1973 (2) TMI 119 - HC - VAT and Sales Tax

Issues Involved:
1. Legality of the penalty notices (Exhibits PI and P2).
2. Consideration of delays caused by factors beyond the company's control.
3. Nature of the penalty under Section 23(3) of the Kerala General Sales Tax Act, 1963.
4. Discretion in imposing penalties and the requirement of natural justice.
5. Applicability of mens rea to the penalty under Section 23(3).

Detailed Analysis:

1. Legality of the Penalty Notices (Exhibits PI and P2):
The petitioner, Burmah Shell Oil Storage and Distributing Co. of India Limited, received penalty notices demanding payment of Rs. 18,211.84 and Rs. 43,790 for defaults in tax payments. The company contested these notices through revisions, which were rejected by the Deputy Commissioner and the Board of Revenue. The court examined the relevant provisions, particularly Section 23(3) of the Kerala General Sales Tax Act, 1963, and Rule 31 of the Kerala General Sales Tax Rules, 1963. The court found that the language of Form 11 required payments "before the 10th day of the succeeding month," thereby confirming the delays.

2. Consideration of Delays Caused by Factors Beyond the Company's Control:
The petitioner argued that the delays were due to uncontrollable factors such as holidays and telegraphic transfer delays. The court noted that the company had chosen to make payments into the Government treasury despite having the option to pay by crossed cheque or demand draft. The court held that the delays, even if caused by uncontrollable factors, did not exempt the company from the penalty, as the payments were required before the 10th day of the succeeding month.

3. Nature of the Penalty under Section 23(3):
The petitioner contended that the penalty was an additional tax rather than penal interest. The court referred to precedents, including Commissioner of Income-tax, Andhra Pradesh v. Bhikaji Dadabhai & Co., where penalties under taxing statutes were considered additional taxes. However, the court accepted the State's argument that the penalty under Section 23(3) was in the nature of interest by way of damages for delayed payments, not an additional tax. The court also dismissed the petitioner's claim of discrimination under Article 14 of the Constitution, as the choice of payment mode was voluntary.

4. Discretion in Imposing Penalties and the Requirement of Natural Justice:
The petitioner argued that imposing penalties involved discretion and required a quasi-judicial process, including an opportunity to be heard. The court reviewed several decisions, including M/s. Hindustan Steel Ltd. v. The State of Orissa and Commissioner of Income-tax, West Bengal v. Anwar Ali, which emphasized the need for discretion and natural justice in penalty impositions. However, the court found that Section 23(3) imposed an absolute liability on the assessee, with no discretion vested in the taxing authority. The penalty was automatic upon failure to pay within the specified time, excluding the application of natural justice principles.

5. Applicability of Mens Rea to the Penalty under Section 23(3):
The petitioner attempted to equate the penalty to a criminal liability, requiring mens rea. The court referred to cases like Sweet v. Parsley and State of Gujarat v. Acharya Shri Devendraprasadji Pande, which held that mens rea is essential for criminal offenses unless explicitly excluded by statute. The court concluded that Section 23(3) imposed an absolute liability without any requirement of mens rea, as the legislative intent was clear in making the penalty automatic for delayed payments. The court also noted that even if the penalty were considered a criminal imposition, it would fall within exceptions where mens rea is not required.

Conclusion:
The court dismissed the writ petition, upholding the legality of the penalty notices and the orders passed by the Deputy Commissioner and the Board of Revenue. The court found no merit in the petitioner's arguments regarding delays, the nature of the penalty, discretion in imposing penalties, and the requirement of mens rea. The statutory provisions under Section 23(3) were clear in imposing an absolute liability for delayed tax payments, excluding the application of natural justice and mens rea principles.

Petition dismissed without costs.

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