Ambey Metallic LTD., Thr. Its Managing Director, Sunil Garg. vs. State, Thr. The Chief Secretary And 2 Ors.

Held

The Court allowed the petition and set aside the impugned order. The application dated November 14, 2017, filed by the petitioner was dismissed as withdrawn. The Court noted that the material dispute regarding the petitioner's liability and entitlement to input tax credit was pending before the Assistant/Additional Commissioner of Commercial Taxes, and no prosecution had been initiated. Therefore, the application for compounding under Section 43 of the Act of 2000 was not competent. The Court emphasized that the pending appeals before the Assistant/Additional Commissioner of Commercial Taxes would be decided on their own merits. The rival contentions of the parties were left open, and there was no order as to costs. The ratio is that where a substantive dispute is pending adjudication before the appropriate forum and no prosecution has been initiated, an application for compounding of an offence, especially one not provided for under the relevant section, may be premature and can be withdrawn, with the substantive appeals to proceed on merits.

Facts

The petitioner, Ambey Metallic Ltd., is a dealer with a manufacturing unit. Prior to June 1, 2013, goods used as raw material/capital goods were taxed at 0.3% under the Goa Tax on Entry of Goods Act, 2000. The petitioner claimed input tax credit for Value Added Tax (VAT) assessment based on this rate. The entry tax rate was enhanced to 2% effective June 1, 2013. The petitioner claims to have been unaware of this enhancement and continued to pay entry tax and claim input tax credit at the old rate. The respondents raised claims for the difference in entry tax. The petitioner filed an application on November 14, 2017, for compounding of the offence of short declaration/payment of entry tax for the period April 1, 2013, to June 30, 2017, and sought adjustment of excess VAT paid against the short entry tax payment. The Commissioner rejected this application by an order dated October 31, 2018, primarily on the ground that only entry tax "paid" is eligible for input tax credit. This order is under challenge.

Key Issues

1. Whether the Commissioner was justified in rejecting the petitioner's application for compounding of the offence and adjustment of excess VAT paid against short entry tax, considering that the material dispute regarding the petitioner's liability and entitlement to input tax credit is pending before the Assistant/Additional Commissioner of Commercial Taxes and no prosecution has been initiated. The petitioner argued that the application for compounding was filed out of inadvertence, that Section 43 of the Act of 2000 does not provide for compounding of offences, and that the Commissioner's observations in the impugned order might prejudice their pending appeals. The petitioner also stated they were withdrawing the application. The respondents, through the Additional Government Advocate, did not dispute that the material dispute regarding liability and input tax credit entitlement was pending before the Commissioner and stated the Court could pass appropriate orders.