-post shortly before it had reached the Nippani check-post, that it has happened on the same day and that the findings subsequently recorded which formed the basis of the penalty order, namely, that the tanker contained groundnut oil and not sunflower oil are totally unjustified. The first submission is that if the department''s own officers found everything to be in order at the Davanagere check-post, that there is really no warrant for a diametrically opposite conclusion being recorded by some other officer of the same department in respect of the same vehicle and the same consignment on the same day and in the course of the same journey.

The learned Government Advocate was quick to point out that there is nothing to prevent the appellants from altering the contents of the tanker and that consequently, merely because it was passed at the Davanagere check-post that there is no guarantee that the contents of the tanker were identical when it reached the Nippani check-post. We do see considerable justification in this submission and we have also taken note of the fact that the department is required to undertake a summary examination and that there is every possibility that the officer at the Davanagere check-post having trust in the appellants did not physically check the nature of oil that the tanker contained. Under these circumstances, we do not see any substance in this contention.

The next submission canvassed was that the appellants seriously dispute the finding that it was groundnut oil and the appellants'' learned Counsel submits that they were entitled to tax exemption because it was a new unit and that the only oil being extracted in that unit was sunflower oil. Furthermore, it is his submission that if the department contended that it was some other oil, then the onus of establishing that fact shifts to the department and that only after this misstatement is established, can the penalty be justified.

The learned Government Advocate relies on two facts, the first being that the officer had taken a sample of the oil, that he had smelt it and after carrying out this examination he came to a clear conclusion that it was groundnut oil and not sunflower oil. Consequently, what the learned Counsel submits is that, the appellants did not dispute the conclusion arrived at and we do find a reference in the earlier order wherein it is stated that on the other hand, the appellant is willing and voluntarily accepted that position and then paid up the penalty. In response to this last submission, the appellants'' learned Counsel submits that this was virtually under compulsion because the appellants were in no position to delay the consignment until the controversy was resolved and that this was the reason why they had to pay the penalty. His submission is that irrespective of this fact that if the imposition of the penalty was unjustified in law that they are still entitled to dispute the validity of the same.

The short point that arises in this appeal is the question as to whether the department was justified in levying the penalty on the basis of the conclusion that the oil in question was not sunflower oil and that it was groundnut oil. The onus of establishing this fact is undoubtedly on the department and if in a commodity of this kind the department contended that it does not conform with what the documents declare it be, then it is up to the department to have established the correctness of its officer''s conclusions. The learned Government Advocate was quick to point out that there are no facilities available at areas such as check-posts to carry out the requisite analysis and that therefore the simple smell test would suffice. The possible inaccuracy of such a situation is demonstrated from the fact that the appellants'' learned Counsel submitted before us that these oil tankers carry different types of edible oil and if the previous consignment was one of groundnut oil, there was every possibility of the same smell carrying over. We do not propose to enter into any discussions with regard to the possibility beyond recording that the mere smell test that was used was certainly inadequate and inconclusive and that consequently, the imposition of the penalty was unjustified. We need to observe in passing that the department could always have drawn a sample and got it analysed so that it could have conclusive evidence on record if the imposition of the penalty has been disputed.

Having regard to the above said conclusion, the imposition of the penalty is held to be unjustified and the appeal succeeds. The appellants would accordingly be entitled to refund of the penalty amount. In the circumstances of the case, there shall be no order as to costs.