HIGH COURT OF JAMMU & KASHMIR AND LADAKH

AT SRINAGAR

STR No. 1/2024

Dated: 28

th

of July, 2025.

1. Commissioner State Taxes,

J&K Government,

Excise & Taxation Complex,

Solina, Rambagh, Srinagar/

Rail Head Complex, Jammu.

2. Assessing Authority, Commercial Taxes Check Post,

Lower Munda, Kashmir

[Presently State Tax Officer,

Office of Dy. Commissioner, State Taxes

(Enforcement) South, Lower Munda, Kashmir].

… Petitioner(s)

Through: -

Mr Mohsin-ul-Showkat Qadri, Sr. AAG with

Ms Maha Majeed, Assisting Counsel.

V/s

M/s Reliance Jio Infocomm Limited,

Drangbal Pampore,

Principal Place 1

st

Floor K. C. Plaza,

Residecy Road, Jammu.

… Respondent(s)

Through: -

Mr Sachin Sharma, Advocate.

CORAM:

Hon’ble Mr Justice Sanjeev Kumar, Judge.

Hon’ble Mr Justice Sanjay Parihar, Judge.

(JUDGMENT)

Sanjeev Kumar-J:

01. This is a Petition by the Commissioner, State Taxes, J&K

Government and Another, filed under Section 12-D of the Jammu &

Kashmir General Sales Tax Act, 1962 [“the GST Act” for short] read with

Section 6 of the J&K Entry Tax on Goods Act, 2000 [“the Act of 2000”] for

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seeking a direction to the J&K Sales Tax (Appellate) Tribunal [“the

Tribunal”] to refer the following questions of law:

“(a) Whether the findings returned by the J&K Sales

Tax (Appellate) Tribunal are perverse keeping in view the law

laid down by the Apex Court holding/ observing that the source

of power is not specifically referred to or a reference is made to

a wrong provision of law, that by itself does not vitiate the

exercise of power so long as the power does exist and can be

traced to a source available in law; and

(b) Whether invoking of section 67 (1) (o) of the J&K

VAT Act, 2005 by the Assessing Authority instead of invoking

section 17 (1) (o) of the J&K GST Act, 1962 renders the order

passed by the Assessing Authority as well as proceedings

vitiated, more particularly section 17 (1) (o) of the J&K GST

Act, 1962 is pari-materia to section 69 (1) (o) of the J&K Vat

Act, 2005, in view of the law laid down by the Supreme Court

of India in case reported as in Ram Sunder Ram v. Union of

India (2007) 13 SCC 255.”

02. Before we advert to the questions of law sought to be referred

by the Petitioners herein to the High Court, we deem it appropriate to give a

brief factual background leading to the filing of this Petition.

03. Vide Order dated 16

th

of December, 2016 passed by the

Assessing Authority, Commercial Taxes Check Post, Lower Munda [“the

Assessing Authority”], a penalty to the tune of Rs.1,48,17,658/- was

imposed upon the Respondent-Company purportedly under Section 69 (1)

(o) of the J&K VAT Act, 2005 [“the Act of 2005”]. The penalty was

imposed in reference to an incident which took place on 15

th

of November,

2016 when a vehicle carrying the goods of the Respondent-Company was

intercepted at Lower Munda Check Post and it was found that the goods

carried by the vehicle had not been cleared at the Commercial Taxes Check

Post, Lakhanpur.

04. On the failure of the driver of the vehicle to produce the

documents evidencing the clearance of goods/ vehicle at Lakhanpur Check

Post, the goods were detained and proceedings under the Act of 2005 were

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initiated. Accordingly, notice under Sections 67 (10) and 69 (1) (o) of the

Act of 2005 were issued to the Respondent-Company.

05. The aforesaid notices were contested by the Respondent-

Company through their Sales Tax Practitioner and, after considering the

matter in the light of submissions made by the Sales Tax Practitioner

concerned, the Assessing Authority came to the conclusion that the goods

were being transferred by the Respondent-Company for its own use and

consumption and not for sale and were, therefore, liable to Entry Tax under

Section 4 (2) of the Act of 2000. The proceedings under Section 67 (10) of

the Act of 2005 were dropped and order for payment of Entry Tax under

Section 4 (2) of the Act of 2000 was issued. The Assessing Authority also

invoked the penalty provision, i.e., Section 69 (1) (o) of the Act of 2005 and

imposed penalty equal to double the amount of tax payable under the Act of

2000.

06. The said Order of the Assessing Authority was called in

question by the Respondent-Company before the Appellate Authority. The

Appellate Authority rejected the appeal and upheld the Order passed by the

Assessing Authority. This constrained the Respondent-Company to

approach the Tribunal by way of a second appeal.

07. The Tribunal, having considered the matter in the light of

submissions made on both the sides, came to the conclusion that invocation

of jurisdiction by the Assessing Authority under Section 69 (1) (o) of the

Act of 2005 was uncalled for and, therefore, the entire proceedings were

vitiated. There was further direction from the Tribunal to the Petitioners

herein to refund the penalty, if any, deposited by the Respondent-Company.

08. Feeling dissatisfied with the Judgment dated 17

th

of March,

2022 passed by the Tribunal, the Petitioners herein moved an application

before the Tribunal under Section 12-D of the GST Act seeking reference

of questions of law purportedly arising out of the proceedings of appeal

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before the Tribunal. Later, during the pendency of the proceedings, on the

concession made by the Petitioners herein, the proceedings were treated as

proceedings under Section 75 of the Act of 2005.

09. Be that as it may, the matter was considered by the Tribunal at

some length and, after hearing both the sides, the Tribunal came to the

conclusion that the questions posed by the Petitioners herein for reference

were not the questions arising out of the appeal and were, therefore, not

referable to the High Court for determination. This is how the instant

Petition has been moved by the Petitioners in terms of second proviso to

Section 12-D of the GST Act.

10. Having heard learned Counsel for the parties and perused the

material on record, we are of the considered opinion that the questions of

law framed by the Petitioners herein for making reference to the High Court

for determination actually do not arise out of the proceedings. Once it is

conceded by the Petitioners that the goods seized by the authorities at

Lower Munda Check Post were leviable to Entry tax Under Section 4 of the

Act of 2000, no proceedings should have been initiated, either under the

GST Act or the Act of 2005. The only provisions under the Act of 2000

pertaining to penalty is sub-section (3) of Section 4 which reads thus:

“(3) Any person carrying the goods with documents

specified in sub-section (1), which are fake or false in respect

of any particulars containing therein, shall be liable to penalty,

which shall be equal to double the amount of entry tax payable

on such goods.”

11. From reading of sub-section (3) of Section 4 of the Act of

2000, it clearly transpires that the penalty can be imposed on the person

carrying the goods with documents specified in sub-section (1) only on the

ground that the documents accompanying the goods are fake or false in

respect of any particulars contained therein. This penalty which is leviable

under sub-section (3) shall be equal to the double amount of Entry Tax

payable on such goods. Indisputably, it is not the case of the Petitioners

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herein that the documents accompanying the goods seized at Lower Munda,

Check Post were either fake or false.

12. With a view to find out as to whether there is any provision in

the Act of 2000 relating to imposition of penalty for bypassing the

Commercial Taxes Check Post, we went through the entire Act. We,

however, stumbled on Section 6 of the Act of 2000 which, for facility of

reference, is reproduced hereinbelow:

“6. Application of certain provisions of the Jammu

and Kashmir General Sales Tax Act, 1962: The provisions of

the Jammu and Kashmir General Sales Tax Act, 1962 relating

to appeal, revisions, appellate tribunal, power to withdraw and

transfer cases, recovery of fines, taxes or penalty, powers by

authorized person, powers to give instructions and

determination of issues, shall, mutatis mutandis, apply to all

such proceedings under this Act.”

13. From careful reading of Section 6 of the Act of 2000, it is

abundantly clear that the provisions of the GST Act or, for that matter, the

Act of 2005 do apply to the proceedings under the Act of 2000, but their

application is limited to the provisions relating to appeal, revisions,

Appellate Tribunal, power to withdraw and transfer cases, recovery of fines,

taxes or penalties, etc., etc. The procedural provisions of the GST Act, of

which reference is made in Section 6 of the Act of 2000, have been applied

to the proceedings under the Act of 2000 mutatis mutandis and, therefore,

shall be deemed to be part of the Act of 2000 by reference. The provisions

of Section 69 (1) (o) of the Act of 2005 and the provisions of Section 17 (1)

(o) of the GST Act have, thus, not been made part of the Act of 2000. In

short, the only provisions which are adopted mutatis mutandis for the

proceedings under the Act of 2000, in terms of Section 6 of the Act of 2000,

are either those which pertain to the right of appeal and revision and the

forums for hearing such appeals and revisions or to the provisions providing

for recovery and refund of fines, taxes and penalties imposable under the

Act of 2000. Since, no penalty is imposable under the Act of 2000 for

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bypassing the Commercial Taxes Check Post simplicitor, as such, Section 6

of the Act of 2000 cannot be interpreted to create a provision of penalty

which otherwise does not exist in the Act of 2000.

14. When a Statute levies tax, interest or penalty, it does so by

inserting a charging Section by which a liability is created or fixed and then

proceeds to provide machinery to enforce the liability. The Section in the

Statute that creates or fixes liability, whether it is tax, interest or penalty, is

known as ‘Charging Section’ and the Section that provides mode for

recovery and collections of tax, interest or penalty is known as ‘Machinery

Provision’. The penalty is a statutory liability and is in addition to tax and,

therefore, can only be created by a ‘Charging Section’. This view we have

taken is fortified by a Judgment of the Hon’ble Supreme Court rendered in

case titled ‘M/s Khemka and Co. (Agencies) Pvt. Ltd. v. State of

Maharashtra’, reported as (1975) 2 SCC 22. Paragraph Nos. 25 to 28 are

relevant and reproduced hereunder:

“25. Penalty is not merely sanction. It is not merely

adjunct to assessment. It is not merely consequential to

assessment. It is not merely machinery. Penalty is in addition to

tax and is a liability under the Act. Reference may be made

to section 28 of the Indian Income-tax Act, 1922 where penalty

is provided for concealment of income. Penalty is in addition to

the amount of income-tax. This Court in Jain Brothers & Ors.

v. Union of India said that penalty is not a continuation of

assessment proceedings and that penalty partakes of the

character of additional tax.

26. The Federal Court in Chatturam & Ors. v.

Commissioner of Income-tax, Bihar said that liability does not

depend on assessment. There must be a charging section to

create liability. There must be, first a liability created by the

Act. Second, the Act must provide for assessment. Third, the

Act must provide for enforcement of the taxing provisions. The

mere fact that there is machinery for assessment, collection and

enforcement of tax and penalty in the State Act does not mean

that the provision for penalty in the State Act is treated as

penalty under- the Central Act. The meaning of penalty under

the Central Act cannot be enlarged by the provisions of

machinery of the State Act incorporated for working out the

Central Act.

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27. This Court in State of Tamil Nadu v. K. A. Ramudu

Chettiar & Co. said that the power to enhance assessment

which was contained in the Madras Act of 1959 though such

power was not available under the 1939 Act would be available

in respect of assessment under the Central Act. Enhancement it

of assessment is in the process of assessment. It is a procedural

power. The liability to tax is created by the statute. Therefore,

when the power to assess is attracted a fortiori enhancement is

within the power.

28. For the foregoing reasons we are of opinion that the

provision in the state Act imposing penalty for non-payment of

income-tax within the prescribed time is not attracted to impose

penalty on dealers under the Central Act in respect of tax and

penalty payable under the Central Act. There is no lack of

sanction for payment of tax. Any dealer who would not comply

with the provisions for payment of tax, would be subjected to

recovery proceedings under the public Demands Recovery Act.

A penalty is a statutory liability. The Central Act contains

specific provisions for penalty. Those are the only provisions

for penalty available against the dealers under the Central Act.

Each State Sales Tax Act contains provisions for penalties.

These provisions in some cases are also for failure to submit

return or failure to register. It is rightly said that those

provisions cannot apply to dealers under the Central Act

because the Central Act makes similar provisions. The Central

Act is a self-contained code which by charging section creates

liability for tax and which by other sections creates a liability

for penalty and impose penalty. Section 9(2) of the Central Act

creates the State authorities as agencies to carry out the

assessment, reassessment, collection and enforcement of tax

and penalty by a dealer under the Act.”

15. It is, thus, trite that penalty, being a liability and a sort of

additional tax, requires constitutional mandate for its imposition. Article

265 of the Constitution of India provides that no tax shall be levied or

collected, except by authority of law. It is, thus, well settled that the penalty

is like addition tax and can only be charged or levied by a substantive

‘Charging Section’. In the instant case, Section 4 of the Act of 2000 is a

standalone ‘Charging Section’ dealing with imposition of penalty and

provides for its imposition only if the documents accompanying the taxable

goods are found false and forged with regard to particulars containing

therein. Section 6 of the Act of 2000 is merely a ‘Machinery Provision’ that

is by reference to GST Act/ Act of 2005.

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16. There may be lacuna in the Act of 2000, but the Court has to

interpret and apply the provisions of the Statute as they stand. We also find

it little anomalous that a person, who violates law and does not report the

concerned Check Post for verification of the documents and the goods, is

not held liable for any penalty and would be let off only by payment of the

Entry Tax leviable under the Act of 2000. This was something for the

Petitioners herein to ponder over and take remedial measures, if they so

deemed it fit. This lacuna was required to be taken care of at the appropriate

stage but the legislation has now been repealed, therefore, nothing more is

required to be said on the issue. However, in the instant case, the debate on

the various provisions of the GST Act and the Act of 2005 was totally

uncalled for and the forums below were unnecessarily kept engaged on the

issues that never arose for determination in the proceedings. It is, thus, high

time that we put quietus on the issue.

17. For all the aforesaid reasons, we find no merit in this Petition

and the same is, accordingly, dismissed. Interim direction(s), if any

subsisting as on date, shall stand vacated.

(Sanjay Parihar) (Sanjeev Kumar)

Judge Judge

SRINAGAR

July 28

th

, 2025

“TAHIR”

i. Whether the Judgment is approved for reporting? Yes.