1973 (8) TMI 143 - HC - VAT and Sales Tax

Summary

Issues:
1. Jurisdiction of Sales Tax Officer to impose penalty for non-payment of tax demanded under the Central Sales Tax Act.

Detailed Analysis:

The petitioner was assessed under the Central Sales Tax Act for various periods, and penalties were imposed for non-payment of the demanded tax. The petitioner challenged the authority of the Sales Tax Officer to impose penalties, leading to the central issue of whether the Sales Tax Officer had jurisdiction to levy penalties for non-payment of the demanded tax.

The Act does not contain a specific provision for the imposition of penalties for default in satisfying the demand of tax. Rule 16(2) of the Central Sales Tax (Orissa) Rules, under which the penalty was imposed, derives its authority from the rule-making power vested in the State Government under section 13 of the Act. However, the Act does not clearly provide for the making of a provision like rule 16(2) regarding the imposition of penalties for non-payment of tax.

The petitioner argued that the rule is ultra vires the Act, citing a Mysore High Court decision that penal provisions in a taxing statute are substantive and cannot be considered part of procedural law without express adoption by the central Act. Similar views were expressed by the Calcutta and Patna High Courts. The absence of specific authorization in the central Act for imposing penalties for non-payment of tax under the State rules indicates that the rule is beyond the jurisdiction conferred on the State Government.

The Court held that unless the statute expressly or implicitly authorizes the creation of penal liability in the rules, the rule-making authority lacks jurisdiction to impose penalties. As there was no specific provision in the Central Act authorizing a rule like 16(2) of the Orissa Rules, the rule was deemed ultra vires the Act and contrary to the law. Consequently, the imposition of penalty in the case was considered an act without jurisdiction, leading to the quashing of the penalty and allowing the writ petition with costs awarded to the petitioner.

In conclusion, the High Court determined that the Sales Tax Officer did not have the jurisdiction to levy penalties for non-payment of the demanded tax under the Central Sales Tax Act, as the relevant rule was found to be ultra vires the Act and contrary to the law.