1971 (3) TMI 101 - HC - VAT and Sales Tax

Summary

Issues:
- Assessment of tax at different rates for two consecutive years
- Levying penalty under section 18-A of the Mysore Sales Tax Act, 1957
- Validity of penalty imposition without a speaking order

Analysis:
The judgment by the High Court of Mysore involved two writ petitions challenging the orders levying penalty under section 18-A of the Mysore Sales Tax Act, 1957. The assessee, a dealer named Ganesh Foundry, was assessed to tax for the period from April 1, 1963, to March 31, 1964, at a rate of four per cent. The assessee collected tax from customers at this rate. However, upon appeal, the assessment was revised to a lower rate of two per cent for the same period. Subsequently, for the period from April 1, 1964, to March 31, 1965, the assessee again collected tax at four per cent, but the assessment for this period was also done at two per cent based on the previous year's decision. The assessing authority imposed a penalty under section 18-A for the excess tax collected by the assessee, leading to the writ petitions challenging the penalty imposition.

The first issue addressed was whether the penalty under section 18-A was justified in this case. The court highlighted that the authority imposing the penalty must consider the circumstances of the contravention. In this case, there was a genuine doubt regarding the applicable tax rate for the goods. The assessing authority initially assessed tax at four per cent, and the assessee collected tax accordingly. Only upon appeal was the rate reduced to two per cent. The court emphasized that the penalty imposition should take into account the bona fide nature of the collection and the circumstances under which it occurred. It was noted that without considering these aspects, the penalty under section 18-A could not be levied equal to the excess amount collected by the assessee. Therefore, the court ruled that the penalty imposition lacked proper consideration of the circumstances and was not justified.

The second issue raised was the validity of the penalty imposition without a speaking order. The court agreed with the argument presented by the petitioner's counsel that the orders imposing the penalty did not provide reasons for the penalty imposition, rendering them insufficient as speaking orders. It was established that a speaking order is necessary under section 18-A, and in this case, the orders did not fulfill that requirement. As a result, the court quashed the impugned orders levying the penalty under section 18-A. The writ petitions were allowed, and the penalty imposition was declared invalid. The court did not delve into the correctness of the first ground raised by the petitioner's counsel, leaving that question open for future consideration.