1977 (9) TMI 104 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Nature of penalty proceedings and applicability of Supreme Court guidelines.
2. Assessment of sales and whether they were first or second sales.
3. Legitimacy of penalty imposed based on undisclosed turnover.
4. Conduct of the dealer and whether it was contumacious or dishonest.
5. Interpretation of statutory provisions regarding penalty.

Detailed Analysis:

1. Nature of Penalty Proceedings and Applicability of Supreme Court Guidelines:
The petitioner argued that penalty proceedings are quasi-criminal in nature and referenced the Supreme Court's guidelines in Hindustan Steel Ltd. v. State of Orissa, which emphasize that penalty should not be imposed unless the default was deliberate, contumacious, or dishonest. The department contended that the Andhra Pradesh General Sales Tax Act's scheme allows for penalty irrespective of the Supreme Court's general guidelines.

2. Assessment of Sales and Whether They Were First or Second Sales:
The petitioner, M/s. Vijaya Wines, claimed that the sales in question were second sales and thus exempt from tax. The assessing authority, however, treated the transactions as first sales within the state due to the lack of evidence proving otherwise. The Assistant Commissioner and the Appellate Tribunal upheld this assessment.

3. Legitimacy of Penalty Imposed Based on Undisclosed Turnover:
The assessing authority issued a notice for penalty based on the undisclosed turnover found during the inspection. The petitioner objected, but the objections were rejected, leading to an initial penalty of Rs. 78,755.25, which was later reduced by the Assistant Commissioner to Rs. 12,658.49. The penalty was challenged on the grounds that the turnover was not taxable and that the penalty should only apply to taxable turnover.

4. Conduct of the Dealer and Whether It Was Contumacious or Dishonest:
The Supreme Court's guidelines in Hindustan Steel Ltd. v. State of Orissa and Khemka and Company v. State of Maharashtra were considered, emphasizing that penalty should not be imposed unless the dealer acted in defiance of the law or was guilty of contumacious or dishonest conduct. The Assistant Commissioner noted that the department did not make consequential inquiries to prove smuggling or non-local purchases, suggesting a lack of deliberate misconduct by the petitioner.

5. Interpretation of Statutory Provisions Regarding Penalty:
Section 14 of the Andhra Pradesh General Sales Tax Act was scrutinized, particularly sub-section (2), which allows for penalty on undisclosed turnover. The court agreed with the department's interpretation that the turnover need not be taxable to attract penalty. However, the proviso to sub-section (8) states that no penalty shall be levied if the failure to disclose was due to a bona fide mistake. The court found that the Assistant Commissioner's order reducing the penalty was inconsistent with his findings that the purchases were local and not taxable.

Conclusion:
The High Court concluded that the penalty imposed was not justified as the petitioner did not demonstrate deliberate or dishonest conduct. The Assistant Commissioner's findings, which were not overturned by the Appellate Tribunal, indicated that the department failed to prove the transactions were not local purchases. Consequently, the penalty was set aside, and the petition was allowed. No costs were awarded, and the advocate's fee was fixed at Rs. 200.