1998 (1) TMI 432 - SC - VAT and Sales Tax

Whether penalty imposed under section 43 must be regarded as a fresh assessment and therefore, a penalty under section 43 can be imposed only within the period prescribed by section 18(8) of the said Act for the purposes of assessment? Held that - Appeal dismissed. We find it difficult to accept the argument, for the power under section 43 can be invoked only in proceedings in appeal from an assessment order or otherwise in proceedings under the said Act. Necessarily, therefore, the imposition of the penalty is a part of such proceedings and cannot be regarded as a fresh assessment. In these circumstances, the limitations of time prescribed under section 18(8) for assessments would not apply to the imposition of penalty under section 43.

Summary

Issues:
1. Interpretation of the power to impose penalty under section 38(5) of the State Act
2. Justification of penalty imposed under section 43(1) read with section 9(2) of the Central Act

Analysis:

Issue 1: Interpretation of the power to impose penalty under section 38(5) of the State Act
The case involved a penalty imposed on the appellant for a delayed return. The assessing authority imposed a penalty of Rs. 4,000, which was upheld by the Deputy Commissioner of Sales Tax. The appellant contended that since the assessing authority did not impose the penalty, the appellate authority could not do so under section 38(5) of the State Act. The High Court, however, held that the penalty could be imposed under section 43 if the conditions were met, irrespective of the assessing authority's actions. Section 38(5) allows the appellate authority to confirm, reduce, enhance, or annul a penalty only if it has already been imposed by the assessing authority.

Issue 2: Justification of penalty imposed under section 43(1) read with section 9(2) of the Central Act
The appellant argued that the penalty imposed under section 43 should be considered a fresh assessment and subject to the time limitations of section 18(8) of the Act. However, the court disagreed, stating that the power under section 43 can only be invoked in proceedings in appeal or under the Act, making the penalty imposition part of those proceedings and not a fresh assessment. Therefore, the time limitations for assessments under section 18(8) do not apply to penalties imposed under section 43.

In conclusion, the Supreme Court dismissed the appeal, upholding the penalty imposed under section 43 and clarifying that the power to impose penalties under section 38(5) is limited to confirming, reducing, enhancing, or annulling penalties already imposed by the assessing authority.