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Judgment
Heard learned senior counsel for the petitioner company and learned counsel for the respondent State.
The petitioner company is aggrieved by the impugned order of penalty dated 29.1.2016, passed by the respondent No. 3, Deputy Commissioner,
Commercial Taxes, South Circle, Ranchi Division, Ranchi, whereby penalty of Rs. 10,43,43,655/- was imposed upon the petitioner company, under
Section 40(2) of the JVAT Act, for the alleged concealment of purchases made by the company to the tune of Rs. 69,56,24,365.36, which, according
to the Assessing Authority were taxable due to the fact that the goods were purchased for being sold, on which no tax was paid. Upon appeal filed
against the said order of penalty, the Appellate Authority confirmed the order, by its order dated 24.5.2016, and the revision, filed against the same,
was also dismissed by the Commercial Taxes Tribunal, Jharkhand, Ranchi, (herein after referred to as the 'Tribunal'), by Judgment dated 17.4.2017,
passed in Revision Petition No. RN 88 of 2016.
Aggrieved thereby, the present writ application has been preferred.
The facts giving rise to the present writ application are that the petitioner company was engaged in the business of installation and transmission of
electricity and was granted transmission license, under Sections 14/15 of the Electricity Act, 2003, for the purposes of installing the transmission line in
the span of 111 Kms. in the State of Jharkhand, for which, work contract was also issued to the petitioner company. In order to satisfy the work
contract, the petitioner company was required to make purchases of the capital goods from outside the State of Jharkhand and to bring those materials
within the State of Jharkhand for installation of the transmission facilities. The petitioner company applied for registration, under the JVAT Act and
though, it was granted registration on 15.11.2014, but the said registration was mistakenly obtained under the category ‘Wholesale and Retail
Trade’, which necessarily indicated that the purchases that were made by the petitioner company were meant for sale. On realising the mistake,
an application for amendment of the registration certificate was also filed by the petitioner company, but no order could be passed thereon. In the
meantime, the petitioner company purchased the goods worth Rs. 69,56,24,365.36 from outside the State of Jharkhand, which were brought into the
State of Jharkhand, by using 356 numbers of Sugam-G challans. As it was detected that these purchases were not shown in the returns filed by the
company, accordingly, treating these purchases to be concealed by the company and also treating these purchases to be meant for sale of the goods,
the tax on these purchases were assessed at Rs. 3,47,81,218.27, and based thereon, three times penalty of Rs. 10,43,43,655/- was imposed upon the
petitioner company, under Section 40(2) of the JVAT Act. The demand notice was issued only for the penalty, which clearly gave the indication that
the assessment of the tax was notional, only for the purpose of determining the amount of penalty.
It is pointed out by learned senior counsel for the petitioner company that the registration of the petitioner-company under the category
‘Wholesale and Retail Trade’ was by mistake and the registration ought to have been under 'Power Transmission', for which application for
amendment of the registration certificate was also filed by the petitioner company. It is also pointed out to us that there was no tax liability to the
petitioner company for the purchases made, and the mistake in filing the return was also rectified, but without taking into consideration these facts, the
penalty was imposed upon the petitioner company, even though, there was no tax liability to the petitioner company.
In course of arguments, it was canvassed before us by learned senior counsel to the petitioner that the tax liability was only calculated on a notional
basis, only in order to assess the amount of penalty, and the tax was never levied from the petitioner. Learned senior counsel for the petitioner had
placed reliance upon the decision of the Hon’ble Apex Court in Mukerian Papers Ltd. Vs. State of Punjab, reported in (1991) 2 SCC 58,0 laying
down the law that once there was no tax liability, there could be no question of penalty or interest on the unpaid amount of tax.
In course of arguments on 27.11.2019, in view of the submission that there was no assessment / demand order with respect to the tax liability,
learned counsel for the State sought for time in order to ascertain whether in fact any assessment order had been passed or not. Time was allowed to
learned counsel for the State and the matter was adjourned. On 2.12.2019, when this matter was again taken up, learned counsel for the State came
out with an assessment order dated 28.3.2019, imposing the tax liability upon the petitioner company, with which, prima facie we were not satisfied
and accordingly, we called for the concerned file to be produced before the Court on the next day. On 3.12.2019 the concerned file was produced
before us, and in course of arguments, learned Advocate General intervened in the matter and on the basis of submission of learned Advocate
General, the following order was passed on 3.12.2019:-
Having heard the matter at length, learned Advocate General intervened in the matter and submitted that an opportunity be given to the
authorities concerned to revisit the impugned order and to review the same on merits.
At the request of the learned Advocate General, we adjourn the matter for a period of four weeks, giving the liberty to the concerned
authorities to revisit the impugned action and to take final decision on merits.
It goes without saying that no coercive steps shall be taken against the petitioner in the meantime.
Put up the matter on 08th January, 2020.
Pursuant to the aforesaid order, a supplementary counter affidavit has been filed by the respondent-State, which shows that the Secretary-cum-
Commissioner, Commercial Taxes, Government of Jharkhand, Ranchi, had authorized the Assessing Authority, i.e., the Deputy Commissioner,
Commercial Taxes, South Circle, Ranchi Division, Ranchi, to review the order of assessment of tax. The Assessing Authority accordingly, revisited
the matter and has passed the amended assessment order dated 3.1.2020, which has been brought on record as Annexure-B to the supplementary
counter affidavit. A bare perusal of this order shows that all the documents have been considered and revisited by the respondent No. 3, the Deputy
Commissioner, Commercial Taxes, South Circle, Ranchi Division, Ranchi, who has given the finding that the registration of the petitioner company
under the JVAT Act had been corrected under the heading ‘Power Transmission’ with effect from 15.11.2014 itself. The Assessing Authority
has also held that the documents clearly showed that the petitioner company was engaged in the business of power transmission and the purchases
were also made by the company of the capital goods for the purposes of distribution / generation of electricity, and the goods purchased were never
sold. Taking into consideration these facts, the reassessment order has been passed, fixing the tax liability of the petitioner as 'Nil', and only due to the
fact that the returns were filed after the delay of 64 days, the penalty of Rs. 640/- has been imposed upon the petitioner company.
In the supplementary counter affidavit, by which, this order has been brought on record, it is stated that the penalty order is independent of the
assessment order, which has been upheld up to the Tribunal, and in such circumstances, it may be appropriate that the legality of the penalty order /
impugned order may be adjudicated by this Court.
In view of the aforesaid fresh developments that have taken place during the pendency of the writ application, which have been brought on record,
we find that the stand of the petitioner company has been ratified by the concerned authorities and it has been found that the petitioner company is
engaged in the business of power transmission only, and whatever goods were purchased by the petitioner, were the capital goods for installation and
transmission of the electricity in the State of Jharkhand. These goods were never sold by the petitioner company, and the Assessing Authority has
found the tax liability of the petitioner, to be 'Nil'. As such, the very basis on which the penalty was imposed upon the petitioner company, does not
exist anymore.
The original order dated 29.1.2016, imposing penalty, shows that under Section 40(2) of the JVAT Act, the penalty equal to three times the amount
of tax payable was imposed. In view of the fact that the tax liability has now been found to be 'Nil', we find that no penalty could be imposed upon the
petitioner company for the simple reason that 'Nil' multiplied by three, shall also be 'Nil' only. We are also fortified by the decision of the Hon’ble
Apex Court in Mukerian Papers Ltd.'s case (supra), laying down the law that once there was no tax liability, there could be no question of penalty or
interest on the unpaid amount of tax.
For the foregoing reasons, the impugned order dated 29.1.2016, imposing penalty upon the petitioner company, the order passed by the Appellate
Authority dated 24.5.2016, as well as the Judgment dated 17.4.2017, passed by the Tribunal, in Revision Petition No. RN 88 of 2016, as contained in
Annexures-6, 8 and 9 respectively, to the writ application, are hereby, set aside.
It goes without saying that the statutory amount deposited by the petitioner company, while filing the appeal against the penalty order, shall be
refunded to the petitioner with the statutory interest thereon till the date of the refund of money.
This writ application is accordingly, allowed with the direction as above.