1980 (11) TMI 145 - HC - VAT and Sales Tax

Summary

Issues:
1. Imposition of penalty under section 11(3a) of the Act for default in tax payment under section 10.

Detailed Analysis:
The case involves a sales tax reference where the Commissioner of Sales Tax raised the question of whether a penalty can be imposed under section 11(3a) of the Act in the event of default in the payment of tax under section 10 of the Act. The facts revolve around a dealer who tendered a cheque along with his return for the first quarter of the year 1971-72. The cheque was dishonored, leading to the imposition of a penalty, which was later reduced but ultimately quashed by the Financial Commissioner. The controversy stems from the interpretation of sections 10(3), 11(1), and 11(3a) of the Act, which govern the filing of returns, payment of tax, and imposition of penalties for defaults.

The relevant provision of section 10(3) mandates that a registered dealer must pay the full amount of tax due under the Act before furnishing quarterly returns. While the usual method involves payment into a government treasury or Reserve Bank of India with a receipt, alternative methods, such as sending a cheque, are permitted. However, if the cheque is dishonored, it constitutes a default in payment, raising the question of when and how a penalty can be imposed for such default.

Section 11(1) allows for the imposition of a penalty if a registered dealer fails to submit a return with a receipt from a government treasury or Reserve Bank of India. This provision addresses defaults related to the timely filing of returns. On the other hand, section 11(3a) deals specifically with defaults in tax payment. It empowers the Commissioner to direct the recovery of a penalty not exceeding the amount of arrears from the dealer in cases of default in tax payment.

The Court's analysis indicates that the penalty under section 11(3a) is more appropriately applicable in cases where tax is not paid along with the return, as required by section 10(3). It distinguishes between defaults related to filing returns and those related to tax payment. The judgment aligns with previous decisions and Supreme Court rulings, emphasizing that the penalty under section 11(3a) can be imposed immediately upon detecting a default in tax payment, without waiting for the completion of assessment procedures.

In conclusion, the Court answers the reference question in the affirmative in favor of the Commissioner of Sales Tax, highlighting that the penalty under section 11(3a cannot exceed the amount of tax due. The revisional authority is tasked with determining the appropriate penalty in accordance with the provisions of the Act. The judgment sets a precedent for similar cases and underscores the importance of timely tax payment to avoid penalties.