1971 (7) TMI 145 - HC - VAT and Sales Tax

Summary

Issues:
Validity of notice of demand and penalty imposition under U.P. Sales Tax Act, compliance with section 15-A(3) regarding opportunity of being heard, justification for penalty imposition, calculation of penalty amount.

Analysis:
The case involved a reference under section 11(1) of the U.P. Sales Tax Act regarding the imposition of a penalty on an assessee, M/s. Swadeshi Cotton Mills Company Ltd., for failure to pay assessed tax within the specified time. The Sales Tax Officer imposed a penalty of Rs. 2,45,758 at 20% of the tax due, which was later reduced to 10% by the judge (Revisions). The main issues revolved around the validity of the notice of demand, compliance with section 15-A(3) for providing an opportunity of being heard, justification for penalty imposition, and the calculation of the penalty amount.

The questions raised included whether the notice of demand was valid, compliance with section 15-A(3) for a reasonable opportunity of being heard, and whether there was a reasonable cause for the delay in tax payment. The court reframed the questions to focus on the validity of the notice issued to the assessee and the compliance with the provisions of section 15-A(3) regarding affording an opportunity of being heard.

The court analyzed section 15-A of the U.P. Sales Tax Act, which mandates that before imposing a penalty, the dealer must be given a reasonable opportunity of being heard. It was found that the notice issued to the assessee did not provide a specific date for a personal hearing or fix a date for the assessee to appear before the Sales Tax Officer. The court held that the notice did not fulfill the requirement of sub-section (3) of section 15-A, which necessitates affording an opportunity of being heard to the assessee.

The court referred to similar provisions under the Income-tax Act and relevant case law to emphasize the importance of providing an opportunity for a personal hearing before imposing a penalty. It was concluded that the penalty order was invalid due to non-compliance with the requirement of section 15-A(3) regarding providing an opportunity of being heard to the assessee.

As a result of the finding of non-compliance with the statutory provision, the court did not delve into the other questions raised and ruled in favor of the assessee, holding the penalty order invalid. The court awarded costs to the assessee and closed the reference accordingly.