An Unfilled Column in Form 38 Alone Cannot Attract VAT Penalty Without Proof of Tax Evasion Intent: Allahabad High Court
Case Background
Case Name: Commissioner Commercial Tax U.P. Lucknow Vs S/S Saurabh Traders Railway Bus Stand Pilkhuwa Hapur (Allahabad High Court)
Court: Allahabad High Court
Citation: 2026 taxguru.in 13390
Facts of the Case
Goods being transported in Vehicle No. UA-10/3486 were intercepted by the Mobile Squad at Moradabad. Upon inspection of the documents furnished by the driver, it was noticed that Column 6 of Form 38 — the column designated for recording the bill/cash memo/chalan/tax invoice number — had been left blank. The authorities took the position that the form had been deliberately kept incomplete to facilitate tax evasion and to enable the reuse of the same Form 38 for importing unaccounted goods.
A show cause notice was subsequently issued to the respondent, and a penalty of Rs. 1,38,000/- was imposed by the assessing authority under Section 54(1)(14) of the U.P. VAT Act, 2008.
The respondent challenged this penalty order dated 31.08.2010 before the Additional Commissioner Grade-II (Appeals), Moradabad, which dismissed the first appeal after examining the full facts of the matter. Aggrieved, the respondent filed a second appeal before the Commercial Tax Tribunal.
Tribunal's Decision
The Commercial Tax Tribunal, vide its order dated 14.05.2013, allowed the respondent's appeal and set aside the penalty order. The Tribunal reasoned that the mere fact that Column 6 of Form 38 was left unfilled could not, by itself, give rise to a presumption of an intention to evade tax. The Tribunal further noted the following key facts supporting its conclusion:
- The respondent had duly applied for and obtained Form 38 through the proper channel.
- The duplicate copy of Form 38 contained all the relevant entries, including the details in Column 6.
- The driver of the vehicle was in possession of all other supporting documents, including a certificate issued by the Forest Department following a physical inspection of the goods being transported.
- The omission in the main copy was explained as a result of oversight or human error, and was not indicative of any fraudulent intent.
The Tribunal concluded that imposing penalty in such circumstances was arbitrary and unjustified.
Revenue's Revision Before the High Court
The Department filed a revision before the Allahabad High Court challenging the Tribunal's order. The learned Standing Counsel for the revenue argued that non-filling of Column 6 in Form 38 creates a real risk of misuse — namely, that the same form could be reused for importing unaccounted goods of the same quantity, weight, and value, thereby facilitating tax evasion. It was contended that when all other columns are filled with the aid of the relevant bill/cash memo/chalan/tax invoice, there is no cogent reason for Column 6 to have been left blank, and this omission must be treated as evidence of an intent to evade tax.
The revenue also placed reliance on the Supreme Court's decision in M/s Guljag Industries, specifically paragraph 22 of the judgment, which held that:
"22. …… Section 78(2) is a mandatory provision. If the declaration Form 18A/18C does not support the goods in movement because it is left blank then in that event Section 78(5) provides for imposition of monetary penalty for non-compliance. Default or failure to comply with Section 78(2) is the failure/default of statutory civil obligation and proceedings under Section 78(5) is neither criminal nor quasi-criminal in nature. The penalty is for statutory offence. Therefore, there is no question of proving of intention or of mens rea as the same is excluded from the category of essential element for imposing penalty. ………."